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...
EXHIBIT
4(b)
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.
Original
Issue Date: June 6, 2007
Original
Conversion Price (subject to adjustment herein): $0.00622
$1,530,000
SENIOR
SECURED CONVERTIBLE NOTE
DUE
JUNE 6, 2010
THIS
NOTE
is one of a series of duly authorized and issued Senior Secured Convertible
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 Senior Secured Convertible Note, due June 6, 2010 (the
“Note(s)”).
FOR
VALUE
RECEIVED, the Company promises to pay to CAMOFI
MASTER LDC
or its
registered assigns (the “Holder”),
the
principal sum of $1,530,000 on June 6, 2010 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 5(e)(iii).
“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 50% 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).
Exhibit
4(b) - Page
1
“Common
Stock”
means
the common stock, par value $0.01 per share, of the Company and stock of any
other class into which such shares may hereafter have been reclassified or
changed.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Conversion
Date”
shall
have the meaning set forth in Section 4(a) hereof.
“Conversion
Price”
shall
have the meaning set forth in Section 4(b).
“Conversion
Shares”
means
the shares of Common Stock issuable upon conversion of Notes or as payment
of
interest in accordance with the terms hereof.
“Effectiveness
Date”
shall
have the meaning given to such term in the Registration Rights Agreement.
“Effectiveness
Period”
shall
have the meaning given to such term in the Registration Rights
Agreement.
“Equity
Conditions”
shall
mean, during the period in question, (i) there is an effective Registration
Statement pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares issuable pursuant hereunder and to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (ii)
the
Common Stock is trading on the Trading Market and all of the shares issuable
pursuant hereunder and to the Transaction Documents are listed for trading
on a
Trading Market (and the Company believes, in good faith, that trading of the
Common Stock on a Trading Market will continue uninterrupted for the foreseeable
future), (iii) the average daily trading volume of the Common Stock for the
30
Trading Days prior to the Interest Payment Date is at least 50,000 shares,
(iv)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the share issuable pursuant
hereunder and to the Transaction Documents, (v) there is then existing no Event
of Default or event which, with the passage of time or the giving of notice,
would constitute an Event of Default, and (vi) all of the share issued or
issuable pursuant to the transaction proposed would not violate the limitations
set forth in Section 4(c) below.
“Event
of
Default” shall have the meaning set forth in Section 8.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
Exhibit
4(b) - Page
2
“Fundamental
Transaction”
shall
have the meaning set forth in Section 5(e)(iii) hereof.
“Interest
Conversion Rate”
means
eighty-five percent (85%) of the lesser of (i) the average 10 VWAP’s immediately
prior to the applicable Interest Payment Date or (ii) the average 10 VWAP’s
immediately prior to the date the applicable interest payment shares are issued
and delivered if after the Interest Payment Date.
“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) 115% of the principal amount of Notes to be
prepaid, plus all accrued and unpaid interest thereon, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such
Notes.
“Monthly
Sinking Payment”
shall
mean the sinking payments on the Note pursuant to Section 6(a)
hereof.
“Monthly
Sinking Payment Amount”
shall
mean, as to a Monthly Sinking Payment, 1/36th of the original principal amount
in the aggregate.
“Monthly
Sinking Payment Date”
means
the 1st
of each
month, commencing on the 1st
day of
the month following the anniversary of the Original Issue Date and ending upon
the full redemption or Maturity of this Note.
“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.
“Prime
Rate”
means,
on any day, the rate of interest published as the "Prime Rate" as of such day
appearing in the "Money Rates" section of the Wall Street Journal, or any
successor to such section.
“Purchase
Agreement”
means
the Securities Purchase Agreement, dated as of June 6, 2007, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of the Purchase
Agreement, to which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Conversion
Shares and naming the Holder as a “selling stockholder” thereunder.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Exhibit
4(b) - Page
3
“Sinking
Fund Account”
means
the account to be maintained at a commercial bank or financial institution
acceptable to the Holders of a majority of the Notes.
