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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, OR ANY STATE
SECURITIES LAWS. 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 AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
DYNAMIC HEALTH PRODUCTS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE
MINIMUM BORROWING NOTE
FOR VALUE RECEIVED, each of
DYNAMIC HEALTH PRODUCTS, INC., a Florida corporation (the “
Parent ”), and the other companies listed on
Exhibit A attached hereto (such other companies together
with the Parent, each a “ Company ” and
collectively, the “ Companies ”), jointly and
severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (the “ Holder ”) or its registered
assigns or successors in interest, on order, the sum of Two Million
Dollars ($2,000,000), or, if different, the aggregate principal
amount of all Loans (as defined in the Security Agreement referred
to below), together with any accrued and unpaid interest hereon, on
March 29, 2008 (the “ Maturity Date ”) if not
sooner paid.
Capitalized terms used herein
without definition shall have the meanings ascribed to such terms
in the Security Agreement among the Companies and the Holder dated
as of the date hereof (as amended, modified and supplemented from
time to time, the “ Security Agreement
”).
The following terms shall
apply to this Minimum Borrowing Note (the “ Note
”):
ARTICLE I
CONTRACT
RATE
1.1 Contract Rate .
Subject to Sections 4.2 and 5.10, interest payable on the
outstanding principal amount of this Note (the “ Principal
Amount ”) shall accrue at a rate per annum equal to the
“prime rate” published in The Wall Street
Journal from time to time (the “ Prime Rate
”), plus two percent (2%) (the “ Contract Rate
”). The Contract Rate shall be increased or decreased as the
case may be for each increase or decrease in the Prime Rate in an
amount equal to such increase or decrease in the Prime Rate; each
change to be effective as of the day of the change in the Prime
Rate. Subject to Section 1.2, the Contract Rate shall not be less
than six percent (6%).
1.2 Contract Rate
Adjustments and Payments . The Contract Rate shall be
calculated on the last business day of each calendar month
hereafter (other than for increases or decreases in the Prime Rate
which shall be calculated and become effective in accordance with
the terms of Section 1.1) until the Maturity Date (each a “
Determination Date ”) and shall be
subject to adjustment as set forth
herein. If (i) the Parent shall have registered the shares of the
Common Stock underlying the conversion of each Minimum Borrowing
Note and each Warrant on a registration statement declared
effective by the Securities and Exchange Commission (the “
SEC ”), and (ii) the market price (the “
Market Price ”) of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market for the five (5) trading
days immediately preceding a Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty-five percent
(25%), the Contract Rate for the succeeding calendar month shall
automatically be reduced by 200 basis points (200 b.p.) (2%) for
each incremental twenty-five percent (25%) increase in the Market
Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to
the contrary contained herein), in no event shall the Contract Rate
be less than zero percent (0%). Interest shall be (i) calculated on
the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing on April 1, 2005 and on the first business day of each
consecutive calendar month thereafter until the Maturity Date (and
on the Maturity Date), whether by acceleration or
otherwise.
ARTICLE II
LOANS; PAYMENTS UNDER THIS
NOTE
2.1 Loans . All Loans
evidenced by this Note shall be made in accordance with the terms
and provisions of the Security Agreement.
2.2 No Effective
Registration . Notwithstanding anything to the contrary herein,
the Holder shall not be required to accept shares of Common Stock
as payment following a conversion by the Holder if there fails to
exist an effective current Registration Statement (as defined in
the Registration Rights Agreement) covering the shares of Common
Stock to be issued, or if an Event of Default hereunder exists and
is continuing, unless such requirement is otherwise waived in
writing by the Holder in whole or in part at the Holder’s
option.
2.3 Optional Redemption in
Cash . The Companies will have the option of prepaying this
Note (“ Optional Redemption ”) by paying to the
Holder a sum of money equal to one hundred fifteen percent (115%)
of the then outstanding principal amount of this Note 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
Security Agreement, or any other Ancillary Agreement (the “
Redemption Amount ”) outstanding on the Redemption
Payment Date (as defined below). The Companies shall deliver to the
Holder a written notice of redemption (the “ Notice of
Redemption ”) specifying the date for such Optional
Redemption (the “ Redemption Payment Date ”),
which date shall be seven (7) business days after the date of the
Notice of Redemption (the “ Redemption Period
”). A Notice of Redemption shall not be effective with
respect to any portion of this Note for which the Holder has
previously delivered a Notice of Conversion (defined below)
pursuant to Section 3.1, or for conversions elected to be made by
the Holder pursuant to Section 3.1 during the Redemption Period.
