Exhibit 10.3D
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND ARE
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
8% CONVERTIBLE SUBORDINATED PROMISSORY NOTE
Due August 8, 2002
$300,000 August 8, 2000
LCS Golf, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay American Warrant Partners, LLC (such payee and
each subsequent holder from time to time of this Note being hereinafter called
the "Holder") the principal sum of Three Hundred Thousand Dollars ($300,000)
together with interest thereon (collectively, the "Note Amount") calculated from
the date hereof in accordance with the provisions of this 8% Convertible
Promissory Note ("Note"). Payments on this Note are to be made at such address
as duly designated by the Holder, in lawful money of the United States of
America.
The Company agrees that the proceeds of this Note shall not, without
the consent of the Holder, be used to pay (a) any indebtedness for borrowed
money or (b) any of the Company's obligations, including indebtedness (both
principal and any interest thereon) for borrowed funds and unpaid salaries, fees
or other compensation, owed to any officers or directors or stockholders owning
one percent or more of the Company's outstanding shares of Common Stock or any
of their family members or affiliates (collectively, the "Insiders") for
whatever purpose made and whether or not evidenced by a note, bond, debenture or
other formal instrument, excluding, for the purposes hereof, any salaries or
fees payable on a current basis to officers and directors in the ordinary course
of the Company's business.
1. Payment of Principal and Interest; Rate. Principal shall be
payable in one payment on August 8, 2002 (the "Maturity Date"). Interest shall
be payable on a quarterly basis commencing September 30, 2000 and continue on
each December 31, March 31, June 30, and September 30, thereafter until the Note
is paid in full; provided, however, that if on any such day banks in the City of
New York are authorized or required to close, an interest payment payable on
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such date will be payable on the next day that banks in the City of New York are
not authorized or required to close.
This Note shall bear interest on the outstanding principal amount
hereof at the annual rate of interest of eight percent (8%). Interest shall
accrue on the principal amount of this Note outstanding from time to time
(computed on the basis of a 360-day year of twelve 30-day months) from the date
hereof. Interest shall be payable on the Maturity Date or upon acceleration of
maturity or voluntary prepayment of this Note as provided herein.
In addition, if the Securities and Exchange Commission does not
declare effective a Registration Statement relating to all of the Conversion
Stock (as hereinafter defined) in a manner set forth in that certain
Registration Right Agreement of even herewith between the Company and the Holder
("Registration Statement"), the Conversion Price will decrease and the interest
rate will increase in the manner set forth therein.
At the Company's option, so long as the Company's authorized capital
is sufficient and the Company issues freely tradeable and fully registered
shares, the Company shall have the right, in lieu of paying some or all of any
interest in cash, to issue such number of shares of Common Stock to the Holder
which is equal to the interest payment divided by the Current Market Price (as
such term is defined in Paragraph 2(c) of this Note. By way of example, if the
amount of the interest payment is $1,000 and the market price of the Common
Stock is $2.00 per share, then the Company may issue 500 shares of Common Stock
to the Holder. Fractional amounts will be rounded to the nearest whole-number.
2. Conversion.
(a) Right to Convert; Mandatory Conversion. Subject to and upon
compliance with the provisions of this Note, the Holder shall have the right at
any time to convert all or any portion hereof, in denominations of $1,000
principal amount at maturity or integral multiples thereof, into that number of
fully paid and nonassessable whole shares of the Company's common stock, $.001
par value (the "Common Stock") obtained by dividing (i) the Note Amount plus any
accrued and unpaid interest, through and including the date of conversion, by
(ii) $.25 (the "Conversion Price"), which is subject to adjustment (i) (a) 30
days after the date hereof and/or (b) in the event the Registration Statement
(defined below) is not filed by September 15, 2000, then on the date the
Registration Statement is filed with the Securities and Exchange Commission, to
the lower of $.25 or 80% of the Current Market Price (as defined below), and
(ii) pursuant to Paragraph 4 below.
The shares of Common Stock issuable upon conversion of the Note (the
"Conversion Stock"), when the same shall be issued in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable Common Stock in
the hands of the Holders thereof.
(b) Mechanics of Conversion. In order to effect the conversion of
the Note into Conversion Stock, the Holder shall surrender to the Company the
Note to be converted accompanied
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by a duly executed notice of conversion stating that the Holder elects to
convert all or a specified portion of the Note Amount in accordance with the
provisions hereof and specifying the name or names in which such Holder wishes
the Conversion Stock to be issued.