“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.
“Qualified
Offering”
means
an equity or debt financing for the account of the Company which financing
results in cumulative aggregate proceeds to the Company of at least three times
the principal amount of Notes then outstanding.
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the primary Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
on
a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the
“Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Holders holding
a
majority of the principal amount of Notes then outstanding.
Section
2. Interest/Repayment.
a) Payment
of Interest in Cash or Kind.
The
Company shall pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note at the rate equal to the Prime Rate
plus 2.75% per annum, payable monthly in arrears beginning on August 1, 2007,
on
each Conversion Date (as to that principal amount then being converted), 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) and on each Monthly
Redemption Date (as to that principal amount then being redeemed) (each such
date, an “Interest
Payment Date”),
in
(i) cash, (ii) senior
secured convertible notes, each having the same terms and conditions of this
Note except that the principal amount of such senior secured convertible notes
shall be the amount of interest due on the Interest Payment Date, or (iii)
shares of Common Stock at the Interest Conversion Rate; provided,
however,
payment
in additional senior secured convertible notes shall only be permitted through
December 31, 2007, and payment in shares of Common Stock may only occur if
during the 10 Trading Days immediately prior to the applicable Interest Payment
Date all of the Equity Conditions have been met and the Company shall have
given
the Holder notice in accordance with the notice requirements set forth
below.
Exhibit
4(b) - Page
4
b) Company’s
Election to Pay Interest In Kind.
Subject
to the terms and conditions herein, the decision whether to pay interest in
(i)
cash, (ii) additional senior secured convertible notes or (iii) shares of Common
Stock shall be at the discretion of the Company. Not less than 5 Trading Days
prior to each Interest Payment Date, the Company shall provide the Holder with
written notice of its election to pay interest hereunder either in cash,
additional senior secured convertible notes or shares of Common Stock. Within
5
Trading Days prior to an Interest Payment Date, the Company’s election shall be
irrevocable as to such Interest Payment Date. Subject to the aforementioned
conditions, failure to timely provide such written notice shall be deemed an
election by the Company to pay the interest on such Interest Payment Date in
cash.
c) Interest
Calculations.
Interest shall be calculated on the basis of a 360-day year and shall accrue
daily commencing on the Original Issue Date until payment in full of the
principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be compounded
monthly. Interest shall cease to accrue with respect to any principal amount
converted, provided that the Company in fact delivers the Conversion Shares
within the time period required by Section 4(d)(ii) and if not so delivered,
interest will accrue until delivery of the Conversion Shares. Interest hereunder
will be paid to the Person in whose name this Note is registered on the records
of the Company regarding registration and transfers of Notes (the “Note
Register”).
d) Late
Fee.
All
overdue accrued and unpaid interest to be paid hereunder shall entail a late
fee
at the rate of 18% 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.
e) Optional
Prepayment.
At any
time after the two-year anniversary of the Original Issue Date, the Company
shall have the right to prepay, in cash, all of the Notes at any time at 115%
of
the principal amount thereof plus accrued interest to the date of repayment,
and
may apply any Sinking Fund Payments previously made toward such prepayment.
The
Company shall give the Holder at least ten (10) day’s prior written notice of
its intention to prepay all or a portion of the Note, during which time the
Holder shall have the right to convert any portion of the Note into Common
Stock.
f) Mandatory
Repayment.
If the
Company (i) engages in a Qualified Offering, (ii) shall be a party to any Change
of Control Transaction or Fundamental Transaction or (iii) shall agree to sell
or dispose any of its assets in one or more transactions (whether or not such
sale would constitute a Change of Control Transaction), the Company will be
required to offer to repay, in cash, the aggregate principal amount of the
Notes
not converted to Common Stock at 115% of the principal amount thereof to such
date of repayment. The Company shall give the Holder at least ten (10) day’s
prior written notice of its intention to repay the Note, during which time
the
Holder shall have the right to convert any portion of the Note into Common
Stock.
