Exhibit 4.2
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: March 15, 2005
$550,000.00
12% SENIOR SUBORDINATED SECURED NOTE DUE SEPTEMBER 1, 2006
THIS NOTE is duly authorized and issued 12% Senior Subordinated
Secured Notes of Knobias, Inc., a Delaware corporation, having a principal place
of business at 000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 (the "Company"),
designated as its 12% Senior Subordinated Secured Note, due September 1, 2006
(the "Note(s)"). This Note is being exchanged for the Company's 12% Senior
Subordinated Notes due June 15, 2005.
FOR VALUE RECEIVED, the Company promises to pay to DCOFI MASTER LDC or
its registered assigns (the "Holder"), the principal sum of $550,000.00 on
September 1, 2006 or such earlier date as the Notes are required or permitted to
be repaid as provided hereunder (the "Maturity Date"), and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Note in accordance with the provisions hereof. This Note is subject to the
following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Note: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 4(c).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
1
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 33% of the voting securities of the Company,
or (ii) a replacement at one time or within a three year period of more
than one-half of the members of the Company's board of directors which
is not approved by a majority of those individuals who are members of
the board of directors on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof),
or (iii) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the
events set forth above in (i) or (ii).
"Common Stock" means the common stock, $ .01 par value, of the
Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Event of Default" shall have the meaning set forth in Section
8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" shall have the meaning set forth in
Section 4(c) hereof.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Note.
"Mandatory Prepayment Amount" for any Notes shall equal the
sum of (i) (A) 100% of the principal amount of Notes to be prepaid,
plus all accrued and unpaid interest thereon if such prepayment shall
occur on or before ninety (90) days from the date hereof, or (B) 105%
of the principal amount of Notes to be prepaid, plus all accrued and
unpaid interest thereon if such prepayment shall occur after ninety
(90) days from the date hereof and prior to the Maturity Date and (ii)
all other amounts, costs, expenses and liquidated damages due in
respect of such Notes.
"Original Issue Date" shall mean the date of the first
issuance of the Notes regardless of the number of transfers of any Note
and regardless of the number of instruments which may be issued to
evidence such Note.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
2
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of March 15, 2005, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Section 2. Interest and Prepayments.
a) Payment of Interest in Cash. The Company shall pay interest
to the Holder on the aggregate and outstanding principal amount of this
Note at the rate of 12% per annum, payable monthly in cash on the first
day of each month, beginning on the first such date after the Original
Issue Date and on the Maturity Date (except that, if any such date is
not a Business Day, then such payment shall be due on the next
succeeding Business Day).
b) Late Fee. All overdue accrued and unpaid interest to be
paid hereunder shall entail a late fee at the rate of 20% per annum (or
such lower maximum amount of interest permitted to be charged under
applicable law) ("Late Fee") which will accrue daily, from the date
such interest is due hereunder through and including the date of
payment.
c) Optional Prepayment. The Company shall have the right to
prepay, in cash, all or a portion of the Notes for an amount equal to
such percentage of the principal amount to be repaid at 110% of the
principal amount thereof, plus all accrued and unpaid interest thereon
to the date of repayment.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Note is exchangeable for an
equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration of transfer or
exchange.
3
b) Investment Representations. This Note has been issued
subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged
only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance on Note Register. Prior to due presentment to the
Company for transfer of this Note, the Company and any agent of the
Company may treat the Person in whose name this Note is duly registered
on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not
this Note is overdue, and neither the Company nor any such agent shall
be affected by notice to the contrary.
Section 4. Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:
a) Other than liens or indebtedness pursuant to the 8% Secured
Convertible Notes due November 1, 2006, (the "8% Notes") enter into,
create, incur, assume or suffer to exist any indebtedness or liens of
any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom that is senior to, or pari passu with, in any respect, the
Company's obligations under the Notes;
b) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
c) repay, repurchase or offer to repay, repurchase or
otherwise acquire any of its Common Stock, Preferred Stock, or other
equity securities; or
d) enter into any agreement with respect to any of the
foregoing.