In case such notice shall specify a name or names other than that of
the Holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of Conversion Stock in such name or names. Other than
such taxes, the Company will pay any and all issue and other taxes (other than
based on income) that may be payable in respect of any issue or delivery of
Common Stock upon conversion of the Note.
As promptly as practicable and in any event within ten business days
after surrender of the Note to be converted and the receipt of such notice of
conversion relating thereto and, if applicable, payment of all transfer taxes
(or the demonstration to the satisfaction of the Company that any such taxes
have been paid) the Company will deliver promptly to, or upon the written order
of, the Holder of this Note (i) certificates representing the number of validly
issued, fully paid and nonassessable whole shares of Conversion Stock to which
the Holder shall be entitled, (ii) any cash owing in lieu of a fractional
Conversion Stock, determined in accordance with subparagraph (d) of this Section
2 and (iii) if fewer than all the Note Amount surrendered are being converted, a
new Note, of like tenor, evidencing a principal amount at maturity equal to the
principal amount at maturity of the Note surrendered for conversion less the
principal amount at maturity of the Notes being converted. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the Note to be converted and the making of any such
required payment. Upon such conversion, the rights of the Holder being converted
shall cease except for the right to receive Conversion Stock (or such other
consideration as provided herein) in accordance herewith, and the person
entitled to receive the Conversion Stock shall be treated for all purposes as
having become the record Holder of such Conversion Stock at such time.
(c) For purposes of this Paragraph 2, the following terms shall have
the meaning indicated:
(1) "Current Market Price" means the average of the
daily Closing Prices per share of Common Stock on the
principal trading market of the Common Stock for the five (5)
consecutive Trading Days immediately prior to the conversion
date in question.
(2) "Trading Day" means (a) if shares of Common Stock
are listed or admitted to trading on a national securities
exchange, a day on which the principal national securities
exchange on which such shares are listed or admitted to
trading is open for business or(b) if such Common Shares are
not so listed or admitted to trading, a day on which any New
York Stock Exchange member firm is open for business.
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(d) No Fractional Shares. No fractional Conversion Stock or scrip
representing fractional Conversion Stock shall be issued upon conversion of this
Note. Instead of any fractional Conversion Stock that would otherwise be
issuable upon conversion of any Note, the Company shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the same fraction of
the Current Market Price at the close of business on the Trading Day immediately
preceding the date of conversion.
3. [Intentionally Omitted]
4. Antidilution
(a) Adjustments Generally. The Conversion Price and the number of
shares of Conversion Stock (or other securities or property) issuable upon
exercise of this Note shall be subject to adjustment from time to time upon the
occurrence of certain events as provided herein.
Except as hereinafter provided, in case the Company shall at
any time after the date hereof issue, grant or sell any shares of Additional
Stock (as hereinafter defined) for a consideration, exercise or conversion price
per share less than the Conversion Price in effect immediately prior to the
issuance or sale of such shares, or without consideration, then forthwith upon
such issuance or sale, the Conversion Price shall (upon such issuance or sale)
be reduced to a price (calculated to the nearest cent) determined by dividing
(i) an amount equal to the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price then in effect, plus (b) the consideration, if any, received by
the Company upon such issuance or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issuance or sale; provided,
however, that in no event shall the Conversion Price be adjusted pursuant to
this computation to an amount in excess of the Conversion Price in effect
immediately prior to such computation. "Additional Stock" shall mean Common
Stock or options, warrants or other rights to acquire or securities convertible
into or exchangeable for shares of Common Stock, including shares held in the
Company's treasury, and shares of Common Stock issued upon the exercise of any
options, rights or warrants to subscribe for shares of Common Stock and shares
of Common Stock issued upon the direct or indirect conversion or exchange of
securities for shares of Common Stock, other than:
(A) Common Stock issued or issuable upon conversion of the
Note;
(B) Options granted and Common Stock issued or issuable upon
the exercise thereof to purchase up to 2,000,000 shares of Common Stock
(adjusted for any stock splits, dividends or recapitalizations) on a
post-Closing, fully-diluted, as-converted basis pursuant to the Company's
stock option plan, currently in effect. Other options shall be treated as
Additional Stock for purposes of this Section 4; and
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(C) Common Stock or rights to acquire Common Stock issued or
issuable in connection with an acquisition by the Company of another
business entity as the material assets of another business entity;
For the purpose of any computation to be made in accordance with
this Section 4(f), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common Stock
for a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price) before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.