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.
Exhibit
4(b) - Page
5
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. Conversion.
a) Voluntary
Conversion.
At any
time after the Original Issue Date until this Note is no longer outstanding,
this Note shall be convertible into shares of 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
(a
“Notice
of Conversion”),
specifying therein the principal amount of Notes to be converted and the date
on
which such conversion is to be effected (a “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 Notes 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 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.
b) Conversion
Price.
The
conversion price in effect on any Conversion Date (subject to adjustment herein)
shall be equal to $0.00622 per share.
Exhibit
4(b) - Page
6
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
Exchange Act. 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 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 61 days’ prior notice to the
Company, and the provisions of this Section 4(c) shall continue to apply until
such 61st day (or such later date, as determined by the Holder, as may be
specified in such notice of waiver).
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 Trading Days after any Conversion Date, the Company will
deliver to the Holder (A) a certificate or certificates representing the
Conversion Shares which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of
Notes
(including, if so timely elected by the Company, shares of Common Stock
representing the payment of accrued interest) and (B) a bank check in the amount
of accrued and unpaid interest (if the Company is required to pay accrued
interest in cash). 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 Trading Day
after a Conversion Date, the Holder shall be entitled by written notice to
the
Company at any time on or 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.
Exhibit
4(b) - Page
7
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 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, $5 per Trading Day (increasing to $10 per Trading Day after 5 Trading
Days after such damages begin to accrue) for each Trading Day after such third
Trading Day until such certificates are delivered. The Company’s obligations to
issue and deliver the Conversion Shares 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 Conversion Shares;
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 Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. Nothing herein shall limit a Holder’s right to pursue actual damages
or declare an Event of Default pursuant to Section 8 herein for the Company’s
failure to deliver Conversion Shares 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.
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 Trading Day after the Conversion Date, and if
after such third 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 Conversion Shares 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
Conversion Shares 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.
Exhibit
4(b) - Page
8
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 Notes and payment of interest on the Note,
each
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 (subject to any additional requirements
of
the Company as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions
of
Section 5) upon the conversion of the outstanding principal amount of the Notes
and payment of interest hereunder. 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, nonassessable and, if the Registration
Statement is then effective under the Securities Act, registered for public
sale
in accordance with such Registration Statement.
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 may
if
otherwise permitted, make a cash payment in respect of any final fraction of
a
share based on the VWAP at such time. If the Company elects not, or is unable,
to make such a cash payment, the Holder shall be entitled to receive, 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.
Exhibit
4(b) - Page
9
Section
5. Certain
Adjustments.
a) Stock
Dividends and Stock Splits.
If the
Company, at any time while the Notes are outstanding: (A) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Note, including
as
interest thereon), (B) subdivide outstanding shares of Common Stock into a
larger number of shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (D)
issue
by reclassification of shares of the Common Stock any shares of capital stock
of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after
such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this Note
is
outstanding shall offer, sell, grant any option to purchase or offer, sell
or
grant any right to reprice its securities, or otherwise dispose of or issue
(or
announce any offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then
Conversion Price (such lower price, the “Base Share Price” and such issuances
collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with such issuance,
be
entitled to receive shares of Common Stock at an effective price per share
which
is less than the Conversion Price, such issuance shall be deemed to have
occurred for less than the Conversion Price), then, the Conversion Price shall
be reduced to equal the Base Share Price and the number of Conversion Shares
issuable hereunder shall be increased. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this
section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms (such
notice the “Dilutive Issuance Notice”). For purposes of clarification, whether
or not the Company provides a Dilutive Issuance Notice pursuant to this Section
3(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Conversion.
c) Pro
Rata Distributions.
If the
Company, at any time while Notes are outstanding, shall distribute to all
holders of Common Stock (and not to Holders) evidences of its indebtedness
or
assets or rights or warrants to subscribe for or purchase any security, then
in
each such case the Conversion Price shall be determined by multiplying such
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors
in
good faith. In either case the adjustments shall be described in a statement
provided to the Holders of the portion of assets or evidences of indebtedness
so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
Exhibit
4(b) - Page
10
d) Calculations.
