Document:

SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

 
EXHIBIT 4.5

 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL
BE REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS. 
 
TEAM SPORTS ENTERTAINMENT
INC. 
 
Senior Secured Convertible Promissory
Note due August 31, 2003 
 

	 No. TSE-          
	 	 Dated: September 1, 2002

 
For value received,
TEAM SPORTS ENTERTAINMENT, INC. CORPORATION, a Delaware corporation (the “MAKER”) 13801 Reese Blvd., West, Suite 150, Huntersville, NC 28078, hereby promises to pay to the order of
                                        
together with its successors, representatives, and permitted assigns, the “HOLDER”), in accordance with the terms hereinafter provided, the principal amount of
                                        
         Dollars ($                    ), together with interest thereon. Concurrently with the
issuance of this Note, the Maker is issuing separate notes (the “OTHER NOTES”) to separate purchasers (the “OTHER HOLDERS”) pursuant to the Purchase Agreement (as defined in Section 1.1 hereof). All payments under or pursuant to
this Note shall be made in United States Dollars in immediately available finds to the Holder at the address of the Holder first set forth above or at such other place as the Holder may designate from time to time in writing to the Maker. The
outstanding principal balance of this Note shall be due and payable on August 31, 2003 (the “MATURITY DATE”) or at such earlier time as provided herein. 
 
ARTICLE I 
 
Section 1.1 PURCHASE AGREEMENT. This Note has been executed and delivered pursuant to the Promissory Note Purchase Agreement, dated as of
September 1, 2002 (the “PURCHASE AGREEMENT”), by and between the Maker and the purchasers listed therein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

 
Section 1.2 INTEREST. Beginning on the date
hereof, the outstanding principal balance of this Note shall bear interest, in arrears, at a rate per annum equal to eight percent (8%), payable quarterly or upon conversion unless prepaid as provided herein on December 1, March 1, June 1 and
September 1. Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day months and shall accrue commencing on the issuance date of this Note (the “ISSUANCE DATE”). The interest shall be payable in cash. Upon the
occurrence of an Event of Default (as defined in Section 2.1 hereof), then to the extent permitted by law, the Maker will pay interest to the Holder, payable on demand, on the outstanding principal balance of the Note from the date of 

 
the Event of Default until
such Event of Default is cured at the rate of twelve percent (12%) per annum. 
 
Section 1.3 SECURITY AGREEMENT. The obligations of the Maker hereunder shall be secured by, and the Holder shall be entitled to the rights and security granted by the Maker pursuant to the Security Agreement dated as of
the date hereof by the Maker for the benefit of the Holder (the “SECURITY AGREEMENT”). 
 
Section 1.4 SENIOR NOTE. This Note shall be senior to all other indebtedness of the Maker. 
 
Section 1.5 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the
laws of the State of North Carolina, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date. 
 
Section 1.6 TRANSFER. This Note may be transferred or sold,
subject to the provisions of Section 4.8 of this Note and the provisions of the other Transaction Documents (as defined in the Purchase Agreement), or pledged, hypothecated or otherwise granted as security by the Holder. 
 
Section 1.7 REPLACEMENT. Upon receipt of a duly executed,
notarized and unsecured written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), and without requiring an indemnity bond or other security, or, in the case of a mutilation of this
Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount in lieu of such lost, stolen, destroyed or mutilated Note. 
 
ARTICLE II 
 
EVENTS OF DEFAULT; REMEDIES 
 
Section 2.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall be an “EVENT OF DEFAULT” under this Note:

 
(a) the Maker shall fail to make the payment of
any amount of principal outstanding for a period of five (5) business days after the date such payment is due hereunder; or 
 
(b) the Maker shall fail to make any payment of interest in cash for a period of five (5) days after the date such interest is due; or

 
(c) the Maker’s notice to the Holder,
including by way of public announcement, at any time, of its inability to comply or its intention not to comply with proper requests for conversion of this Note into shares of Common Stock; or 
 
(d) any material representation or warranty made by the Maker
herein or in the Purchase Agreement or, the Security Agreement shall prove to have been false or incorrect or breached in a material respect on the date as of which made; or 
 

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(e) the
consummation of any of the following transactions: 
 
(i) the consolidation, merger or other business combination of the Maker with or into a person or entity (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Maker or (B) a consolidation, merger or other business combination in which holders of the Maker’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting
power of the surviving entity or entitles necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities), except if in the case of a consolidation, merger or other
business combination of the Maker, the Maker shall have given the Holder not less than fifteen (15) business days prior written notice thereof (the “TRANSACTION NOTICE”) and shall have furnished the Holder with such information regarding
the consolidation, merger or other business combination (including, without limitation, the counterparties thereto) as the Holder may reasonably request in order for the Holder to determine if it will exercise its conversion rights hereunder prior
to the consummation of such consolidation, merger or other business combination; 
 