(2) In the case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
fair market value of such consideration as determined in good faith by the
Board.
(3) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(4) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(ii) In the case of the issuance of options, rights, or warrants to
purchase or subscribe for shares of Common Stock, securities convertible into or
exchangeable for shares of Common Stock, or options, rights or warrants to
purchase or subscribe for any such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(a):
(A) The aggregate maximum number of shares of Common Stock issuable
under such options, rights or warrants shall be deemed to be issued and
outstanding at the time such options, rights or warrants were issued, and shall
be deemed to be issued for a consideration equal to the minimum purchase price
per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration received in connection with sale of the
foregoing, if any, received by the Company for such options, rights or warrants;
provided, however, that upon the expiration or
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other termination of such options, rights or warrants, if any thereof shall not
have been exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this subsection (A) shall be reduced by such number
of shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares of Common Stock shall no
longer be deemed to be issued and outstanding, and the Conversion Price then in
effect shall forthwith be readjusted and thereafter be the price which it would
have been had such adjustment been made on the basis of the issuance only of
shares of Common Stock actually issued or issuable upon the exercise of those
options, rights or warrants as to which the exercise of rights shall not have
expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common Stock issuable
upon conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and shall be deemed to be issued for a consideration equal to the
consideration received in connection with the sale of the foregoing received by
the Company for such securities, plus the consideration, if any, receivable by
the Company upon the conversion or exchange thereof; provided, however, that
upon the termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason of redemption or otherwise), the
number of shares deemed to be issued and outstanding pursuant to this subsection
(B) shall be reduced by such number of shares as to which the conversion or
exchange rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding and the Conversion
Price then in effect shall forthwith be readjusted and thereafter be the price
which it would have been had such adjustment been made on the basis of the
issuance only of shares actually issued or issuable upon the conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(C) If any change shall occur in the price per share provided for in
any of the options, rights or warrants referred to in subsection (A) of this
Section 4(e)(ii), or in the price per share at which the securities referred to
in subsection (B) of this Section 4(e)(ii) are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case may
be, shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(D) Except as otherwise provided in this Section 4(a)(ii), no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock upon exercise of options, rights or warrants or upon the
actual issuance of such Common Stock upon conversion or exchange of any
convertible or exchangeable securities.
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(iii) In the event of a split of Common Stock, dividend of Common
Stock, subdivision of Common Stock, combination or reclassification of Common
Stock (including where the Common Stock is exchanged for common stock of another
entity) (each, an "Action"), the Conversion Price shall be adjusted to equal the
Conversion Price immediately prior to such Action, multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately prior to such Action, and the denominator of which is the number of
shares of Common Stock outstanding immediately after such Action.
(iv) No adjustment in the Conversion Price for the note shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such Conversion Price; provided, however, that any
adjustments which by reason of this Section 4(a)(iv) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 4(a) shall be
made to the nearest one cent ($0.01).
(f) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 45),
provision shall be made so that the Holder of the Note shall thereafter be
entitled to receive upon conversion of the Note the number of shares of stock or
other securities or property of the Note or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the Holder of the Note after the recapitalization to the end that the provisions
of this Section 4 (including adjustment of the Conversion Price for the Note
then in effect and the number of shares issuable upon conversion of the Note
shall be applicable after that event as nearly equivalent as may be practicable.
(g) The Company will not, by amendment of its Certificate 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 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holder of the Note
against impairment.
(h) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with and into
another corporation, or the sale of all or substantially all of its assets to
another corporation, shall be effected while the note is outstanding in such a
manner that holders of shares of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby each Holder
of the note shall thereafter have the right to receive upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock
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immediately theretofore receivable upon conversion of the note, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore so receivable had
such reorganization or reclassification, consolidation, merger or sale not taken
place, and in such case appropriate provision shall be made with respect to the
rights and interests of the Holder of the Note to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price of the note and of the number of shares of Common Stock
issuable upon conversion thereof) shall thereafter be applicable, as nearly as
may be possible, in relation to any shares of stock, securities or assets
thereafter deliverable upon the conversion of the Note. Prior to or
simultaneously with the consummation or any such consolidation, merger or sale
of the Company, the survivor or successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and mailed or
delivered to the holder of the note, the obligation to deliver to the Holder of
the note such shares of stock, securities or assets as, in accordance with the
foregoing provisions, Holder of the note may be entitled to receive, and
containing the express assumption of such successor corporation of the due and
punctual performance and observance of every provision of the note to be
performed and observed by the Company and of all liabilities and obligations of
the Company hereunder with respect to the note.