Section 5. Events of Default.
a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal of
amount of any Note, or (B) interest (including Late Fees) on,
or damages in respect of, any Note, in each case free of any
claim of subordination, as and when the same shall become due
and payable (whether on the Maturity Date or by acceleration
or otherwise) which default, solely in the case of an interest
payment or other default under clause (B) above, is not cured,
within 2 Trading Days;
4
ii. the Company shall fail to observe or perform any
other covenant or agreement contained in this Note or any of
the other Transaction Documents which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading
Days after notice of such default sent by the Holder or by any
other Holder and (B) 10 Trading Days after the Company shall
become or should have become aware of such failure;
iii. a default or event of default (subject to any
grace or cure period provided for in the applicable agreement,
document or instrument) shall occur under (A) any of the
Transaction Documents other than the Notes, or (B) any other
material agreement, lease, document or instrument to which the
Company or any Subsidiary is bound;
iv. any representation or warranty made herein, in
any other Transaction Document, in any written statement
pursuant hereto or thereto, or in any other report, financial
statement or certificate made or delivered to the Holder or
any other holder of Notes shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
v. (i) the Company or any of its Subsidiaries shall
commence, or there shall be commenced against the Company or
any such Subsidiary, a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days;
or (iii) the Company or any Subsidiary thereof is adjudicated
by a court of competent jurisdiction insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (v) the
Company or any Subsidiary thereof makes a general assignment
for the benefit of creditors; or (vi) the Company shall fail
to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or
(vii) the Company or any Subsidiary thereof shall call a
meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or
(viii) the Company or any Subsidiary thereof shall by any act
or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any
corporate or other action is taken by the Company or any
Subsidiary thereof for the purpose of effecting any of the
foregoing;
vi. the Company or any Subsidiary shall default in
any of its obligations under any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or
5
other instrument under which there may be issued, or by which
there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding
$150,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise become due and
payable;
vii. the Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market and
shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
viii. the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to
sell or dispose of all or in excess of 33% of its assets in
one or more transactions (whether or not such sale would
constitute a Change of Control Transaction) or shall redeem or
repurchase more than a de minimis number of its outstanding
shares of Common Stock or other equity securities of the
Company (other than repurchases of shares of Common Stock or
other equity securities of departing officers and directors of
the Company; provided such repurchases shall not exceed
$100,000, in the aggregate, for all officers and directors
during the term of this Note);
6
b) Remedies Upon Event of Default. If any Event of Default
occurs, the full principal amount of this Note, together with interest
and other amounts owing in respect thereof, to the date of acceleration
shall become, at the Holder's election, immediately due and payable in
cash. The aggregate amount payable upon an Event of Default shall be
equal to the Mandatory Prepayment Amount. Commencing 5 days after the
occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue
at the rate of 20% per annum, or such lower maximum amount of interest
permitted to be charged under applicable law. All Notes for which the
full Mandatory Prepayment Amount hereunder shall have been paid in
accordance herewith shall promptly be surrendered to or as directed by
the Company. The Holder need not provide and the Company hereby waives
any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Xxxxxx at any time prior to payment hereunder
and the Holder shall have all rights as a Note holder until such time,
if any, as the full payment under this Section shall have been received
by it. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
Section 6. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder shall be in writing
and delivered personally, by facsimile, sent by a nationally recognized
7
overnight courier service, addressed to the Company, at the address set
forth above, facsimile number (000) 000-0000, Attn: X. Xxx Xxxxxx,
President, or such other address or facsimile number as the Company may
specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such Xxxxxx
appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business
of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after
the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section later than 5:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
interest and liquidated damages (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct debt obligation of the Company. This Note ranks pari
passu with all other Notes now or hereafter issued under the terms set
forth herein
c) Lost or Mutilated Note. If this Note shall be mutilated,
lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated
Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated,
lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof,
and indemnity, if requested, all reasonably satisfactory to the
Company.
d) Security Interest/Subordination. This Note is a direct debt
obligation of the Company and, pursuant to the Security Agreement is
secured by a second priority perfected security interest in all of the
assets of the Company for the benefit of the Holders. The obligations
of the Company to the Holders are subordinated in right of payment to
the obligations owing to the holders of the 8% Notes.
e) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed
by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
8
against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Note or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any
provisions of this Note, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
f) Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Note shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of
any other provision of this Note. The failure of the Company or the
Holder to insist upon strict adherence to any term of this Note on one
or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that
term or any other term of this Note. Any waiver must be in writing.
g) Severability. If any provision of this Note is invalid,
illegal or unenforceable, the balance of this Note shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of or interest
on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefits or advantage of
9
any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impeded the execution of any power herein granted
to the Holder, but will suffer and permit the execution of every such
as though no such law has been enacted.
h) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
i) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Note and shall not be deemed to
limit or affect any of the provisions hereof.
*********************
10
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.
KNOBIAS, INC.
/s/ X. XXX XXXXXX
-------------------------
X. Xxx Xxxxxx, President
11
