Exhibit 10.2
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 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 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SPACEDEV, INC., THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE NOTE
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FOR VALUE RECEIVED, SpaceDev, Inc., a Colorado corporation (hereinafter
called the "BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the "HOLDER") or
its registered assigns, on order, without demand, the sum of ONE MILLION DOLLARS
($1,000,000), or such other amount as may be due and owing from time to time by
Borrower to Holder pursuant to the terms of the Security Agreement (as hereafter
defined) (the "PRINCIPAL AMOUNT"), together with any accrued and unpaid
interest, on June 3, 2005 (the "MATURITY DATE").
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Security Agreement between the Borrower and the
Holder dated the date hereof (as amended, modified and supplemented from time to
time, the "SECURITY AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST
1.1. Interest Rate. Subject to Section 1.2 hereof, interest on this
Note shall be payable at the Contract Rate in accordance with the terms of the
Security Agreement.
1.2. Default Rate. Following the occurrence and during the continuance of
an Event of Default, interest on this Note shall be payable at the Default Rate.
ARTICLE II
ADVANCES UNDER NOTE
2.1. Mechanics of Advances. All Revolving Credit Advances evidenced
by this note shall be made in accordance with the terms and provisions of the
Security Agreement.
ARTICLE III
CONVERSION RIGHTS
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 thereafter during an Event of Default (as defined in Article
V), 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 Common Stock at the conversion price set forth in Section 3.2 (the
"CONVERSION PRICE"). The shares of Common Stock to be issued upon such
conversion are herein referred to as the "CONVERSION SHARES."
3.2. Conversion Price. Subject to adjustment as provided in Section 3.7
hereof, the Conversion Price per share shall be $0.54 (the "FIXED CONVERSION
PRICE") which price shall be determined at closing by multiplying the volume
weighted average closing price of the Borrower's Common Stock for the ten (10)
trading days prior to closing by 103%. If an Event of Default has occurred and
shall be continuing hereunder, then the Conversion Price shall be equal to the
lower of (i) the Fixed Conversion Price; or (ii) eighty three percent (83%) of
the average of the three lowest closing prices for the Common Stock on the
principal trading exchange or market for the Common Stock, (the "PRINCIPAL
MARKET"), or on any securities exchange or other securities market on which the
Common Stock is then being listed or traded, for the thirty (30) trading days
prior to but not including the Conversion Date. For every $1 million of
conversions made hereunder, the fixed Conversion Price shall thereafter be
adjusted upward to equal 103% of the volume weighted average closing price for
the ten (10) trading days prior to the last day of the period during which such
$1 million has been converted.
3.3. Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert, nor shall the
Borrower be permitted to require the Holder to accept, 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 the number of shares of Common
Stock beneficially owned by such holder or issuable upon exercise of warrants
held by such holder and 4.99% of the outstanding shares of Common Stock of the
Borrower. For the 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 Holder may void the Conversion Share
limitation described in this Section 3.3 upon 75 days prior notice to the
Borrower or without any notice requirement upon an Event of Default.
3.4. Mechanics of 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 Borrower and such Notice of Conversion shall provide a
breakdown in reasonable detail of the amount of 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 Borrower within two (2) business days after the Conversion Date. Each date
on which a Notice of Conversion is delivered or telecopied to the Borrower in
accordance with the provisions hereof shall be deemed a Conversion Date (the
"CONVERSION DATE"). A form of Notice of Conversion that may be employed by the
Holder is annexed hereto as Exhibit A. The Borrower will 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 with the
Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt by the
Borrower of the Notice of Conversion (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 Borrower of the Notice of Conversion. The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides the Borrower written instructions to the contrary.
3.5. Late Payments. The Borrower understands that a delay in the
delivery of the shares of Common Stock in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder.
As compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of the such shares in the form required
pursuant to this Article III upon conversion of the Note, in the amount equal to
the greater of (i) $500 per business day after the Delivery Date or (ii) the
Borrower's actual damages from such delayed delivery. The Borrower shall pay
any payments incurred under this Section in immediately available funds upon
demand and, in the case of actual damages, accompanied by reasonable
documentation of the amount of such damages.
3.6. Adjustment Provisions. The Fixed Conversion Price and number and kind
of shares or other securities to be issued upon conversion determined pursuant
to Sections 3.1 and 3.2, shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains outstanding,
as follows:
A. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.
B. Stock Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of shares of Common
Stock, or if a dividend is paid on the Common Stock in shares of Common Stock,
the Fixed Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.
C. Share Issuances. Subject to the provisions of this Section 3.6, if the
Borrower shall at any time prior to the conversion or repayment in full of the
Principal Amount issue any shares of Common Stock to a person other than the
Holder (otherwise than (i) pursuant to Subsections A or B above; (ii) pursuant
to options, warrants, or other obligations to issue shares outstanding on the
date hereof as disclosed to Holder in writing; or (iii) pursuant to options that
may be issued under any employee incentive stock option and/or any qualified
stock option plan adopted by the Borrower for a consideration per share (the
"Offer Price")) less than the Fixed Conversion Price in effect at the time of
such issuance, then the Fixed Conversion Price shall be immediately reset to
such lower Offer Price. For purposes hereof, the issuance of any security of the
Borrower convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price only upon the conversion,
exercise or exchange of such securities.
D. Computation of Consideration. For purposes of any computation respecting
consideration received pursuant to Subsection C above, the following shall
apply:
(a) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Borrower for any underwriting of the issue or
otherwise in connection therewith;
(b) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board of Directors of the Borrower (irrespective of
the accounting treatment thereof); and
(c) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by the
Borrower for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Borrower upon the conversion
or exchange thereof (the consideration in each case to be determined in the
same manner as provided in clauses (a) and (b) of this Subsection (D)).