The Redemption Amount shall be determined as if such Holder’s
conversion elections had been completed immediately prior to the
date of the Notice of Redemption. On the Redemption Payment Date,
the Redemption Amount (plus any additional interest and fees
accruing on the Notes during the Redemption Period) must be
irrevocably paid in full in immediately available funds to the
Holder. In the event the Companies fail to pay the Redemption
Amount on the Redemption Payment Date, then such Redemption Notice
shall be null and void.
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ARTICLE III
CONVERSION RIGHTS AND
FIXED CONVERSION PRICE
3.1 Optional
Conversion . Subject to the terms of this Article III, the
Holder shall have the right, but not the obligation, at any time
until the Maturity Date, or during an Event of Default (as defined
in Article IV), and, subject to the limitations set forth in
Section 3.2 hereof, to convert all or any portion of the
outstanding Principal Amount and/or accrued interest and fees due
and payable into fully paid and nonassessable shares of the Common
Stock at the Fixed Conversion Price. For purposes hereof, subject
to Section 3.6 hereof, the initial “ Fixed Conversion
Price ” means $ 1.13 [which has been determined on the
date of this Note as an amount equal to 103% of the average closing
price of the Common Stock for the ten (10) trading days immediately
prior to the date of this Note; provided that the Fixed Conversion
Price shall not exceed 110% of the closing price on the date
immediately preceding the Closing Date]. The shares of Common Stock
to be issued upon such conversion are herein referred to as the
“ Conversion Shares. ”
3.2 Conversion
Limitation . Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to
the terms of this Note an amount that would be convertible into
that number of Conversion Shares which would exceed the difference
between (i) 4.99% of the outstanding shares of Common Stock and
(ii) the number of shares of Common Stock beneficially owned by the
Holder. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 3.2 shall
automatically become null and void without any notice to any
Company upon the occurrence and during the continuance of an Event
of Default, or upon 75 days prior notice to the Parent.
Notwithstanding anything contained herein to the contrary, the
provisions of this Section 3.2 are irrevocable and may not be
waived by the Holder or any Company.
3.3 Mechanics of
Holder’s Conversion . In the event that the Holder elects
to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed
notice of conversion (“ Notice of Conversion ”)
to the Parent and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued
interest and fees that are being converted. On each Conversion Date
(as hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its
records and shall provide written notice thereof to the Parent
within two (2) Business Days after the Conversion Date. Each date
on which a Notice of Conversion is delivered or telecopied to the
Parent in accordance with the provisions hereof shall be deemed a
Conversion Date (the “ Conversion Date ”). A
form of Notice of Conversion is annexed hereto as Exhibit A
. To the extent that a registration statement registering the
shares of Common Stock underlying this Note has been filed by the
Parent and such registration statement is effective on the date on
which a Notice of Conversion is delivered to the Parent (such a
registration statement, an “Effective Registration
Statement”), the Parent will issue instructions to the
transfer agent accompanied by an opinion of counsel within one (1)
Business Day of the date of the delivery to the Parent of the
Notice of Conversion and shall cause the transfer agent to transmit
the certificates representing the Conversion Shares to the Holder
by crediting the account of the Holder’s designated
broker
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with the Depository Trust Corporation
(“ DTC ”) through its Deposit Withdrawal Agent
Commission (“ DWAC ”) system within three (3)
Business Days after receipt by the Parent of the Notice of
Conversion (the “ Delivery Date ”). To the
extent that an Effective Registration Statement is not existing,
the Parent will issue instructions to its transfer agent within one
(1) Business Day of the date of delivery to the Parent of the
Notice of Conversion and shall cause the transfer agent to issue
the certificates representing the Conversion Shares (with a
restrictive legend if necessary) to Holder on the Delivery Date. In
the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and
the Conversion Shares issuable upon such conversion shall be deemed
to have been issued upon the date of receipt by the Parent of the
Notice of Conversion. The Holder shall be treated
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