Contract
FOR
VALUE
RECEIVED, SOUTHPEAK INTERACTIVE, L.L.C., a Virginia limited liability company
(the “Borrower”),
hereby promises to pay to FI Investment Group, LLC, a Virginia limited liability
company (the “Holder”),
or
its registered assigns or successors in interest, the sum of Two Million Dollars
($2,000,000) (the “Principal
Amount”),
together with any accrued and unpaid interest thereon, on the six month
anniversary date of this Secured Term Note (the “Note”)
(the
“Maturity
Date”),
if
not sooner paid; or if this Note becomes convertible in accordance with the
terms set forth herein, the Principal Amount, together with any accrued and
unpaid interest, will be payable on demand by the Holder.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof
between the Borrower and the Holder (the “Purchase
Agreement”).
The
Borrower entered into that Agreement and Plan of Reorganization (the
“Reorganization
Agreement”)
dated
January 15, 2008 among the Borrower, SouthPeak Interactive Corporation, Global
Services Partners Acquisition Corp., GSPAC Merger Company and the members of
the
Borrower. If the closing of the transactions contemplated under the
Reorganization Agreement (the “GSPAC
Closing”)
fails
to consummate on or before April 30, 2008 (the “Conversion
Date”),
then
on the Conversion Date, this Note shall become convertible at the option of
the
Holder and shall be referred to at such time as a “Secured Convertible Demand
Note” as more fully described in Section 1.2(b) and Article III (but for
purposes of this Note, it shall be continued to be referred to herein as the
“Note”).
ARTICLE I
INTEREST
AND INTEREST PAYMENTS
1.1 Interest,
Rate.
Subject
to Section 4.9 hereof, upon issuance this Note shall bear interest, on a monthly
basis, at a rate equal to fourteen percent (14%) per annum.
1.2 Payments.
The
Principal Amount shall be payable as follows:
(a) If
the
GSPAC Closing is consummated on or before the Conversion Date, the Principal
Amount shall be payable in cash in full on the Maturity Date. Accrued interest
payments shall be made payable to Holder in cash on a monthly basis, beginning
on the one (1) month anniversary of the execution of the Note and each month
thereafter on the same date, until the Maturity Date or until this Note has
otherwise been paid in full.
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(b) If
the
GSPAC Closing is not consummated on or before the Conversion Date, this Note
shall convert to a “Secured Convertible Demand Note” on the Conversion Date,
and, commencing on the Maturity Date, the Principal Amount shall be payable
in
cash in full on written demand of the Holder within ten (10) business days
after
Holder makes such written demand (“Demand
Right”).
Accrued interest payments shall be made payable to Holder in cash on a monthly
basis, beginning on the one (1) month anniversary of the execution of the Note
and each month thereafter on the same date, until either (i) the Holder
exercises its Demand Right, (ii) the Holder exercises its Conversion Option,
or
(iii) this Note has otherwise been paid in full. Notwithstanding the foregoing,
the Holder’s Demand Right, and all other rights to repayment of the Principal
Amount, terminate upon the Holder’s exercise of its Conversion
Option.
ARTICLE II
REPAYMENT
2.1 Optional
Redemption of Principal Amount.
(a) Consummation
of GSPAC Closing.
At any
time after consummation of the GSPAC Closing, the Borrower will have the option
of prepaying the outstanding Principal Amount (“Optional
Redemption”),
in
whole or in part, by paying to the Holder a sum of money equal to one hundred
percent (100%) of the portion of the Principal Amount to be redeemed, together
with accrued but unpaid interest thereon and any and all other sums due, accrued
or payable to the Holder arising under this Note, the Purchase Agreement or
any
Related Agreement (the “Redemption
Amount”),
on
the Redemption Payment Date (as defined below). The Borrower shall deliver
to
the Holder a notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be not less than ten (10) business days after the date of the Notice
of Redemption. On the Redemption Payment Date, the Redemption Amount shall
be
paid in good funds to the Holder. If the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date as set forth herein, then such Notice
of
Redemption will be null and void.
If a
GSPAC Closing fails to occur on or before the Conversion Date, the Borrower’s
Optional Redemption rights set forth in this Section 2.1(a) shall terminate
on
the Conversion Date.
(b) No
GSPAC Closing.