(ii) the sale or transfer of all or substantially all of the Maker’s assets; or 
 
(iii) the consummation of a purchase, tender
or exchange offer made to the holders of more than 30% of the outstanding shares of Common Stock; or 
 
(f) the Maker shall: 
 
(i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property or assets, 
 
(ii) make a general assignment for the benefit of its creditors, 
 
(iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), 
 
(iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally,

 
(v) acquiesce in writing to any
petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), or 
 
(vi) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or 
 
(g) the occurrence of an Event of Default under the Other Notes; 
 

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Section 2.2 REMEDIES
UPON AN EVENT OF DEFAULT. If an Event of Default shall have occurred and shall be continuing, the Holder of this Note may at any time at its option (a) declare the entire unpaid principal balance of this Note, together with all interest accrued
thereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Maker. An Event of
Default under Section 2.1 may only be waived by the Holder or holders of a majority of outstanding principal amount of this Note and the Other Notes. No course of delay on the part of the Holder shall operate as a waiver thereof or otherwise
prejudice the right of the Holder. No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise. 
 
ARTICLE III 
 
CONVERSION; ANTIDILUTION; PREPAYMENT 
 
Section 3.1 CONVERSION OPTION. At any time on or after the
Issuance Date, this Note shall be convertible (in whole or in part), at the option of the Holder (the “CONVERSION OPTION”), into such number of fully paid and non-assessable shares of Common Stock (the “CONVERSION RATE”) as is
determined by dividing (x) that portion of the outstanding principal balance under this Note as of such date that the Holder elects to convert by (y) the Conversion Price (as hereinafter defined) then in effect on the date on which the Holder faxes
prior to 5:00 p.m. eastern standard time a notice of conversion (the “CONVERSION NOTICE”), duly executed, to the Maker (facsimile number) (704) 992-1291, Attn.: Terry Hanson, President) (the “CONVERSION DATE”). 
 
Section 3.2 MECHANICS OF CONVERSION. Not later than five (5)
Trading Days after any Conversion Date, the Maker will deliver to the applicable Holder by express courier: (A) a certificate or certificates which shall carry any applicable restrictive legends and/or trading restrictions representing the number of
shares of Common Stock being acquired upon the conversion of this Note and (B) one or more new promissory notes representing the amount of this Note not converted. If in the case of any Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the fifth Trading Day after the Conversion Date (the “DELIVERY DATE”), the Holder shall be entitled by written notice to the Maker at any time before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which event the Maker shall immediately return this Note tendered for conversion, whereupon the Maker and the Holder shall each be restored to their respective positions immediately prior to
the delivery of such notice of revocation. 
 
Section 3.3
ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be subject to adjustment from time to time as follows: 
 
(a) ADJUSTMENTS FOR STOCK SPLITS AND COMBINATIONS. If the Maker shall at any time or from time to time after the Issuance Date, effect a
stock split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased. If the Maker shall at any time or from time to time after the Issuance Date, combine the
outstanding shares of Common Stock, the applicable 
 

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Conversion Price in effect
immediately prior to the combination shall be proportionately increased. Any adjustments under this Section 3.4(a)(i) shall be effective at the close of business on the date the stock split or combination occurs. 
 
(b) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If
the Maker shall at any Time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock,
then, and in each event, the applicable Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record
date, by multiplying, as applicable, the applicable Conversion Price then in effect by a fraction: 
 
(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date; and 
 
(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or distribution. 
 
(c) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the Maker shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of this Note shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of securities of the Maker which they would
have received had this Note been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities (together with any distributions
payable thereon during such period), giving application to all adjustments called for during such period under this Section 3.4(a)(iii) with respect to the rights of the holders of this Note and the Other Notes. 
 
(d) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE OR
SUBSTITUTION. If the Common Stock issuable upon conversion of this Note at any time or from time to time after the Issuance Date shall be changed to the same or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Sections 3.3), then, and in each event, an appropriate revision to the Conversion Price shall be
made and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the holder of this Note shall have the right thereafter to convert this Note into the kind and amount of shares of stock and other securities receivable
upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock 
 

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into which such Note might
have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein. 
 
