Exhibit 4.1
THIS SECURITY HAS NOT 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: April 7, 2005
$50,000.00
12% SUBORDINATED PROMISSORY NOTE DUE OCTOBER 7, 2005
THIS NOTE is a duly authorized and issued 12% Subordinated Promissory Note
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% Subordinated Promissory Note, due October 7, 2005 (the "Note").
FOR VALUE RECEIVED, the Company promises to pay to XXXXXXX X. XXXXX or his
registered assigns (the "Holder"), the principal sum of $50,000.00 on October 7,
2005, or such earlier date as the Note is required or permitted to be repaid as
provided hereunder (the "Maturity Date"), and to pay interest to the Holder on
the 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, the following terms shall have the following
meanings:
"Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a 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 4.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Original Issue Date" shall mean the date of the first issuance of
the Note 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.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"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.
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).
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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, from time to time, all or a portion of the principal amount of
the Note, plus all accrued and unpaid interest thereon to the date of
repayment.
Section 3. Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not directly or indirectly:
a) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder;
b) repay, repurchase or offer to repay, repurchase or otherwise
acquire any of its Common Stock, Preferred Stock, or other equity
securities; or
c) enter into any agreement with respect to any of the foregoing.
Section 4. 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 the 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;
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in this Note 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 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 any other material agreement, lease,
document or instrument to which the Company is bound;
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iv. (i) the Company shall commence, or there shall be
commenced against the Company, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Company 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 thereof or (ii) there is commenced against the Company any
such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or (iii) the Company 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 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 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 shall call
a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (viii) the Company
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 for the purpose of
effecting any of the foregoing;
v. the Company shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or 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;
vi. 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;
vii. the Company shall be a party to any Change of Control
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);
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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.
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. Upon
payment of all amounts due hereunder the Note 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 5. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
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 Holder 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 the 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.
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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) Subordination. The obligations of the Company to the Holder are
subordinated in right of payment to the obligations of the Company owing
to the holders of the Company's 8% Secured Convertible Notes due November
1, 2006.
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 Mississippi, 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 this Note (whether brought 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 Jackson, Xxxxx
County, Mississippi (the "Mississippi Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the Mississippi
Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
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 Mississippi Courts are an 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.
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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 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.
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
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