(i) If
the
GSPAC Closing fails to occur on or before the Conversion Date, the Borrower
will
have the option, at any time after the Maturity Date, to elect to make an
Optional Redemptionby
paying
the Redemption Amount on the Redemption Payment Date. The Borrower shall deliver
to the Holder the Notice of Redemption, specifying a Redemption Payment Date,
which date shall be not less than fifteen (15) business days after the date
of
the Notice of Redemption. Except
as
otherwise provided in Section 2.1(b)(ii), on the Redemption Payment Date, the
Redemption Amount shall be paid in good funds to the Holder. If the Borrower
fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then such Notice of Redemption will be null
and void. Partial
payment of the Redemption Amount is not permitted under this Section 2.1(b)(i).
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(ii) Notwithstanding
receipt of the Notice of Redemption under Section 2.1(b)(i), the Holder shall
have the right
to
exercise the Conversion Option by delivering written notice of such exercise
to
the Borrower on or before the fifth (5th)
business day prior to the Redemption Payment Date (the “Conversion
Deadline”)
in
accordance with Section 3.3. The class of Equity Securities (as defined below)
to be issued to the Holder under this Section 2.1(b)(ii)
shall be
common stock or membership interests, as applicable, and the amount to be issued
shall be determined though utilization of the formula set forth in Section
3.1(a)(A) below.
If the
Holder fails to exercise its Conversion Option on or before the Conversion
Deadline, the Borrower
shall
pay the Redemption Amount in good funds on the Redemption
Payment Date. If the Borrower fails to pay the Redemption Amount on the
Redemption Payment Date as set forth herein, then such Notice of Redemption
will
be null and void. Partial
payment of the Redemption Amount is not permitted under this Section
2.1(b)(ii).
(iii) If,
after
the Holder exercises its Conversion Option
under
Section 2.1(b)(ii), a Financing Event (as defined below) closes before June
30,
2009, the Holder shall have the right to convert the Equity
Securities
it
received under Section 2.1(b)(ii) (which Equity Securities shall be equal in
value to the total outstanding Principal Amount,
accrued
interest and any failed payment fee(s) that was converted under such Section)
into Tag Along Conversion Stock (as defined below) (the “Securities
Conversion Option”),
with
the number of shares of Tag Along Conversion Stock determined through whichever
of the methods/formulas set forth in Sections 3.1(a)(A) and 3.1(a)(B) results
in
the highest number of shares of Tag Along Conversion Stock issued by the
Borrower.
2.2 Issuance
of Replacement Note.
Upon
any partial prepayment of this Note, a replacement Note containing the same
date
and provisions of this Note (to the extent such provisions remain applicable
at
such time) shall, at the written request of the Holder, be issued by the
Borrower to the Holder for the outstanding Principal Amount of this Note and
accrued interest which shall not have been paid. Subject to the provisions
of
Article IV, the Holder will pay no costs, fees or any other consideration to
the
Borrower for the production and issuance of a replacement Note.
ARTICLE III
CONVERSION
& DEMAND OF REPAYMENT
3.1 Conversion.
In the
event that this Note converts to a “Secured Convertible Demand Note” on the
Conversion Date, then commencing on the Maturity Date, the Borrower, upon demand
by the Holder (the “Conversion
Option”),
shall
be required to exchange and convert the Note into fully paid and non-assessable
shares of the Borrower’s equity
securities (the “Equity
Securities”,
it
being understood that such Equity Securities may be in the form of membership
interests if the Company remains a limited liability company at the time of
conversion
of this
Note or stock, if the Company has converted to a corporation at the time of
the
conversion of this Note) as follows:
(a) Concurrently
with the closing of the next round of public or private financing secured by
the
Borrower that closes before June 30, 2009 (the “Financing
Event”),
the
class of Equity
Securities to be issued to Holder shall be of the same class offered as part
of
the
Financing Event, and such Equity Securities shall be issued with accompanying
rights and privileges materially similar to those offered as part of the
Financing Event (the “Tag
Along Conversion Stock”;
for
convenience, the use of this term assumes that the Company is a corporation
at
the time of conversion, it being understood that if the Equity Securities are
converted into membership interests at the time of conversion, the term will
refer to membership interests acquired in such conversion).