(e) ADJUSTMENTS FOR REORGANIZATION, MERGER, CONSOLIDATION OR SALES OF ASSETS. If at any time or from time to time after the Issuance Date
there shall be a capital reorganization of the Maker or a merger or consolidation of the Maker with or into another corporation, or the sale of all or substantially all of the Maker’s properties or assets to any other person (an “ORGANIC
CHANGE”), then as a part of such Organic Change an appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the holder of this Note shall have the right
thereafter to convert such Note into the kind and amount of shares of stock and other securities or property of the Maker or any successor corporation resulting from Organic Change. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.3(e) with respect to the rights of the holder of this Note after the Organic Change to the end that the provisions of this Section 3.3(e) (including any adjustment in the applicable Conversion Price
then in effect and the number of shares of stock or other securities deliverable upon conversion of this Note and the Other Notes) shall be applied after that event in as nearly an equivalent manner as may be practicable. 
 
(f) ADJUSTMENTS FOR ISSUANCE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Maker, shall, at any time, from time to time, issue or sell any Additional Shares of Common Stock to a third party other than the Holder or the Other Holders for a consideration per share less than the Conversion Price then
in effect for the Note immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Conversion Price then in effect for the Notes shell be reduced to a price equal to the consideration per share paid for such
Common Stock. 
 
(g) ISSUANCE OF COMMON STOCK
EQUIVALENTS. If the Maker, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“CONVERTIBLE SECURITIES”), other than this Note, or any rights or
warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “COMMON STOCK EQUIVALENTS”) and the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be
issuable thereafter is amended or adjusted, and such price as so amended shall be less than the applicable Conversion Price in effect at the time of such amendment, then the applicable Conversion Price upon each such issuance or amendment shall be
adjusted as provided in the first sentence of subsection (f) of this Section 3.3(a). 
 
(h) CONSIDERATION FOR STOCK. In case any shares of Common Stock or any Common Stock Equivalents shall be issued or sold: 
 
(i) in connection with any merger or consolidation in which the Maker is the surviving
corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Maker shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration

 

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therefore shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board of Directors of the Maker, of such portion of the assets and business of the nonsurviving corporation as such Board may determine to be attributable to such shares of Common Stock, Convertible Securities, rights or warrants or
options, as the case may be; or 
 
(ii) in the event of any consolidation or merger of the Maker in which the Maker is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Maker shall be changed into or exchanged for the
stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Maker for stock or other securities of any corporation, the Maker shall be deemed to have issued a number of shares of its
Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such
transaction of all such stock or securities or other property of the other corporation. If any such calculation results in adjustment of the applicable Conversion Price, or the number of shares of Common Stock issuable upon conversion of the Notes,
the determination of the applicable Conversion Price or the number of shares of Common Stock issuable upon conversion of the Notes immediately prior to such merger, consolidation or sale, shall be made after giving effect to such adjustment of the
number of shares of Common Stock issuable upon conversion of the Notes. 
 
Section 3.4 PREPAYMENT. 
 
(a) MAKER PREPAYMENT OPTION. (a) Maker may not prepay this Note without first obtaining a written consent from the Holder. Should the prepayment not be received by the Holder within Five (5) business days of the Maker’s receipt
of the written consent, the written consent shall be deemed null and void. 
 
Section 3.5 INABILITY TO FULLY CONVERT. 
 
(a) HOLDER’S OPTION IF MAKER CANNOT FULLY CONVERT. If, upon the Maker’s receipt of a Conversion Notice, the Maker cannot issue shares of Common Stock because the Maker does not have a sufficient number of shares of
Common Stock authorized and available, or is otherwise prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Maker then the
Maker shall issue as many shares of Common Stock as it is able to issue in accordance with the Holder’s Conversion Notice and, with respect to the unconverted portion of this Note, the Holder, solely at Holder’s option, can elect to: (i)
require the Maker to prepay that portion of this Note for which the Maker is unable to issue Common Stock in accordance with the Holder’s Conversion Notice or void its Conversion Notice and retain or have returned, as the case may be, this Note
that was to be converted pursuant to the Conversion Notice (provided that the Holder’s voiding its Conversion Notice shall not effect the Maker’s obligations to make any payments which have accrued prior to the date of such notice).

 
(b) MECHANICS OF FULFILLING HOLDER’S
ELECTION. The Maker shall immediately send via facsimile to the Holder, upon receipt of a facsimile copy of a Conversion 
 

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Notice from the Holder which
cannot be fully satisfied as described in Section 3.8(a) above, a notice of the Maker’s inability to fully satisfy the Conversion Notice (the “INABILITY TO FULLY CONVERT NOTICE”). Such Inability to Fully Convert Notice shall indicate
(i) the reason why the Maker is unable to fully satisfy such holder’s Conversion Notice, and (ii) the amount of this Note which cannot be converted. The Holder shall notify the Maker of its election pursuant to Section 3.8(a) above by
delivering written notice via facsimile to the Maker (“NOTICE IN RESPONSE TO INABILITY TO CONVERT”). 
 