All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not includes shares of Common Stock
owned or held by or for the account of the Company, and the description of
any
such shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of
the
number of shares of Common Stock (excluding treasury shares, if any) issued
and
outstanding.
e) Notice
to Holders.
12. Adjustment
to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any of this Section 5,
the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall
be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement), or the lowest possible adjustment price in the case of
an
MFN Transaction (as defined in the Purchase Agreement).
13. Notice
to Allow Conversion by Xxxxxx.
If (A)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of
the
assets of the Company, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Notes, and shall cause to be mailed to the Holders at their
last addresses as they shall appear upon the stock books of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x)
the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled
to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided,
that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Notes during the 20-day period
commencing the date of such notice to the effective date of the event triggering
such notice.
Exhibit
4(b) - Page
11
14. Fundamental
Transaction.
If, at
any time while this Note is outstanding, (A) the Company effects any merger
or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then
upon any subsequent conversion of this Note, the Holder shall have the right
to
receive, for each Conversion Share that would have been issuable upon such
conversion absent such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon
the
occurrence of such Fundamental Transaction if it had been, immediately prior
to
such Fundamental Transaction, the holder of one share of Common Stock (the
“Alternate
Consideration”).
For
purposes of any such conversion, the determination of the Conversion Price
shall
be appropriately adjusted to apply to such Alternate Consideration based on
the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any conversion of this Note following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new note consistent with the foregoing provisions
and evidencing the Holder’s right to convert such note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that this Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
15. Exempt
Issuance.
Notwithstanding
the foregoing, no adjustment will be made under this Section 5 in respect of
an
Exempt Issuance.
Exhibit
4(b) - Page
12
Section
6. Monthly
Sinking Payment
a) Monthly
Sinking Payment.
Beginning on the 1st
day of
the month following the anniversary of the Original Issue Date, on each Monthly
Sinking Payment Date the Company shall pay the Holder’s Monthly Sinking Payment
Amount plus accrued but unpaid interest, the sum of all liquidated damages
and
any other amounts then owing to such Holder in respect of the Note. The Monthly
Sinking Payment due on each Monthly Sinking Payment shall be paid into the
Sinking Fund Account in cash for the benefit of the Holder. Any Sinking Fund
Payment shall not be deemed a redemption or repayment of the Note in any
manner.
b) Sinking
Payment Procedure.
The
payment of cash pursuant to a Monthly Sinking Payment shall be made on the
Monthly Sinking Payment Date. If any portion of the cash payment for a Monthly
Sinking Payment shall not be paid by the Company by the respective due date,
interest shall accrue thereon at the rate of 18% per annum (or the maximum
rate
permitted by applicable law, whichever is less) until the payment of the Monthly
Sinking Payment, plus all amounts owing thereon is paid in full.
Section
7. 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:
j) 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, subordinated to or pari passu
with, in
any respect, the Company’s obligations under the Notes, other than subordinated
indebtedness owed to the Bank of Brookhaven and Xxxxxxx Xxxxx that is
outstanding as of the date hereof and evidenced by the Brookhaven Subordinated
Note and the Xxxxx Subordinated Note, respectively;
k) amend
its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holder;
l) repay,
repurchase or offer to repay, repurchase, make any payment in respect of or
otherwise acquire any of its Common Stock, Preferred Stock, or other equity
securities other than as to the Conversion Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents;
m) engage
in
any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company and (iv) transactions with the Holder as contemplated
by the Transaction Documents; or
n) create
or
acquire any Subsidiary after the date hereof unless (i) such Subsidiary is
a
wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes party
to
the Security Agreement and the Subsidiary Guaranty (either by executing a
counterpart thereof or an assumption or joinder agreement in respect thereof)
and, to the extent required by the Purchaser, satisfied each condition of this
Agreement and the Transaction Documents as if such Subsidiary were a Subsidiary
on the Closing Date;
Exhibit
4(b) - Page
13
o) enter
into any agreement with any holder of the Company’s securities without the prior
written consent of the Holder, except as permitted by the Transaction
Documents;
p) other
than the 100 for 1 reverse stock split previously approved by the Board of
Directors of the Company, authorize or approve any reverse stock split of the
Common Stock;
q) increase
of decrease the number of Directors on the Company’s Board of Directors;
or
r) enter
into any agreement with respect to any of the foregoing.
