SENIOR CONVERTIBLE PROMISSORY NOTE

 

 

                                   Exhibit 4.1

 

      THIS PROMISSORY   NOTE AND THE SECURITIES   OBTAINABLE UPON CONVERSION

      HEREOF   (COLLECTIVELY,   THE   "SECURITIES")   HAVE NOT BEEN REGISTERED

      UNDER THE   SECURITIES   ACT OF 1933, AS AMENDED   ("THE ACT"),   OR THE

      SECURITIES   LAWS OF ANY STATE.   THE   SECURITIES   MAY NOT BE PLEDGED,

      SOLD,   ASSIGNED   OR   TRANSFERRED   EXCEPT   PURSUANT   TO AN   EFFECTIVE

      REGISTRATION    STATEMENT    UNDER   SUCH   ACT   AND   APPLICABLE    STATE

      SECURITIES   LAWS OR PURSUANT   TO AN   APPLICABLE   EXEMPTION   FROM THE

      REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

                       SENIOR CONVERTIBLE PROMISSORY NOTE

 

U.S. $________                                                     March __, 2005

 

      FOR VALUE RECEIVED, Drinks Americas Holdings, Ltd., a Delaware corporation

(the   "Company"),   hereby   promises   to   pay   to the   order   of   ___________(the

"Lender")   the   principal   amount of   _____________   ($_________)   Dollars   (the

"Principal   Amount"),   together with interest on the Principal Amount under this

senior   convertible   promissory   note (this "Note") at the per annum rate of ten

(10%)   percent   (calculated   daily on the   basis of a   360-day   year and   actual

calendar   days   elapsed).   Subject to   conversion   or   acceleration   as provided

herein,   the Principal Amount and accrued interest on this Note shall become due

and payable in one installment on the first anniversary of the date of this Note

(the "Maturity Date").

 

      Both the   Principal   Amount and accrued   interest   shall be paid in lawful

money of the United   States of   America   to the   Lender at c/o Sloan   Securities

Corp.,   444 Madison   Avenue,   23rd Floor,   New York, New York 10022,   or at such

other   address as the Lender may   designate by notice in writing to the Company,

in immediately available funds.

 

      If any payment hereunder falls due on a Saturday, Sunday or legal holiday,

it shall be payable on the next succeeding business day and such additional time

shall be included in the computation of interest.

 

      This   Note is one of a   series   of   Senior   Convertible   Promissory   Notes

containing   substantially identical terms and conditions issued pursuant to that

certain   Securities   Purchase   Agreement   by and between the Company and certain

Lenders of even date herewith (the   "Securities   Purchase   Agreement"),   some of

which   Lenders will execute the   Securities   Purchase   Agreement   after the date

hereof (the "Lenders").   All capitalized terms not defined herein shall have the

meanings ascribed thereto in the Securities Purchase Agreement.

 

      1. Senior. The indebtedness   evidenced by this Note and the payment of the

Principal Amount and interest   thereof shall be Senior (as hereinafter   defined)

to, and have priority in right of payment over, all indebtedness of the Company.

"Senior"   shall be   deemed to mean   that,   in the   event of any   default   in the

payment   of the   obligations   represented   by this   Note or of any   liquidation,

insolvency,   bankruptcy,   reorganization, or similar proceedings relating to the

Company, except for the Company's obligations to its secured creditors, all sums

payable on this Note, shall first be paid in full, with interest, if any, before

any payment is made upon any other indebtedness,   now outstanding or hereinafter

incurred,   and, in any such event,   any payment or distribution of any character

which shall be made in respect of any other   indebtedness   of the Company   other

than   secured   obligations,   shall be paid   over to the   holder of this Note for

application to the payment hereof,   unless and until the obligations   under this

Note (which shall mean the Principal   Amount and other   obligations   arising out

of, premium, if any, interest on, and any costs and expenses payable under, this

Note) shall have been paid and satisfied in full. The Company will not issue any

secured   debt other   than under its   existing   credit   facilities   to any person

without the consent of the Lender.

<PAGE>

 

      2. Conversion.

 

             (a)   Conversion.   In the event   the   Company   consummates   a debt or

equity   financing of at least   $6,000,000   on or before the   Maturity   Date with

respect to which Sloan   Securities   Corp.   acts as the broker dealer (the "Sloan

Financing"),   at the Lender's   option,   the entire principal amount on this Note

shall be converted ("Exchange   Conversion") into the Company's equity securities

("Sloan Equity   Securities")   or debt   securities   ("Sloan Debt   Securities" and

together with the Sloan Equity Securities,   the "Sloan   Securities") sold in the

Sloan   Financing.   The Company   shall notify the Lender in writing ten (10) days

before the expected first closing of the Sloan Financing and if the Lender wants

to effect the Exchange   Conversion it must notify the Company no later that five

(5) days before the closing date. If so elected,   the Exchange   Conversion shall

occur at the first closing of the Sloan Financing ("First Closing"). Lenders who

do not   elect   the   Exchange   Conversion   within   the   requisite   five   (5) days

notification period will have permanently waived the Exchange Conversion option.