Section 3.6 NO RIGHTS AS SHAREHOLDER. Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the conversion of this Note, the right to vote or to
receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Maker or of any other matter, or any other rights as a shareholder of the Maker. 
 
ARTICLE IV 
 
MISCELLANEOUS 
 
Section 4.1 NOTICES. Any notice, demand, request, waiver or
other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy or facsimile at the address or number designated in the Purchase
Agreement (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The Maker will give written
notice to the Holder at least ten (10) days prior to the date on which the Maker closes its books or takes a record (x) with respect to any dividend or distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to
holders of Common Stock or (z) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such notice be provided to such holder prior to such information being made known to the
public. The Maker will also give written notice to the Holder at least ten (10) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place but in no event shall such notice be provided to the Holder
prior to such information being made known to the public. The Maker shall promptly notify the Holder of this Note of any notices sent or received, or any actions taken with respect to the Other Notes. 
 
Section 4.2 GOVERNING LAW. This Note shall be governed by and
construed in accordance with the internal laws of the State of North Carolina, without giving effect to the choice of law provisions. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be
drafted. 
 
Section 4.3 HEADINGS. Article and section
headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose. 
 

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Section 4.4
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including,
without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder’s
right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause
irreparable and material harm to the Holder and that the remedy at law for any such breach may be inadequate. Therefore the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all
other available rights and remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited to an injunction retaining any such breach or threatened breach, without the necessity of showing economic loss and without
any bond or other security being required. 
 
Section 4.5
ENFORCEMENT EXPENSES. The Maker agrees to pay all costs and expenses of enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses. 
 
Section 4.6 BINDING EFFECT. The obligations of the Maker and the Holder set forth herein shall be binding upon
the successors and assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof. 
 
Section 4.7 AMENDMENTS. This Note may not be modified or amended in any manner except in writing executed by the Maker and the Holder.

 
Section 4.8 COMPLIANCE WITH SECURITIES LAWS. The
Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account for investment. This Note and any Note issued in substitution or replacement therefore shall be stamped or imprinted with a legend in
substantially the following form: 
 
“THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND SUCH STATE SECURITIES LAWS.” 
 
Section 4.9
CONSENT TO JURISDICTION. Each of the Maker and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the District of North Carolina and the courts of the State of North
Carolina located in Mecklenburg 
 

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County for the purposes of any
suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit;
action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Maker and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy
thereof via certified mail, return receipt requested, to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing in this Section 4.9 shall affect or limit any right to serve process in any other manner permitted by law. 
 
Section 4.10 PARTIES IN INTEREST. This Note shall be binding upon, inure to the benefit of and be enforceable by the Maker, the Holder and
their respective successors and permitted assigns. 
 
Section
4.11 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder 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. 
 
Section 4.12 MAKER WAIVERS. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this
Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon,
all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note. 
 
IN WITNESS WHEREOF, the Maker has executed this Note as of the day and year first above written. 
 

	 TEAM SPORTS ENTERTAINMENT,
INC.

	
	 By:
	 	

	 	 	 Terry Hanson, President

 

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FORM OF
NOTICE OF CONVERSION 
 
(To be Executed by the
Registered Holder in order to Convert the Note) The undersigned hereby irrevocably elects to convert $                 of the principal amount of the above
Note No.              into shares of Common Stock of TEAM SPORTS ENTERTAINMENT, INC. (the “Maker”) according to the conditions hereof, as of the date written
below. Date of Conversion 
 
Applicable Conversion Price: $.20/Share 
 

	
	 Signature:
	  	

	
	 Name:
	  	

	
	 Address:
	  	

	
	

 

11SECURITY AGREEMENT

 
EXHIBIT 4.6

 
SECURITY AGREEMENT 
 
SECURITY AGREEMENT, dated September 1, 2002 (this
“Agreement”), by TEAM SPORTS ENTERTAINMENT, INC., a Delaware corporation having its principal place of business at 13801 Reese Blvd. West, Suite 150, Huntersville, NC 28078 (the “Grantor”), for the benefit of the secured
parties listed on Exhibit “A” attached hereto (the “Secured Parties”). 
 