Section
8. 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 liquidated 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 a Conversion Date or 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
3
Trading Days;
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 (other than
a
breach by the Company of its obligations to deliver shares of Common Stock
to
the Holder upon conversion which breach is addressed in clause (xii) below)
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 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,
which
default, solely in the case of a default under clause (B) above, is not cured,
within 10 Trading Days;
iv. any
representation or warranty made herein, in any other Transaction Document,
or in
any written statement pursuant hereto or thereto, shall be untrue or incorrect
in any material respect as of the date when made or deemed made;
Exhibit
4(b) - Page
14
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 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 $50,000, 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 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 redemptions of Conversion Shares, redemptions, repurchases or
conversions contemplated by the Transaction Documents and repurchases of shares
of Common Stock or other equity securities of departing officers and directors
of the Company; provided such repurchases shall not exceed $50,000, in the
aggregate, for all officers and directors during the term of this
Note);
ix. if,
during the Effectiveness Period (as defined in the Registration Rights
Agreement), the effectiveness of the Registration Statement lapses for any
reason or the Holder shall not be permitted to resell Registrable Securities
(as
defined in the Registration Rights Agreement) under the Registration Statement,
in either case, for more than 10 consecutive Trading Days or 15 non-consecutive
Trading Days during any 12 month period; provided,
however,
that in
the event that the Company is negotiating a merger, consolidation, acquisition
or sale of all or substantially all of its assets or a similar transaction
and
in the written opinion of counsel to the Company, the Registration Statement,
would be required to be amended to include information concerning such
transactions or the parties thereto that is not available or may not be publicly
disclosed at the time, the Company shall be permitted an additional 10
consecutive Trading during any 12 month period relating to such an
event;
Exhibit
4(b) - Page
15
x. an
Event
(as defined in the Registration Rights Agreement) shall not have been cured
to
the satisfaction of the Holder prior to the expiration of thirty days from
the
Event Date (as defined in the Registration Rights Agreement) relating thereto
(other than an Event resulting from a failure of an Registration Statement
to be
declared effective by the Commission on or prior to the Effectiveness Date
(as
defined in the Registration Rights Agreement), which shall be covered by Section
8(a)(ix);
xi. the
Company shall fail for any reason to deliver certificates to a Holder prior
to
the fifth Trading Day after a Conversion Date pursuant to and in accordance
with
Section 4(d) or the Company shall provide notice to the Holder, including by
way
of public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms hereof;
or
xii. the
Company shall fail for any reason to pay in full the amount of cash due pursuant
to a Buy-In within 5 Trading Days after notice therefor is delivered hereunder
or shall fail to pay all amounts owed on account of an Event of Default within
five days of the date due
xiii. the
Company shall fail to cause (A) X. Xxx Xxxxxx to resign as President and Chief
Executive Office of the Company and (B) the Board to (1) appoint Xxxxx Xxxx
as
Chief Executive Officer and (2) approve an employment agreement with Xxxxx
Xxxx
and a consulting agreement with Robins Media Group within one Business Day
after
the Initial Closing Date;
xiv.
the
Company shall fail to cause the Board to (A) set the number of directors
comprising the Board at seven and (B) appoint as members to the Board (1) the
designees of the Holder and the other holders of the Notes, (2) the designees
of
the Series B Shareholders and (3) Xxxxx Xxxx within 20 days of the Initial
Closing Date;
xv. the
Company shall fail (A) to amend its Certificate of Incorporation to effect
a
hundred-to-one (100-to-1) reverse stock split and (B) to amend and restate
its
Certificate of Designation of Series A Preferred Stock within 120 days of the
Initial Closing Date; or
Exhibit
4(b) - Page
16
xvi. the
Company shall fail to cause its Board of Directors, as constituted immediately
after the Initial Closing Date, and its stockholders, as the case may be, to
elect the nominees of the Holder and the other holders of the Notes as members
of the Company’s Board of Directors.
