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FORM OF
8% CONVERTIBLE SECURED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF A PRIOR EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR A PRIOR
OPINION OF COUNSEL TO THE COMPANY OR SUCH OTHER COUNSEL AS SHALL BE
SATISFACTORY TO THE COMPANY STATING THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR STATE SECURITIES LAWS.
January 26, 1998 U.S. $150,000.00
New York, New York
SOULFOOD CONCEPTS, INC.
8% CONVERTIBLE SECURED NOTE DUE JANUARY 26, 2000
THIS NOTE is one of a duly authorized issue of Notes of
Soulfood Concepts, Inc., a corporation duly organized and existing under the
laws of Delaware (the "Company"), designated as its 8% Convertible Secured Note
due January 26, 2000, in an aggregate principal amount not exceeding Two Hundred
Sixty-Five Thousand Dollars (U.S. $265,000).
FOR VALUE RECEIVED, the Company promises to pay to_________
the registered holder hereof, and its successors and assigns (the "Holder"), the
principal sum of One Hundred Fifty Thousand Dollars (U.S. $150,000) on January
26, 2000 (the "Maturity Date"), and to pay interest on the principal sum
outstanding, at the rate of 8% per annum due and payable semi-annually in
arrears on June 30 and December 31, commencing with the period ending June 30,
1998. Accrual of interest shall commence on the date hereof and shall continue
until payment in full of the outstanding principal sum has been made or duly
provided for or the date of conversion of the Notes. The interest so payable
will be paid to the person in whose name this Note (or one or more predecessor
Notes) is registered on the records of the Company regarding registration and
transfers of the Notes (the "Note Register"); provided, however, that the
Company's obligation to a transferee of this Note arises only if such transfer,
sale or other disposition is made in accordance with the terms and conditions
hereof and of the Note Purchase Agreement, dated as of January 26, 1998, between
the Company and the Purchasers parties thereto (the "Note Purchase Agreement").
The principal of, and interest on, this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal of and all
accrued and unpaid interest due upon this Note on the Maturity Date, less any
amounts required by law to be deducted or withheld, to the record Holder of this
Note as of the tenth (10th) day prior to the Maturity Date and addressed to such
record Holder at
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the last address appearing on the Note Register. The forwarding of such check
shall constitute a payment of outstanding principal and interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Note to the extent of the sum represented by such check plus any amounts so
deducted.
This Note is being offered through the Note Purchase
Agreement, and is subject to the terms and provisions thereof. Capitalized terms
not defined herein shall have the meanings ascribed to them in the Note Purchase
Agreement.
1. Denominations. The Notes are issuable in denominations of
Fifty Thousand Dollars (U.S.$50,000) and integral multiples thereof, or if less,
the principal amount thereof. The Notes are exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holders surrendering the same but not less than U.S. $50,000, or if less,
the principal amount thereof. No service charge will be made for such
registration or transfer or exchange.
2. Withholding. The Company shall be entitled to withhold from
all payments of principal of, and interest on, this Note any amounts required to
be withheld under the applicable provisions of the United States income tax
laws, rules or regulations or other applicable laws, rules or regulations at the
time of such payments.
3. Transfer and Conversion Restrictions. This Note has been
issued subject to investment representations of the original purchaser hereof
and may be transferred or exchanged in the United States only in compliance with
the Securities Act and applicable state securities laws. Prior to due
presentment for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on the Company's
Note Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note be overdue, and
neither the Company nor any such agent shall be affected or bound by notice to
the contrary.
4. Conversion. (a) Conversion Price. The Holder of this Note
is entitled, at its option at any time, to convert any or all of the original
principal amount of this Note into shares of common stock, par value $.003 per
share, of the Company (the "Common Stock"), by dividing the principal amount of
this Note that the Holder wishes to convert by $2.20 (the "Conversion Price").
The Conversion Price shall be subject to adjustment as hereinafter provided.
(b) Procedure. Conversion shall be effectuated by
surrendering the Notes to be converted to the Company with the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of this
Note evidencing such Holder's intention to convert this Note or a specified
portion (as above provided) hereof. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the fraction paid in
cash at the discretion of the Company. The date on which notice of conversion is
given shall be deemed to be the date on
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which the Holder has delivered this Note, with the conversion notice duly
executed, to the Company.