3.7. Reservation of Shares. Except as otherwise provided in the
Securities Agreement, during the period the conversion right exists, the
Borrower will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Stock upon the full
conversion of this Note. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. The
Borrower agrees that its issuance of this Note shall constitute full authority
to its officers, agents, and transfer agents who are charged with the duty of
executing and issuing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
3.8. Registration Rights. The Holder has been granted registration rights
with respect to the shares of Common Stock issuable upon conversion of this Note
as more fully set forth in a Registration Rights Agreement dated the date
hereof.
3.9. Required Conversion. In the event that the Common Stock trades on the
Principal Market at a price greater than 118% of the Fixed Conversion Price for
a period of at least five (5) consecutive trading days, then the Borrower may,
at its sole option, provide the Holder irrevocable written notice ("CALL
NOTICE") requiring the conversion at the Fixed Conversion Price of all or a
portion of the Note held by the Holder (subject to the limitation provided for
in Section 3.3) as of the date set forth in such Call Notice (the "CALL DATE").
The Call Date shall be at least eleven (11) trading days following the date of
the Call Notice, provided a registration statement covering resales of that
number of Conversion Shares provided for in the Call Notice has been declared
effective and is available for use. The number of Conversion Shares to be issued
in connection with any such conversion pursuant to a particular Call Notice
pursuant to this Section 3.9 shall not exceed 25% of the aggregate dollar
trading volume of the Common Stock for the eleven (11) trading days immediately
preceding the Call Date. If the price of the Common Stock falls below 118% of
the Conversion Price during the eleven (11) trading day period preceding the
Call Date, then the Holder will no longer be required to convert the Note
pursuant to such Call Notice. The Company shall not be permitted to give the
Investor more than one notice during any twenty-two (22) day period.
ARTICLE IV
EVENT OF DEFAULT
The occurrence of any of the following events is an Event of Default
("EVENT OF DEFAULT"):
4.1. Failure to Pay Principal, Interest or other Fees. The Borrower
fails to pay any installment of principal, interest or other fees hereon or on
any other promissory note issued pursuant to the Security Agreement, when due;
or fails to make any payment, when due, arising from the occurrence of an
Overadvance provided, however, the Borrower shall have five (5) business days to
cure any such failure.
4.2. Breach of Covenant. The Borrower breaches any covenant or other term
or condition of this Note in any material respect and such breach, if subject to
cure, continues for a period of ten (10) days after the occurrence thereof.
4.3. Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith shall be
false or misleading; provided, however, the Borrower shall have ten (10)
business days to cure such failure.
4.4. Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
4.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its property or other assets for
more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of ninety (90) days.
4.6. Bankruptcy. Bankruptcy, insolvency, reorganization 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 Borrower;
provided, however, that where such action is instituted against the Borrower but
is dismissed within thirty (30) days after the filing of such petition, this
provision shall not apply to such action.
4.7. Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock for five (5) consecutive trading days or five (5)
days during a period of 10 consecutive trading days, excluding in all cases a
suspension of all trading on a Principal Market.
4.8. Default Under Related Agreement. The occurrence of an Event of Default
under and as defined in the Security Agreement.
ARTICLE V
DEFAULT PAYMENT
5.1. Default Payment. If an Event of Default occurs, the Holder, at its
option, may elect, in addition to all rights and remedies of Holder under the
Security Agreement and all obligations of Borrower under the Security Agreement,
to require the Borrower to make a Default Payment ("DEFAULT PAYMENT"). The
Default Payment shall be 125% of the outstanding principal amount of the Note,
plus accrued but unpaid interest, all other fees then remaining unpaid, and all
other amounts payable hereunder. The Default Payment shall be applied first to
any fees due and payable to the Holder, then to accrued and unpaid interest due
on the Note and then to the principal balance of the Note.
5.2. Default Payment Date and Default Notice Period. The Default Payment
shall be due and payable on the eleventh (11th) business day after the date
written notice is sent from the Holder to the Borrower of an Event of Default as
defined in Article IV ("DEFAULT PAYMENT DATE"). The period between the date of
the written notice from the Holder to the Borrower of an Event of Default and
the Default Payment Date shall be the "DEFAULT NOTICE PERIOD." If during the
Default Notice Period, the Borrower cures the Event of Default, the Event of
Default will no longer exist and any rights the Holder had pertaining to the
Event of Default will no longer exist. If the Event of Default is not cured
during the Default Notice Period, all amounts payable hereunder shall be due and
payable on the Default Payment Date, all without further demand, presentment or
notice, or grace period, all of which hereby are expressly waived.
5.3. Cumulative Remedies. The remedies under this Note shall be cumulative.
ARTICLE VI
MISCELLANEOUS
6.1. Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
6.2. Notices. Any notice herein required or permitted to be given shall be
in writing and provided in accordance with the terms of the Security Agreement.
6.3. Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
6.4. Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder with the prior written
consent of the Borrower, which consent shall not be unreasonably withheld.
6.5. Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
6.6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of ▇▇▇▇▇▇.
6.7. Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
6.8. Security Interest. The holder of this Note has been granted a security
interest in certain assets of the Borrower more fully described in the Security
Agreement.
6.9. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name
effective as of this 3rd day of June, 2003.
SPACEDEV, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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WITNESS: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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NOTICE OF CONVERSION
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(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ____________ on [
] ___, 2003 into Shares of Common Stock of ____________ (the "Borrower")
according to the conditions set forth in such Note, as of the date written
below.
Date of Conversion: ------------------------------
Conversion Price: ------------------------------
Shares To Be Delivered: ------------------------------
Signature: ------------------------------
Print Name: ------------------------------
Address: ------------------------------