Concurrently with a Financing Event, at the election of the Holder, as an
alternative to its Demand Right set forth in Section 1.2(b), all amounts due
under the Note shall convert to the number of shares of Tag Along Conversion
Stock as determined through whichever of the following methods/formulas set
forth below results in the highest number of shares of Tag Along Conversion
Stock issued by the Borrower:
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A. total
outstanding Principal Xxxxxx and accrued interest due (and failed payment fee(s)
if incurred)
/
($31,600,000 / total outstanding capital stock of Borrower on an as-converted
basis on date of conversion);
or
B. total
outstanding Principal Xxxxxx and accrued interest (and failed payment fee(s)
if
incurred) due X the price per share paid (ignoring the effect of any stock
splits or other mechanisms adopted at the time of conversion to arrive at a
per
share value that do not change the economic substance or value of the converted
Equity Securities) by the investor(s) participating in the Financing
Event.
(b) In
the
event that no Financing Event occurs before June 30, 2009 and the Holder has
not
exercised its Conversion Option under Section 2.1(b)(ii), then on June 30,
2009
(the “Final
Conversion Date”),
provided Holder has given five (5) business days written notice of its desire
to
exercise the Conversion Option, the class of Equity Securities to be issued
to
Holder shall be common stock or membership interests, as applicable, and the
amount to be issued shall be determined though utilization of the formula set
forth in Section 3.1(a)(A) above.
If
Holder
elects not to exercise its Conversion Option
in
accordance with Section 2.1(b)(ii) or Section 3.1, the Note shall become due
and
payable on the Final Conversion Date.
Xxxxxxxx
understands and agrees the Conversion Option set forth herein is provided to
Holder in addition to any other right or remedy set forth herein, including
but
not limited to its Demand Right, and at no time shall such Conversion Option
be
deemed a required or automatic obligation of the Holder.
3.2
Fractional
Shares.
No
fractional Equity Securities shall be issued upon conversion of this Note under
Section 3.1. In lieu of the Borrower issuing any fractional Equity Securities
to
the Holder upon the conversion of this Note, the Borrower shall pay to the
Holder the amount of the outstanding Principal Amount in cash that is not so
converted.
3.3 Conversion
Procedure.
To
exercise the Conversion Option or the Securities Conversion Option, Holder
shall
surrender this
Note or
its Equity Securities, respectively, at the principal corporate office of the
Borrower and give written notice
of such
exercise to the Borrower at its principal corporate office in accordance with
Section 5.2 and shall state therein the name or names in which the certificate
or certificates for Equity Securities are to be issued. The Borrower
shall,
at its
expense, as soon as practicable after the Financing Event (in the case of a
conversion under Section 2.1(b)(iii) or Section 3.1(a)), the Final Conversion
Date (in the case of a conversion under Section 3.1(b)), or the date that the
Borrower receives written notice of such exercise (in the case of a conversion
under Section 2.1(b)(ii))
issue
and deliver to the Holder a certificate or certificates (bearing such legends
as
are required by the Purchase Agreement and Related Agreements and applicable
state and federal securities laws in the opinion of counsel to the Borrower)
for
the full amount of Equity Securities to which the Holder of this Note shall
be
entitled as aforesaid. Such conversion shall be deemed to have been made as
of
the date of the Financing Event (in the case of a conversion under
Section
2.1(b)(iii) or Section 3.1(a)), as of the Final Conversion Date (in the case
of
a conversion under Section 3.1(b)),
or as of
the date that the Borrower receives written notice of such exercise (in the
case
of a conversion under Section 2.1(b)(ii)),
and the
person or persons entitled to receive the Equity Securities issuable upon such
conversion shall be treated for all purposes as the record holder or holders
of
such Equity Securities as of such date.
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ARTICLE IV
EVENTS
OF DEFAULT
Upon
the
occurrence and continuance of an Event of Default beyond any applicable grace
period, 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. In the event of such an acceleration, the amount due and owing
to
the Holder shall be the outstanding Principal Amount of the Note
(plus
accrued and unpaid interest and fees, if any) (the “Default
Payment”).
The
Default Payment shall be applied first to any fees due and payable to the Holder
pursuant to this Note, the Purchase Agreement or the Related Agreements, then
to
accrued and unpaid interest due on the Note and then to the outstanding
Principal Amount of the Note.
The
occurrence of any of the following events set forth in Sections 4.1 through
4.8,
inclusive, is an “Event
of Default”:
4.1 Failure
to Make Payments.
The
Borrower fails to pay when due any amount hereon in accordance herewith, and
in
any such case, such failure shall continue for a period of five (5) business
days following receipt of notice of default.