5. Mandatory Conversion at Company's Option. (a) Mandatory
Conversion. Following a public offering of the Company's Common Stock ("Public
Offering"), if at the end of any rolling thirty (30) consecutive trading day
period (the "Measuring Period") the Common Stock has traded for each trading day
during the Measuring Period at 140% of the Public Offering price per share or
higher, the Company may, in its sole discretion, give notice to the Note Holder
of a mandatory conversion of this Note. The Holder shall, upon receipt of such
notice, surrender its Note to the Company and receive in exchange that number of
shares of Common Stock as determined by Section 4 using the Conversion Price
then in effect at the time in question. No fractional shares or scrip
representing fractions of shares will be issued on such a conversion, but the
number of shares issuable shall be rounded to the nearest whole share, with the
fraction paid in cash at the discretion of the Company.
(b) Notice of Conversion. The right of the Company to cause
the conversion pursuant to this Section 5 shall be conditioned upon its giving
notice of such conversion (the "Notice"), by personal delivery, overnight
courier, certified mail or by facsimile, signed by an authorized officer, to the
holders of Notes (as such names may be set forth in the Note Register), not less
than fifteen (15) business days prior to the date upon which the conversion is
to be made (the "Conversion Date"). The Notice shall specify (i) the aggregate
principal amount of the Note to be converted, and (ii) the date of such
conversion. Within ten (10) business days after receipt of the Notice by the
Holder, such Holder shall surrender to the Company its Note.
(c) Partial Conversion. In the event of a partial
conversion by the Company pursuant to this Section 5, the aggregate principal
amount of Notes so converted by the Company shall be allocated among all of the
Notes at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such Notes.
(d) Interest; Surrender of Notes Upon Mandatory Conversion.
Upon the receipt of the Notice, interest shall cease to accrue upon the Note, or
in the case of a partial conversion, that portion of a Note subject to such
Notice. If a Holder fails to deliver the Note subject to the Notice within 30
days after receipt of such Notice, the Company shall cancel said Note and shall
have no further obligation whatsoever to the Holder regarding the rights
evidenced by the Note except for the delivery of the shares as provided in this
Section 5, provided that the Company shall have no obligation to deliver such
shares until the subsequent delivery of the Note.
6. Adjustments to Conversion Price. The Conversion Price shall
be subject to adjustment as follows:
(a) In case the Company shall, after the date hereof, (i)
pay a stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock
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or of capital stock of any other class), (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the Conversion Price in
effect immediately prior to such action shall be adjusted so that the holder of
this Note thereafter surrendered for conversion shall be entitled to receive an
equivalent number of shares of capital stock of the Company which he would have
owned immediately following such action had this Note been exercised immediately
prior thereto. Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(b) In case the Company shall issue any capital stock, or
any rights, warrants or other securities convertible into shares of capital
stock of the Company entitling such subscriber or purchaser to subscribe for or
purchase shares of capital stock at a price per share less than the Conversion
Price then in effect on the date of such issuance, the Conversion Price shall be
adjusted to such lower price per share at which such capital stock or such
rights, warrants or other securities are issued (such price per share to include
any consideration paid by the holders to acquire such security, if any, plus any
amount paid to the Company to exercise or convert such security). Such
adjustment shall be made whenever such capital stock or such rights, warrants or
other securities are issued, and shall become effective retroactively
immediately after the record date for the determination of stockholders entitled
to receive such capital stock or such rights, warrants or other securities.
(c) Whenever the Conversion Price is adjusted as provided
in Section 5(a) or 5(b) herein, the Company will promptly mail to the Holder a
certificate of the Company's Treasurer or Chief Financial Officer setting forth
the Conversion Price as so adjusted and a brief statement of facts accounting
for such adjustment.
(d) Irrespective of any adjustment or change in the
Conversion Price and the number of shares actually purchasable under this Note,
this Note may continue to express the Conversion Price per share as expressed in
this Note when initially issued.