W I T N E S S E T H: 
 
WHEREAS, on the date hereof, the Grantor has executed secured convertible promissory notes, in favor of each of the Secured Parties in an aggregate principal amount of $2,500,000.00 (the
“Note”), issued pursuant to the Promissory Note Purchase Agreement, dated as of the date hereof among the Grantor and the Secured Parties (the “Purchase Agreement”). In order to provide security for the payment of all of the
obligations of the Grantor to the Secured Parties under the Notes, the Grantor has agreed to grant to the Secured Parties a continuing lien and security interest in all of the Grantor’s Assets (as defined below) and to execute this and such
other security agreements and instruments as are necessary to grant such lien and security interest and enable the Secured Parties to perfect such security interest. 
 
NOW, THEREFORE, in consideration of the premises contained herein and in the Notes and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Grantor agrees with the Secured Parties as follows: 
 
Section 1. DEFINITIONS. Capitalized terms used in this Security Agreement which are not otherwise defined herein shall have the
following meanings: “Code” shall mean the Uniform Commercial Code as in effect in the State of North Carolina from time to time. “Collateral” shall have the meaning assigned thereto in Section 2 of this Agreement.
“Assets” shall have the meaning assigned to that term in the Code. 
 
Section 2. GRANT OF SECURITY INTEREST. The Grantor hereby pledges, assigns and grants to the Secured Parties a continuing security interest in and lien on all Assets of the Grantor, including,
but not limited to, all of Grantor’s accounts, chattel paper, contract rights, commissions, notes, securities and other forms of receivables; general intangibles and all net proceeds received from the sale of the racing cars, wherever located
and whether now or hereafter existing and whether now owned or hereafter acquired and, to the extent not otherwise included all payments under insurance (whether or not any of the Secured Parties is the loss payee) or under any indemnity, warranty,
guaranty or government award which is payable by reason of any damage to, or any loss, taking or condemnation of, the Inventory (collectively, the “Collateral”). 
 
Section 3. OBLIGATIONS SECURED. The Collateral hereunder constitutes and will constitute continuing
security for the strict performance and observance by the Grantor of the prompt payment, when due, of all present and future obligations and indebtedness of the Grantor to the Secured Parties under the Notes (after giving effect to any offset rights
of the Grantor thereunder with respect thereto) and of the Grantor under this Agreement (collectively, the “Obligations”). 

 
Section 4.
GRANTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, in the event of the Secured Parties’ express prior written consent thereto, (a) the Grantor shall remain liable under any and all contracts and agreements included in
the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Parties of any of the rights hereunder shall not
release the Grantor from any of its duties or obligations under any contracts and agreement included in the Collateral, and (c) the Secured Parties shall not have any obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Secured Parties be obligated to perform any of the obligations or duties of the Grantor under any such contact or agreement or to take any action to collect or enforce any claim for payment
assigned hereunder. 
 
Section 5.
REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants to the Secured Parties that: 
 
5.1 The Grantor is a corporation duly incorporated, validly existing and in good standing under the laws of its state of
incorporation, is duty qualified and in good standing under the laws of each jurisdiction where the character of its properties or the transaction of its business makes such qualification necessary, except for any jurisdictions(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material Adverse Effect (as defined in the Purchase Agreement), and has the requisite corporate power to own or hold under lease its properties and assets and to conduct its business
as it is now being conducted. 
 
(a) The Grantor
has the requisite corporate power and authority to enter into and perform this Agreement, which has been duly authorized by all necessary corporate action, and no further consent or authorization of the Grantor or its board of directors or
shareholder, or any public authority is required in connection therewith. The execution, delivery and performance by the Grantor of this Agreement will not violate any provision of law applicable to the Grantor and will not conflict with or result
in the breath of any order, writ, injunction or decree of any court or government instrumentality, or its charter or by-laws or create a default under any agreement, note, or indenture to which it is a party or by which it is bound or to which any
of its property is subject, or result in the imposition of any lien, charge, security interest or encumbrance of any nature whatsoever upon any of its properties or assets under any agreement or any commitment to which the Grantor is bound or by
which any of its properties or assets are bound, except for the liens created under this Agreement and except for such conflicts, defaults, violations, breaches and the like that would not, individually or in the aggregate, have a Material Adverse
Effect. 
 
(b) This Agreement has been duly
executed and delivered, and constitutes the legal, valid and binding obligation of the Grantor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application. 
 

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5.2
Except as disclosed on Schedule 5.2 to this Agreement, the Grantor has good title to and is the lawful owner of the Collateral free from all claims, liens, encumbrances, charges or security interests whatsoever. 
 
5.3 The provisions of this Agreement create a valid,
and upon filing a UCC-1 financing statement with the Secretary of State of the State of North Carolina, a perfected, security interest in the Collateral, enforceable in accordance with its terms, except as such enforceability maybe limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of
general application. 
 