The   number of shares of Sloan   Equity   Securities   to be issued to a Lender who

elects   the   Exchange   Conversion   shall be equal to the   quotient   obtained   by

dividing   (i) the   entire   principal   amount   of this Note by (ii) the price per

share   of the   Sloan   Equity   Securities   ("Sloan   Conversion   Price"),   and the

issuance of such shares upon such conversion shall be upon the terms and subject

to the   conditions   applicable to the Sloan   Financing.   In the event Sloan Debt

Securities   are issued in the Sloan   Financing,   the   Lender who has   elected to

convert shall   exchange this Note and shall be issued the Sloan Debt Security in

an amount equal to the entire principal amount of this Note.

 

            (b)    Discretionary    Conversion.    In   addition   to   the    Exchange

Conversion,   the Lender   shall have the right   ("Discretionary   Conversion")   to

convert all of the principal   amount of this Note into Common Stock.   The number

of shares of Common   Stock to be issued upon such   conversion   shall be equal to

the quotient obtained by dividing (i) the amount converted by the Lender by (ii)

the lower of the price per share in the Sloan   Financing   or $0.45   ("Conversion

Price").   Any fraction of a share   resulting   from these   calculations   shall be

rounded upward to the whole share.   The Company   covenants to cause such shares,

when issued   pursuant to this Section 2(c), to be fully paid and   nonassessable,

and free from all taxes, liens and charges with respect to the issuance thereof,

other   than any   taxes,   liens or charges   not   caused by the   Company.   Accrued

interest for purposes of all conversion events shall be paid in cash.

 

            (c) Mechanics and Effect of Conversion.

 

 

                                      -2-

<PAGE>

 

                  (i) Exchange Conversion. A Lender who has elected the Exchange

Conversion shall surrender this Note at the First Closing, duly endorsed, at the

principal offices of the Company.   At its expense,   the Company will, as soon as

practicable   thereafter,   issue and deliver to such Lender,   at its   address,   a

certificate   or   certificates   for the number of Sloan Equity   Securities   or an

instrument or instruments for the principal   amount of the Sloan Debt Securities

to which such Lender is entitled upon such   conversion.   The Lender   understands

and agrees that the   conversion of the Notes into Sloan   Securities   may require

the Lender's execution of certain   agreements   relating to the purchase and sale

of such   securities as well as   registration   rights,   if any,   relating to such

Sloan   Securities,   and the   Company   agrees   that   upon the   execution   of such

agreements,    the   Lender   shall   receive   rights,   preferences   and   privileges

identical to those received by others   purchasing   like securities at such time.

At the time of the   Exchange   Conversion,   this Note,   the   Securities   Purchase

Agreement and the   Registration   Rights   Agreement   will   terminate and be of no

further force or effect.

 

                  (ii)   Discretionary   Conversion.   To exercise a   Discretionary

Conversion, the Lender shall surrender its Note, duly endorsed,   together with a

written   conversion   notice   to the   Company   at its   principal   office.   At its

expense, the Company will, as soon as practicable thereafter,   issue and deliver

to such Lender, at its address,   a certificate or certificates for the number of

shares to which such Lender is entitled upon such conversion. This Note shall be

deemed to have been converted   immediately prior to the close of business on the

date of giving of such notice and the Lender   shall be treated for all   purposes

as the record holder of the Common Stock   deliverable upon such conversion as of

the close of business on such date.

 

            (d) No   Impairment.   The   Company   will   not,   by   amendment   of its

Articles   of   Incorporation   or through   any   reorganization,   recapitalization,

transfer   of   assets,   consolidation,   merger,   dissolution,   issue   or   sale of

securities or any other voluntary action,   avoid or seek to avoid the observance

or performance of any of the terms to be observed or performed   hereunder by the

Company,   but will at all times in good faith   assist in the carrying out of all

the   provisions of this Section 2 and in the taking of all such action as may be

necessary or appropriate in order to protect the conversion rights of the Lender

of this Note against impairment.

 

      3.   Reservation of Shares.   The Company shall at all times have authorized

and reserved for issuance a sufficient   number of shares of its capital stock to

provide for the full conversion of this Note.

 

      4.   Anti-dilution.   Adjustment of Conversion   Price.   The Conversion Price

shall be adjusted from time to time as follows:

 

            (a)   Adjustment   of   Conversion   Price and   Number   of   Shares   upon

Issuance   of Common   Stock.   If and   whenever   on or after the date this Note is

issued,   the Company   issues or sells,   or is deemed to have issued or sold, any

shares of Common Stock (other than (i) Excluded   Securities (as defined   herein)

and Other   Securities (as defined   herein) and (ii) shares of Common Stock which

are issued or deemed to have been   issued by the Company in   connection   with an

Approved   Stock Plan (as defined   herein) or upon   exercise or conversion of the

Other   Securities)   for a   consideration   per   share   less   than   a   price   (the

"Applicable Price") equal to the Conversion Price in effect immediately prior to

such issuance or sale, then immediately   after such issue or sale the Conversion

Price then in effect shall be reduced to an amount   equal to such   consideration

per share.  