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 18% 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
9. Miscellaneous.
a) Board
of Directors.
So long
as this Note is outstanding, the Holder shall have the right, along with other
holders of the Notes, to designate two (2) of the five (5) members of the
Company’s Board of Directors. In the event that the size of the Company’s Board
of Directors is increased or decreased, the Holder, and the other holders of
the
Notes, will maintain the right to appoint a number of directors to the Board
of
Directors equal to forty percent (40%) of the whole Board of Directors.
In
the
event that the number of directors to the Board of Directors equal to forty
percent (40%) is not a whole number, such number shall be rounded up to the
nearest whole number. Holders
holding a majority of the outstanding Notes shall be entitled to act on behalf
of all holders in selecting such designees.
b) Notices.
Any and
all notices or other communications or deliveries to be provided by the Holders
hereunder, including, without limitation, any Notice of Conversion, 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 _____________,
Attn: Chief Executive Officer, 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.
Exhibit
4(b) - Page
17
c) 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.
d) 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.
e) Security
Interest.
This
Note is a direct debt obligation of the Company and, pursuant to the Security
Agreement is secured by a first priority perfected security interest in all
of
the assets of the Company for the benefit of the Holders.
f) 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 against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) may 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.
Exhibit
4(b) - Page
18
g) 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.
h) 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.
i) 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.
j) 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.
k) Seniority.
This
Note is senior in right of payment to any and all other indebtedness of the
Company.
l) Amendments/Waivers.
No
provision of the Notes may be waived or amended except in a written instrument
signed by the Company and Holders holding 51% of the principal amount of Notes
then outstanding. No waiver of any default with respect to any provision,
condition or requirement of this Note shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of
either party to exercise any right hereunder in any manner impair the exercise
of any such right.
*********************
Exhibit
4(b) - Page
19
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.
|
__________________________________________
Name:
Title:
|
Exhibit
4(b) - Page
20
ANNEX
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert principal under the Senior Secured
Convertible Note of Knobias, Inc., a Delaware corporation (the “Company”),
due
on March ___, 2010, into shares of common stock, par value $ ____ per share
(the
“Common
Stock”),
of
the Company according to the conditions hereof, as of the date written below.
If
shares are to be issued in the name of a person other than the undersigned,
the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested
by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
By
the
delivery of this Notice of Conversion the undersigned represents and warrants
to
the Company that its ownership of the Common Stock does not exceed the amounts
determined in accordance with Section 13(d) of the Exchange Act, specified
under
Section 4 of this Note.
The
undersigned agrees to comply with the prospectus delivery requirements under
the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion
calculations:
Date
to Effect Conversion:
Principal
Amount of Notes to be Converted:
Payment
of Interest in Common Stock __ yes __ no
If
yes, $_____ of Interest Accrued on Account of Conversion at
Issue.
Number
of shares of Common Stock to be issued:
Signature:
Name:
Address:
|
Exhibit
4(b) - Page
21
Schedule
1
CONVERSION
SCHEDULE
The
Senior Secured Convertible Notes due on March ___, 2010, in the aggregate
principal amount of $____________ issued by Knobias, Inc., a Delaware
corporation. This Conversion Schedule reflects conversions made under Section
4
of the above referenced Note.
Dated:
Date
of Conversion
(or
for first entry, Original Issue Date)
|
Amount
of Conversion
|
Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
|
Company
Attest
|
|
|||
Exhibit
4(b) - Page
22