5.4 There are no
judgments outstanding against the Grantor and there are no actions or proceedings before any court or administrative agency pending or, to the knowledge of the Grantor, threatened against the Grantor which, if determined adversely to the Grantor,
would affect the Collateral. 
 
5.5 The
Grantor’s principal office and place of business where it maintains its records concerning the Collateral is at its address stated above. The Grantor has no other office or place of business. 
 
Section 6. COVENANTS. The Grantor covenants and agrees
that from the date of this Agreement until payment in full of all of the Obligations: 
 
6.1 The Grantor shall keep and maintain the Collateral insured against loss or damage by fire and all other risks as is customarily maintained by similar businesses for the full insurable value
thereof. Such policies shall by their teams provide that the Secured Parties be given at least 30 days prior written notice of any amendment, modification or cancellation thereof and that the Secured Parties shall have the option, but not the
obligation, to pay the premiums to continue such insurance in effect or obtain like coverage. Certificates of all such policies shall be delivered to the Secured Parties. The Grantor agrees that any payment made by the Grantor pursuant to the
foregoing authorization shall bear interest thereon at the rate of 10% per annum from the date of such payment and shall become part of the Obligations and be shall secured by the Collateral pursuant to the terms of this Agreement. The Grantor
hereby appoints the Secured Parties as its attorney-in-fact to make, adjust or settle any claim under any insurance policy insuring the Collateral while an Event of Default (as defined below) shall have occurred and be continuing. 
 
6.2 The Grantor shall maintain the Collateral in good
repair, working order and condition, subject to normal wear and tear, and make all reasonable repairs, replacements, additions and improvements thereto. 
 
6.3 The Grantor shall give the Secured Parties access to inspect the Collateral and to all books, correspondence and records of the
Grantor with respect thereto upon reasonable notice and at all reasonable times, and shall permit upon the occurrence and continuance of an Event of Default the Secured Parties and their representatives to examine the same and to make extracts
therefrom all at the Grantor’s expense. 
 

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6.4 The
Grantor shall promptly pay and discharge or cause to be paid and discharged all its obligations and liabilities including, without limitation, all taxes, assessments and governmental charges upon it or its income or properties, when due unless and
to the extent only that the same shall be contested in good faith and by appropriate proceedings and then only to the extent that a bond is filed in cases where the filing of a bond is necessary to avoid the creation of a lien against any of its
property. 
 
6.5 The Grantor shall do, or
cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence and all franchises, rights and privileges necessary for the proper conduct of its business, and continue to engage in the business of the
same type as now conducted by it. 
 
6.6 The
Grantor shall not grant, permit or suffer to exist any lien, claim, security interest or encumbrance upon the Collateral, that is senior or on parity with those in favor of the Secured Parties. 
 
6.7 The Grantor shall notify the Secured Parties in
writing within 5 business days after the occurrence thereof, of the occurrence of any event which constitutes, or which with notice or lapse of time or both, would constitute an Event of Default. 
 
6.8 The Grantor shall execute and deliver such further
or additional instruments and assurances, and take all such additional action as the Secured Parties may require for the purpose of carrying out the provisions of this Agreement. 
 
6.9 Except as expressly permitted by or described in this Agreement or its schedules or exhibits, the
Grantor shall not sell, assign, lease or otherwise dispose of the Collateral except in the ordinary course of business. 
 
6.10 The Grantor shall not change its principal office or the place where it maintains its records pertaining to the Collateral as
specified in Section 5.5 hereof without giving the Secured Parties at least 30 days prior written notice thereof. 
 
6.11 The Grantor shall not remove or permit the removal of the Collateral from its present location except in the ordinary course
of business without the prior written consent of the Secured Parties. 
 
Section 7. OPTION TO PERFORM OBLIGATION OF THE GRANTOR IN RESPECT OF THE COLLATERAL. If the Grantor fails or refuses to make any payment, perform any covenant or obligation, or take any other action which the Grantor
is obligated hereunder to perform, observe, take or do, then the Secured Parties may, at their option, without notice or demand upon the Grantor and without releasing the Grantor from any obligation or covenant hereof, perform, observe, take or do
the same in such manner and to such extent as the Secured Parties may deem necessary to protect any of the Collateral and their rights hereunder including, without limitation, obtaining insurance and the payment of any taxes and the payment of any
sums necessary to discharge liens or security interests at any time levied or placed on the Collateral. 
 