4.2 Breach
of Covenant.
The
Borrower breaches any covenant or any other term or condition of this Note
or
the Purchase Agreement in any material respect, or the Borrower or any of its
Subsidiaries breaches any covenant or any other term or condition of any Related
Agreement in any material respect,
and, in
any such case, such breach, if subject to cure, continues for a period of thirty
(30) days after the Borrower’s receipt of written notice from Holder of such
breach.
4.3 Breach
of Representations and Warranties.
Any
representation or warranty made by the Borrower in this Note or the Purchase
Agreement, or by the Borrower or any of its Subsidiaries in any Related
Agreement, shall, in any such case, be false or misleading in any material
respect on the date that such representation or warranty was made or deemed
made.
4.4 Receiver
or Trustee.
The
Borrower or any of its Subsidiaries shall make an assignment for the 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.
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4.5 Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
the Borrower or any of its Subsidiaries or any of their respective property
or
other assets for more than $150,000, and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days.
4.6 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation 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 or any of its
Subsidiaries and not stayed within thirty (30) days.
4.7 Stop
Trade.
A
Securities and Exchange Commission (the “SEC”)
stop
trade order or Principal Market trading suspension of the Equity Securities
shall be in effect for five (5) consecutive days or five (5) days during a
period of ten (10) consecutive days, excluding in all cases a suspension of
all
trading on a Principal Market, provided that the Borrower shall not have been
able to cure such trading suspension within thirty (30) days of the notice
thereof or list the stock on another Principal Market within sixty (60) days
of
such notice. The “Principal
Market”
for the
stock shall include the OTC Bulletin Board, NASDAQ Capital 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 Equity Securities).
4.8 Default
Under Related Agreements or Other Agreements.
The
occurrence and continuance of any Event of Default (as defined in the Purchase
Agreement or any Related Agreement) or any event of default (or similar term)
under any other indebtedness, which default has not been cured under the cure
provisions associated with any such event of default.
4.9 Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
interest on this Note shall accrue in an amount equal to one and a half percent
(1.5%) per month (eighteen percent (18%) per annum), and all outstanding
obligations under this Note shall continue to accrue such interest from the
date
of such Event of Default until the date such Event of Default is cured or
waived.
4.10 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure
or Indulgence Not Waiver.
No
failure or delay on the part 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.
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5.2 Notices.
Any
notice herein required or permitted to be given shall 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
(5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) 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 provided in the Purchase Agreement executed in connection herewith,
and
to the Holder at the address provided in the Purchase Agreement for the
Holder, or at such other address as the Borrower or the Holder may designate
by
ten (10) days advance written notice to the other parties hereto.
5.3 Amendment
Provision.
The
term “Note”, “Secured Term Note”, or “Secured Convertible Demand Note” and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then
as
so amended or supplemented, and any successor instrument issued pursuant to
Section 2.2 hereof, as it may be amended or supplemented.
5.4 Assignability.
This
Note shall be binding upon the Borrower and 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 in accordance with the requirements of the Purchase
Agreement. This Note shall not be assigned by the Borrower without the consent
of the Holder.
5.5 Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia, without regard to principles of conflicts of laws.
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. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the Borrower’s obligations to the
Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court order in favor of the
Holder.
5.6 Maximum
Payments.
Nothing
contained herein shall be deemed to establish 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 and Subsidiary Guaranty.
The
Holder has been granted a security interest in certain assets of the Borrower
as
more fully described in the Term Note Security Agreement dated
as
of the date hereof. The obligations of the Borrower under this Note are
guaranteed by SouthPeak Interactive Limited, a private company limited by shares
incorporated under the laws of England and Wales and the Borrower’s wholly-owned
subsidiary, pursuant to the Secured Subsidiary
Guaranty
dated as of the date hereof.
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5.8 Construction.
Each
party acknowledges that its legal counsel 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.
5.9 Cost
of Collection.
If
default is made in the payment of this Note, the Borrower shall pay to the
Holder all costs of collection, as reasonably permitted under the laws of the
Commonwealth of Virginia.
[Signatures
on Following Page]
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IN
WITNESS WHEREOF,
the
Borrower has caused this Secured Term Note to be signed in its name effective
as
of this
27th
day
of
February, 2008.
| SOUTHPEAK INTERACTIVE, L.L.C. | ||
| |
|
|
| By: | ||
|
Xxxxx Xxxxxxxx, Manager |
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