(i) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Company shall mail to the Holder, at least 5
business days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this Section 4, the Company, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder of a statement, signed by its chief
financial officer, setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of the Holder of the note,
furnish or cause to be furnished to the Holder a like note setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for the note at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of the note.
(k) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Note, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Note, in addition to such other remedies
as shall be available to the Holder of the Note, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares
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as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to these provisions.
(l) The Company shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Company upon conversion of the note; provided, however,
that the Company shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the Holder of the Note in respect
of which such shares are being issued.
(m) All shares of Common Stock that may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the Company,
be validly issued, fully paid and nonassessable and free from all taxes, liens
or charges with respect thereto.
(n) Any notice required by the provisions of this Section 4 to be
given to the Holders of the Note shall be deemed given if sent by overnight
courier or deposited in the United States mail, postage prepaid, and addressed
to each holder of record at his address appearing on the stock books of the
Company.
(o) In the event the Note shall be converted pursuant to Section 4
hereof or otherwise reacquired by the Company, the shares so converted or
reacquired shall be canceled and may not be reissued. The Certificate of
Incorporation of the Company may be appropriately amended from time to time to
effect the corresponding reduction in the Company's authorized capital stock.
(b) Failure to Have Registration Statement Declared Effective. If
the Securities and Exchange Commission does not declare effective a Registration
Statement relating to all of the Conversion Stock, the Conversion Price will
decrease in the manner set forth therein and will decrease by an additional 2%
thereafter for each 30 day period until such time as the Registration Statement
is declared effective.
(c) Certain Other Events. If any event occurs as to which the
foregoing provisions are not strictly applicable or, if strictly applicable,
would not, in the good faith judgment of the Board of Directors of the Company,
fairly protect the purchase rights of the Note in accordance with the essential
intent and principles of such provisions, then such Board shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of such Board, to protect such purchase rights as aforesaid, but
in no event shall any such adjustment have the effect of increasing the
Conversion Price or decreasing the number of Shares subject to purchase upon
conversion of this Note.
(d) Enforceability. The Company will not by amendment of its
certificate of incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance or any of the terms
of the Note but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of the Note against any
of the foregoing events of dilution or other impairment.
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5. Subordination. The Company subject to this Note's terms, rights
and restrictions shall grant to Holder a general lien and security interest
against all its unindentured assets subordinating, however, to any institutional
financial loan or lender, currently existing or in the future, or current prior
UCC-1 filed lien holder. In order to effectuate the general lien and security
interest of the Holder, the Company agrees to submit a UCC-1 filing to the
benefit of the Holder within ten (10) days of the making of this Note. The
foregoing general lien and security applies to all unconverted or unredeemed
outstanding principal and interest.
6. Covenants
(a) Affirmative Covenants: The Company covenants and agrees that,
while the Note is outstanding, it shall:
(a) Pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income and profits, or upon any
property belonging to it before the same shall be in default; provided, however,
that the Company shall not be required to pay any such tax, assessment, charge
or levy that is being contested in good faith by proper proceedings and adequate
reserves for the accrual of same are maintained if required by generally
accepted accounting principles;
(b) Preserve its corporate existence and continue to engage in
business of the same type as conducted as of the date hereof, and
(c) Comply in all respects with all statutes, laws, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations and requirements ("Requirement(s)") of all governmental bodies,
departments, commissions, boards, companies or associations insuring the
premises, courts, authorities, officials, or officers, that are applicable to
the Company; except where the failure to comply would not have a material
adverse effect on the Company; provided that nothing contained herein shall
prevent the Company from contesting the validity or the application of a
Requirement.
7. Negative Covenants. The Company covenants and agrees that while
this Note is outstanding, it will not directly or indirectly:
(a) Make or forgive any loans to any Insider or guarantee or
otherwise in any way become or be responsible for indebtedness for borrowed
money, or for obligations, in either case of any of the Insiders, contingently
or otherwise, other than such guarantees existing as of the date hereof and
advancement of expenses in the ordinary course of business;
(b) Declare or pay any cash dividends;
(c) Sell, transfer or dispose of any of its assets other than in the
ordinary course of its business and for fair value; or
(d) Purchase, redeem, retire or otherwise acquire for value any of
its capital stock now or hereafter outstanding without prior consent of the
Holder.