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Section 8.
EVENTS OF DEFAULT. For purposes of this Agreement, any of the following events shall constitute an “Event of Default”: 
 
8.1 The Grantor shall fail to make any payment of principal and interest on the Notes prior to the expiration of all applicable
cure periods; 
 
8.2 The Grantor shall
default in the performance or observance of any covenant or agreement contained in this Agreement and such default shall continue for a period of ten (10) business days following the Grantor’s receipt of written notice thereof; 
 
8.3 Any representation or warranty made by the Grantor
in this Agreement or the other Transaction Documents (as defined in the Purchase Agreement) or in any other certificate, agreement, instrument or statement delivered to the Secured Parties by or on behalf of the Grantor shall at any time prove to
have been incorrect when made in any material respect; 
 
8.4 There shall be a defect in the Grantor’s title to any of the Collateral and such defect in title shall not have been cured or removed within 20 days after the Grantor’s receipt of written notice thereof;

 
8.5 The Grantor shall become insolvent,
make a general assignment for the benefit of creditors, file a petition in bankruptcy, be adjudicated insolvent or bankrupt, admit in writing its inability to pay its debts as they mature, petition or apply for, consent to, or acquiesce in the
appointment of, a trustee or receiver for all or a substantial part of the Grantor’s property; or any other bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy, insolvency law, or any dissolution or liquidation
proceeding shall be instituted by or against the Grantor, and if instituted against it, shall be consented to or acquiesced in by the Grantor or shall not be dismissed or, if contested, stayed within a period of 90 days; or any judgment, writ of
attachment or execution or any similar process shall be issued or levied against a substantial part of the property of the Grantor and shall not be released, stayed, bonded or vacated within a period of 90 days after its issue or levy; 
 
8.6 The Grantor shall, at any time without the prior
written consent of the Secured Parties, enter into an agreement to change the location of the Collateral or permit any change in such location of the Collateral from that specified in Section 5.3 hereof except as permitted by Section 6.9 of this
Agreement; and/or 
 
8.7 The lien created
hereunder shall, for any reason other than by or through the conduct of the Secured Parties, cease to be valid. 
 
Section 9. REMEDIES. In case any Event of Default shall have occurred and be continuing, the Secured Parties shall have, in
addition to all other rights and remedies given it by this Agreement or the Notes, those allowed by law and the rights and remedies of a secured party under the Uniform Commercial Code as enacted in any jurisdiction in which any of the Collateral
may be located and, without limiting the generality of the foregoing, the Secured Parties may immediately, without demand of performance and without notice of intention to sell or of time or place of sale or redemption or other notice or demand
whatsoever to the Grantor, all of which are hereby expressly waived, and without advertisement, enter onto the premises where the Collateral is located and take possession thereof without liability for any lawsuit or action, 
 

5 

 
and sell, lease or otherwise
dispose of all or any part of the Collateral or any interest which the Grantor may have therein, either at pubic or private sale or otherwise, and after deducting from the proceeds of sale or other disposition of the Collateral all expenses
(including all reasonable fees and expenses of counsel) as provided in Section 13 hereof, shall apply the residue of such proceeds toward the payment of the Obligations. If notice of any sale or other disposition is required by law to be given, the
Grantor hereby agrees that a notice sent at least 5 days before the time of any intended public sale or before the time after which any private sale or other disposition of the Collateral is to be made shall be reasonable notice of such sale or
other disposition. The Grantor agrees to assemble the Collateral, or cause it to be assembled, at such place or places as the Secured Parties may designate by written notice to the Grantor. At any such sale or other disposition, the Secured Parties
may purchase the whole or any part of the Collateral, free from any right of redemption on the part of the Grantor, which right is hereby waived and released. Without limiting the generality of the rights and remedies conferred upon the Secured
Parties under this Section 9, the Secured Parties may: (a) enter upon the premises of the Grantor and take immediate possession of the Collateral, either personally or by means of a receiver appointed by a court therefor, using reasonable force to
do so; (b) at the Secured Parties’ option, use, operate, manage and control the Collateral in any lawful manner; (c) collect and receive all rents, income, revenue, earnings, issue and profits therefrom; and (d) maintain, repair, renovate,
alter or remove the Collateral as the Secured Parties may determine in their discretion and any monies so collected or received by the Secured Pasties shall be applied to, or may be accumulated for application upon the Obligations and the Grantor
shall be liable for any deficiency. 
 
