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