 

 

                                      -3-

<PAGE>

 

            (b) Effect on Conversion   Price of Certain   Events.   For purposes of

determining   the   adjusted   Conversion   Price   under   Section   4(a)   above,   the

following   shall be   applicable:   (i)   Issuance   of   Options.   If after the date

hereof,   the   Company in any manner   grants any   rights,   warrants or options to

subscribe for or purchase Common Stock or convertible securities ("Options") and

the lowest price per share for which one share of Common Stock is issuable   upon

the   exercise   of   any   such   Option   or   upon   conversion   or   exchange   of any

convertible   securities   issuable   upon exercise of any such Option is less than

the   Conversion   Price then in effect,   then such share of Common Stock shall be

deemed to be outstanding   and to have been issued and sold by the Company at the

time of the   granting   or sale of such   Option   for such   price per   share.   For

purposes of this Section 4(b)(i), the lowest price per share for which one share

of Common Stock is issuable upon exercise of such Options or upon   conversion or

exchange of such convertible   securities shall be equal to the sum of the lowest

amounts of   consideration   (if any)   received or   receivable by the Company with

respect   to any one   share of   Common   Stock   upon the   granting   or sale of the

Option,   upon exercise of the Option or upon conversion or exchange of any other

convertible security other than this Note issuable upon exercise of such Option.

No further   adjustment   of the   Conversion   Price   shall be made upon the actual

issuance   of such   Common   Stock   or of such   convertible   securities   upon   the

exercise of such   Options or upon the actual   issuance of such Common Stock upon

conversion or exchange of such convertible securities.

 

                  (ii) Issuance of Convertible Securities. If the Company in any

manner issues or sells any convertible   securities after the date hereof and the

lowest price per share for which one share of Common Stock is issuable   upon the

conversion or exchange thereof is less than the Conversion Price then in effect,

then such share of Common   Stock shall be deemed to be   outstanding   and to have

been issued and sold by the Company at the time of the   issuance or sale of such

convertible   securities   for such   price per   share.   For the   purposes   of this

Section 4(b)(ii), the lowest price per share for which one share of Common Stock

is issuable upon such   conversion   or exchange   shall be equal to the sum of the

lowest amounts of   consideration   (if any) received or receivable by the Company

with   respect   to one share of Common   Stock   upon the   issuance   or sale of the

convertible   security   and   upon   conversion   or   exchange   of such   convertible

security.   No further   adjustment of the Conversion Price shall be made upon the

actual   issuance   of such   Common   Stock upon   conversion   or   exchange   of such

convertible   securities,   and if any   such   issue   or sale   of such   convertible

securities   is made upon   exercise of any Options   for which   adjustment   of the

Conversion Price had been or are to be made pursuant to other provisions of this

Section 4(b), no further   adjustment   of the   Conversion   Price shall be made by

reason of such issue or sale.

 

                  (iii)   Change in Option   Price or Rate of   Conversion.   If the

purchase price provided for in any Options,   the   additional   consideration,   if

any,   payable   upon   the   issue,   conversion   or   exchange   of   any   convertible

securities, or the rate at which any convertible securities are convertible into

or   exchangeable   for Common Stock changes at any time, the Conversion   Price in

effect at the time of such   change   shall be adjusted   to the   Conversion   Price

which   would have been in effect at such time had such   Options   or   convertible

securities provided for such changed purchase price, additional consideration or

changed   conversion   rate,   as the case may be, at the time   initially   granted,

issued or sold and the number of shares of Common Stock issuable upon conversion

of this   Debenture   shall be   correspondingly   readjusted.   For purposes of this

Section 4(b)(iii),   if the terms of any Option or convertible   security that was

outstanding   as of the date   hereof are changed in the manner   described   in the

immediately preceding sentence, then such Option or convertible security and the

Common Stock deemed issuable upon exercise, conversion or exchange thereof shall

be deemed   to have been   issued   as of the date of such   change.   No   adjustment

pursuant to this Section 4(b) shall be made if such   adjustment   would result in

an increase of the Conversion Price then in effect.

 

 

                                      -4-

<PAGE>

 

            (c) Effect on Conversion   Price of Certain   Events.   For purposes of

determining   the adjusted   Conversion   Price under   Sections 4(a) and 4(b),   the

following shall be applicable:

 

                  (i)   Calculation   of   Consideration   Received.   If any   Common

Stock,   Options or   convertible   securities are issued or sold or deemed to have

been   issued or sold for cash,   the   consideration   received   therefore   will be

deemed to be the net amount   received   by the Company   therefore.   If any Common

Stock, Options or convertible   securities are issued or sold for a consideration

other than cash, the amount of such   consideration   received by the Company will

be the   fair   value   of such   consideration,   except   where   such   consideration

consists of   marketable   securities,   in which case the amount of   consideration

received by the Company will be the market price of such   securities on the date

of   receipt of such   securities.   If any Common   Stock,   Options or   convertible

securities   are issued to the owners of the   non-surviving   entity in connection

with any merger in which the   Company   is the   surviving   entity,   the amount of

consider