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8. Default. Each of the following events shall constitute an "Event
of Default" under this Note:
(a) the failure of the Company to pay when due any interest (and
such default continues for 20 days) following written notice, principal or any
other sum under this Note;
(b) the failure of the Company to observe or perform any covenant
set forth in this Note, and such default shall remain uncured for a 20 day
period following written notice;
(c) the breach of any representation, warranty or covenant made by
the Company in this Note, and such default shall remain uncured for a 20 day
period;
(d) the Company shall (i) file, or consent by answer or otherwise to
the filing against it of, a petition for relief or reorganization or arrangement
or any other petition in bankruptcy or insolvency law of any jurisdiction, (ii)
make an assignment for the benefit of its creditors, (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of itself or of any substantial part of its property, (iv) be adjudicated
insolvent or be liquidated, or (v) take corporate action for the purpose of any
of the foregoing; or
(e) a court or governmental authority of competent jurisdiction
shall enter an order appointing, without consent by the Company, a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or if an order for relief
shall be entered in any case or proceeding for liquidation or reorganization or
otherwise to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Company, or if any petition for any such relief shall be filed against the
Company and such petition shall not be dismissed within 60 days;
(f) if, after requesting in writing reasonable assurances from the
Company regarding its duty to pay the amounts payable hereunder in the time
periods as set forth herein, in the reasonable judgment of the Holder, the
Holder concludes that the Company will be unable to pay when due any unpaid
interest, principal or any other sum under this Note, then, upon the occurrence
of any Event of Default described above, the unpaid principal amount of and the
accrued interest on this Note shall become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company.
9. Note Due On Sale of Company. If during the term of this Note, the
Company consolidates with or merges into another corporation, transfers all or
substantially all of its assets, the Company consummates a sale or exchange of
50% or more of the outstanding voting stock of the Company, or the current Board
of Directors constitutes less than a majority of the Company's Board, (each or
collectively representing a "Change of Control"), the Holder shall thereafter be
entitled upon conversion to Common Stock, with respect to each share of Common
Stock convertible hereunder immediately prior to the date upon which such Change
of Control becomes effective, the securities or property to which a holder of
shares of Common Stock is entitled upon Change of Control, without any change in
the conversion price in effect immediately prior to such Change of Control, and
the Company shall take such steps in connection with such consolidation or
merger as may be necessary to ensure that all of the provisions of the Note
shall thereafter be applicable, as nearly as
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reasonably may be, in relation to any securities or property thereafter
deliverable upon the conversion of this Note. The Company shall not effect any
such Change of Control unless prior to the consummation thereof the successor
entity resulting therefrom shall assume all obligations and provisions of this
Note which are then applicable and outstanding. Notwithstanding the foregoing,
should there be a Change in Control, the Holder, at its election, may choose to
forfeit its rights to conversion into Common Stock and, upon written notice to
Company, elect to retire this Note and demand payment of all outstanding
principal and interest.
10. Fees and Expenses. The Company shall reimburse the Holder for
its reasonable fees and disbursements and the reasonable legal fees and expenses
charged by its legal counsel in connection with modifications, waivers,
consents, amendments, or enforcement, relating to the Note. In addition, the
Company shall reimburse Holder for the reasonable expenses incurred
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<PAGE>
by Holder in connection with the negotiation, documentation and execution of
this Note and the closing of the transactions contemplated herein, and any
amendment, waiver, consent, supplement or modification hereto or thereto, not to
exceed $20,000, including, without limitation, fees of counsel to Holder.
11. Miscellaneous.
(a) This Note shall be construed in accordance with and governed
by the laws of the State of New York (without regard to its
conflict of laws principles).
(b) Notwithstanding anything to the contrary contained in this
Note, no interest shall accrue or be payable hereunder that is
in excess of the maximum amount permitted under the applicable
law relating to usury. Any interest that is in excess of the
maximum amount permitted under the applicable law relating to
usury shall be applied to reduce the outstanding principal
balance hereof and shall be deemed to represent a prepayment
of principal hereunder.
(c) No course of dealing between the Company and the Holder or any
delay on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of any rights of a Holder
hereof, except to the extent expressly waived in writing by
the Holder.
(d) This Note may not be modified or discharged except by an
instrument in writing executed by the Company and the Holder.
(e) This Note shall be binding upon and inure to the successors
and assigns of the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
by a duly authorized officer.
LCS GOLF, INC.
By:
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Name:
Title:
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