Section
10. POWER OF ATTORNEY. The Grantor authorizes the Secured Parties and does hereby make, constitute and appoint the Secured Parties and agents of the Secured Parties with full power of substitution, as the Grantor’s true and lawful
attorney-in-fact with power, in its own name or in the name of the Grantor, upon the occurrence and continuance of any Event of Default, to endorse any notes checks, drafts, money orders, or other instruments of payment (including, payments under or
in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Patties; to sign and endorse any documents relating to the Collateral; to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the Collateral; to grant, collect, receipt or, compromise, settle and sue for monies due in respect of the Collateral; and generally, to do at the Secured Parties’ option and at
the Grantor’s expense, at any time, or from time to time all acts and things which the Secured Parties deem necessary to protect, preserve and realize upon the Collateral and the Grantor’s security interests therein in order to effect the
intent of this Agreement, as fully and effectually as the Grantor might or could do; and the Grantor hereby ratifies all that said attorney shall do or cause to be done by virtue hereof. THIS POWER OF ATTORNEY IS COUPLED WITH AN INTEREST AND SHALL
BE IRREVOCABLE FOR AS LONG AS ANY OF THE OBLIGATIONS SHALL BE OUTSTANDING. The Grantor agrees that any reasonable fees, costs and expenses incurred by the Secured Parties pursuant to the foregoing authorization, and interest thereon at the rate of
8% per annum from the date of incurring any such reasonable fees, costs and expense, shall become part of the Obligations and be secured by the Collateral. 
 
Section 11. NOTICES. All notices, requests, demands and other communications to or upon the respective parties hereto shall be made
in accordance with Section 4.1 of the Notes. 
 

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Section 12.
NO WAIVER; REMEDIES CUMULATIVE. No failure on the part of the Secured Parties to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Secured Parties of any
right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 
 
Section 13. FINANCING STATEMENTS; FURTHER ASSURANCES;
FILING. On the dates thereof, the Grantor shall deliver UCC-1 financing statements in form and substance satisfactory to the Secured Patties and with the Secured Parties’ security interest duly noted thereon with respect to the Collateral
for filing at the appropriate offices. Thereafter, within 10 business days after the Secured Parties’ written request therefor, the Grantor shall cause such additional Uniform Commercial Code financing statements with respect to the Collateral
or any modifications or amendments to any such financing statements (all in form and substance reasonably satisfactory to the Secured Parties) to be delivered to the Secured Panics for filing at the appropriate offices. The Grantor from time to
time, at its sole expense, will promptly execute and deliver all further instruments and documents, and take all further action that the Secured Parties may reasonably request, and hereby authorizes the Secured Parties to take all action (including
the filing of any financing statements, continuation statements or amendments thereto with respect to the Collateral without the signature of the Grantor where permitted by law) as the Seemed Parties in each case may deem reasonably necessary,
proper or desirable in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties to exercise and enforce their rights and remedies hereunder with respect to any Collateral. A
carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Secured Parties shall execute terminations
to any such financing statements within 3 business days of the Grantor’s request therefore upon payment of the Obligations. 
 
Section 14. COSTS AND EXPENSES. The Grantor shall reimburse the Secured Parties for all reasonable costs and expenses incurred by
them and shall pay the reasonable fees and disbursements to one attorney for the Secured Parties in connection with enforcement of the Secured Parties’ rights hereunder. 
 
Section 15. AMENDMENTS. No amendment, modification or waiver of any provision of this Agreement nor
consent to any departure by the Grantor therefrom shall be effective unless the same shall be in writing and signed by the Secured Parties and then such waiver or consent shall be effective only in the specific instance and for the specific purpose
for which given. 
 
Section 16. TERMINATION.
Upon the payment in full of all Obligations, the Secured Parties shall execute and deliver to the Grantor all such documents and instruments as shall be necessary to evidence termination of this Agreement and the security interests created
hereunder; provided, however, the obligations of the Grantor under Section 12 hereof shall survive any termination under this Section 16. 
 
Section 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE 
 

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STATE OF NORTH CAROLINA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW. 
 
Section 18. ASSIGNMENT, ETC. The Grantor shall not assign, pledge, mortgage, sublet or otherwise transfer or encumber any of its rights or obligations, as the case may be, under this Agreement without the Secured Parties’
prior written consent. Any such purported assignment, pledge, mortgage, sublet, transfer or other action without such written consent shall be void. This Agreement shall be binding upon each of the Grantor and its successors and shall inure to the
benefit of the Secured Parties and their successors and assigns. 
 
Section 19. SEVERABILITY. The provisions of this Agreement are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall not
in any manner affect such provision in any other jurisdiction or any other provision of this Agreement in any jurisdiction. 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their authorized representatives on the
date first above written. 
 
GRANTOR: 
 
TEAM SPORTS ENTERTAINMENT, INC. 
 

	
	

	 Terry Hanson, President

 

8

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