Exhibit 4.3
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 AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
KNOBIAS, INC.
8% CONVERTIBLE PROMISSORY NOTE
$75,000.00 April 22, 2005
Ridgeland, Mississippi
FOR VALUE RECEIVED, Knobias, Inc., a Delaware corporation (the "Company"),
hereby promises to pay to Bridges & PIPES, LLC, a Delaware limited liability
company (the "Holder"), the principal sum of SEVENTY FIVE THOUSAND and NO/100
DOLLARS ($75,000.00), together with interest thereon from the date hereof on the
unpaid balance of such principal amount. Interest shall accrue and be deemed to
have accrued from the date hereof on the unpaid principal amount at a rate equal
to eight percent (8%) per annum.
This Note is subject to the following terms and conditions.
1. Maturity. This Note will automatically mature and be due and payable in
full on the first to occur of (a) the completion of additional financing in
which the Company realizes at least $1,500,000 in gross proceeds, or (b) that
date which is four (4) months immediately following the date of this Note.
Anything contained herein to the contrary notwithstanding, all unpaid
principal sum(s) of this Note, together with accrued and unpaid interest
thereon, shall become immediately due and payable in full without notice,
demand, presentment, protest or other formalities of any kind (all of which are
hereby expressly waived by the Company) upon the insolvency of the Company, the
commission of any act of bankruptcy by the Company, the execution by the Company
of a general assignment for the benefit of creditors, the filing by or against
the Company of a petition in bankruptcy or any petition for relief under the
federal bankruptcy act or the continuation of such petition without dismissal
for a period of sixty (60) days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of the Company.
2. Payment and Interest. All payments shall be made in lawful money of the
United States of America at such place as the Holder hereof may from time to
time designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
Prepayment of this Note may be made at any time without penalty. The Company
shall pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note at the rate of 8% per annum, payable,
upon Maturity pursuant to Section 1 hereof, in cash.
3. Default. Failure to make any payment, whether of principal or interest,
after such amount becomes due shall constitute a default ("Event of Default") by
the Company. If an Event of Default shall occur, then, notwithstanding any other
agreement now or hereafter existing, all principal and interest on this Note
shall become immediately due and payable without notice, presentation, demand
for payment or protest, all of which are hereby expressly waived. The Company
covenants and agrees to advise the Holder, in writing, of the happening or
occurrence of any Event of Default.
4. Conversion.
(a) Voluntary Conversion. At any time after the date hereof until
this Note is no longer outstanding, this Note shall be convertible into shares
of the Company's common stock, $0.01 par value per share (the "Common Stock"),
at the option of the Holder, in whole or in part at any time and from time to
time (subject to the limitations on conversion set forth in Section 4(c)
hereof). The Holder shall effect conversions by delivering to the Company the
form of Notice of Conversion attached hereto as Annex A ("Notice of
Conversion"), specifying therein the principal amount of the Note to be
converted and the date on which such conversion is to be effected ("Conversion
Date"). If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is provided
hereunder. To effect conversions hereunder, the Holder shall not be required to
physically surrender the Note to the Company unless the entire principal amount
of this Note plus all accrued and unpaid interest thereon has been so converted.
Conversions hereunder shall have the effect of lowering the outstanding
principal amount of this Note in an amount equal to the applicable conversion.
The Holder and the Company shall maintain records showing the principal amount
converted and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within three (3) Business Days of receipt
of such notice. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest error.
The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note
may be less than the amount stated on the face hereof. However, at the Company's
request, the Holder shall surrender the Note to the Company within five (5)
Trading Days following such request so that a new Note reflecting the correct
principal amount may be issued to Holder.
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(b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $0.60 per share of Common Stock.
(c) Conversion Limitations; Xxxxxx's Restriction on Conversion. The
Company shall not effect any conversion of this Note, and the Holder shall not
have the right to convert any portion of this Note, pursuant to Section 4(a) or
otherwise, to the extent that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the applicable Notice
of Conversion, would beneficially own in excess of 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted portion of this Note beneficially
owned by the Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Notes or the Warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 4(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. To the extent that the limitation contained in
this section applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder) and of which a portion of this
Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the
Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two (2) Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of this Section
4(c) may be waived by the Holder upon, at the election of the Holder, not less
than sixty-one (61) days prior notice to the Company, and the provisions of this
Section 4(c) shall continue to apply until such sixty-first (61st) day (or such
later date, as determined by the Holder, as may be specified in such notice of
waiver).
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(d) Mechanics of Conversion.
(i) Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the
outstanding principal amount of this Note to be converted by (y) the Conversion
Price.
(ii) Delivery of Certificate Upon Conversion. Not later than
three (3) Trading Days after any Conversion Date, the Company will deliver to
the Holder (A) a certificate or certificates representing the shares issuable
upon conversion of this Note, which shall contain all necessary restrictive
legends and trading restrictions as required by applicable law, representing the
number of shares of Common Stock being acquired upon the conversion of the Note
and (B) a bank check in the amount of accrued and unpaid interest. The Company
shall, if available and if allowed under applicable securities laws, use its
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.