7. Lockup. Beginning on the date that shares of Common Stock
are delivered to the Holder pursuant to Section 4 or Section 5 (the "Conversion
Date") hereof, such shares of Common Stock shall be deemed to be subject to the
lockup provisions of this Section 7 and not freely tradeable, and shall be
released from the lockup provisions hereof in one third increments on the three
month, six month and nine month anniversary of the effective date of the Public
Offering. Notwithstanding the foregoing the Company shall also impose a "stop
transfer" instruction on any Common Stock obtained through conversion of this
Note.
8. Restrictive Legend. Upon conversion of this Note, the
Holder shall receive a certificate for shares of Common Stock bearing the
following legend:
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THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF A PRIOR EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR A PRIOR OPINION OF
COUNSEL TO THE COMPANY OR SUCH OTHER COUNSEL AS SHALL BE
SATISFACTORY TO THE COMPANY STATING THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR STATE SECURITIES LAWS.
9. Absolute Obligation. No provision of this Note shall alter
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Note at the time, place and rate
herein prescribed.
10. Waiver of Rights. The Company hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder except as otherwise set forth herein and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
11. Collection Costs. The Company agrees to pay all costs and
expenses, including reasonable attorneys' fees, which may be incurred by the
Holder in collecting any amount due under this Note.
12. Default. If one or more of the following described "Events
of Default" shall occur:
(a) The Company shall default in the payment of principal
or interest on this Note; or
(b) Any of the material representations or warranties made
by the Company herein, in the Note Purchase Agreement, or in any certificate or
financial or other written statements heretofore or hereafter furnished directly
by the Company in connection with the execution and delivery of this Note or the
Note Purchase Agreement shall be false or misleading in any material respect at
the time made; or
(c) The Company shall fail to perform or observe, in any
material respect, any other material covenant, term, provision, condition,
agreement or obligation of the Company under this Note;
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(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for all of its or for a substantial part of its property
or business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within sixty (60) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of Two Hundred Fifty Thousand ($250,000) Dollars in
the aggregate shall be entered or filed against the Company or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of thirty (30) days; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution, or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding;
or
(i) Subsequent to a Public Offering, the Company shall have
its Common Stock delisted from any exchanges or the over-the-counter market;
then, or at any time thereafter, and as long as such Event of Default is
continuing for fourteen (14) days after written notice of such Event of Default
has been delivered, (except for the events described in Section 12(d) and (h)
for which no notice shall be given and no grace period shall be provided) or
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider this Note immediately due and payable, without presentment, demand,
protest or notice of any kinds, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of any
period of grace other than as contained in this Section, enforce any and all of
the Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
13. Security. This Note is secured as set forth in the
Security Agreement between Shark Restaurant, Inc., a Georgia corporation and a
wholly-owned subsidiary of the Company, and the Holder of even date herewith.
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14. Investment Intent. The Holder of this Note, by acceptance
hereof, agrees that this Note is being acquired for investment and that such
Holder will not offer, sell or otherwise dispose of this Note or the shares of
Common Stock issuable upon conversion hereof except under circumstances which
will not result in a violation of the Securities Act or any applicable state
Blue Sky law or similar laws relating to the sale of securities.
15. Severability. In case any provision of this Note is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby.
16. Entire Agreement. This Note and the agreements referred to
in this Note constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this Note
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the Company and the Holder.
17. Governing Law. This Note shall be governed by and
construed in accordance with the laws of New York, without giving effect to its
conflicts of laws rules.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
SOULFOOD CONCEPTS, INC.
By:
-----------------------
Name:
Title:
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to
Convert the 8% Convertible Secured Note)
The undersigned hereby irrevocably elects to convert $_________
principal amount of the above 8% Convertible Secured Note into shares of Common
Stock of Soulfood Concepts, Inc. (the "Company") according to the conditions set
forth in such Note and the Note Purchase Agreement, as of the date written
below.
The undersigned represents that the representations and warranties of
the undersigned contained in the Note Purchase Agreement are true and correct on
the date hereof as though made on and as of the date hereof.
Date of Conversion ____________________________________________________________
Applicable Conversion Price ___________________________________________________
Signature: Holder:
By:_________________________________________________
Name:
Title:
Address: ______________________________________________________________________
______________________________________________________________________
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