(iii) Failure to Deliver Certificates. If in the case of any
Notice of Conversion such certificate or certificates are not delivered to or as
directed by the applicable Holder by the third (3rd) Trading Day after a
Conversion Date, the Holder shall be entitled by written notice to the Company
at any time before its receipt of such certificate or certificates thereafter,
to rescind such conversion, in which event the Company shall immediately return
the certificates representing the principal amount of Notes tendered for
conversion.
(iv) Obligation Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third (3rd) Trading Day after
the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $1000 of principal amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day after
five (5) Trading Days after such damages begin to accrue) for each Trading Day
after such third (3rd) Trading Day until such certificates are delivered. The
Company's obligations to issue and deliver the shares issuable upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
shares issuable upon conversion; provided, however, such delivery shall not
operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event a Holder of this Note shall elect to convert
any or all of the outstanding principal amount hereof, the Company may not
refuse conversion based on any claim that the Holder or any one associated or
affiliated with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Note
shall have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this Note
outstanding, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall
issue the shares issuable upon conversion of this Note or, if applicable, cash,
upon a properly noticed conversion. Nothing herein shall limit a Xxxxxx's right
to pursue actual damages or declare an Event of Default pursuant to Section 3
herein for the Company's failure to deliver shares issuable upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
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(v) Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(d)(ii) by the third (3rd)
Trading Day after the Conversion Date, and if after such third (3rd) Trading Day
the Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the shares issuable upon conversion which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the actual
sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the
option of the Holder, either reissue Notes in principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(d)(ii). For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of Notes with respect to
which the actual sale price of the shares issuable upon conversion at the time
of the sale (including brokerage commissions, if any) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Notwithstanding anything contained
herein to the contrary, if a Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required
to pay such Holder liquidated damages under Section 4(d)(iv) in respect of the
certificates resulting in such Buy-In.
(vi) Reservation of Shares Issuable Upon Conversion. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock, solely for the purpose of
issuance upon conversion of the Note as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall be
issuable upon the conversion of the outstanding principal amount of the Note.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid and
nonassessable.
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(vii) Fractional Shares. Upon a conversion hereunder the
Company shall not be required to issue stock certificates representing fractions
of shares of the Common Stock, but shall issue in lieu of the final fraction of
a share, one whole share of Common Stock.
(viii) Transfer Taxes. The issuance of certificates for shares
of the Common Stock on conversion of the Notes shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided that
the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such Notes so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
5. Representations and Warranties of the Holder. Holder hereby represents
and warrants to the Company as of the date hereof that the execution, delivery
and performance of this Note and the consummation of the transactions
contemplated hereby have been approved by all requisite action of the Holder.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Holder as of the date hereof that:
(a) this Note has been duly and validly executed by the Company and
constitutes a legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms.
(b) the Company has all necessary power and authority to enter into
this Note and to consummate the transactions contemplated hereby, and the
execution and delivery and performance of this Note and the consummation of the
transactions contemplated hereby have been approved by all requisite action of
the Company.
7. Transfer; Successors and Assigns. The terms and conditions of this Note
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. This Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, accompanied by an
opinion of counsel in a form satisfactory to the Company that registration of
the Note is not required under the Securities Act of 1933. Thereupon, a new note
for the same principal amount and interest will be issued to, and registered in
the name of, the transferee. Interest and principal are payable only to the
registered holder of this Note.
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8. Governing Law. This Note and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the state of New York,
without giving effect to principles of conflicts of laws. The parties hereto
further agree and acknowledge that any dispute or controversy arising out of or
in any manner whatsoever relating to this Note shall be brought in the courts of
the state of New York or the United States of America for the Southern District
of New York located in the State of New York, and by execution and delivery of
this Note hereby (i) accepts the jurisdiction of the aforesaid courts; (ii)
irrevocably agrees to be bound by a judgment of any such court with respect to
this Note; and (iii) irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding with respect to this Note brought in any such court
and further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
9. Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or by a nationally-recognized delivery service (such as Fed Ex or UPS), or four
(4) business days after being deposited in the U. S. Mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified.
10. Amendments and Waivers. Any term of this Note may be amended only with
the written consent of the Company and the Holder. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Company,
the Holder and each transferee of the Note.
11. Action to Collect on Note. If action is instituted to collect on this
Note, the Company promises to pay, in addition to principal and interest due and
payable hereon, all costs and expenses, including reasonable attorney's fees,
incurred in connection with such action.
12. Presentment. The Company waives presentment, demand for payment,
notice of dishonor, notice of protest, and protest, and all other notices or
demands in connection with the delivery, acceptance and performance of this
Note. No delay by the Holder shall operate as a waiver of any power or right,
nor shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right hereunder
otherwise; and, subject to the other provisions of this Note respecting waivers,
no waiver or modification of the terms hereof shall be valid unless set forth in
writing by the Holder and then only to the extent set forth therein.
13. Entire Agreement. This Note constitutes the entire understanding of
the parties with respect to the transactions contemplated hereby, and supersedes
all previous agreements and understandings, whether written or oral.
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IN WITNESS WHEREOF, the Company has caused this Note to be executed on the
date first set forth above.
COMPANY:
KNOBIAS, INC.
/s/ X. XXX XXXXXX
-----------------------------------
X. Xxx Xxxxxx, President
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