Exhibit 4.2
Form of Convertible Note
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR IN A
TRANSACTION EXEMPT FROM SUCH REGISTRATION ACCOMPANIED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO OSAGE SYSTEMS GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, OSAGE SYSTEMS GROUP, INC., a Delaware corporation
(hereinafter called "Borrower"), hereby promises to pay to ▇▇▇▇▇▇▇ TRUST REG.,
c/o trevisa-Treuhand-Anstalt, ▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, Fax No.: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇▇ (the "Holder") or order, without
demand, the sum of Five Hundred Thousand Dollars ($500,000.00), with simple
interest accruing at the annual rate of 8%, on October 1, 2001 (the "Maturity
Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of 18% per annum shall apply to the amounts owed
hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert, interest
payable on this Note shall accrue at the annual rate of eight percent (8%) and
be payable quarterly in arrears commencing January 1, 2001 and on the Maturity
Date, accelerated or otherwise, when the principal and remaining accrued but
unpaid interest shall be due and payable, or sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
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2.1. Conversion into the Borrower's Common Stock.
(a) Subject to Sections 7(e) and 9.3 of the Subscription Agreement and
the terms hereof, the Holder shall have the right from and after the issuance of
this Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, and at the Holder's
election, the interest accrued on the Note, (the date of giving of such notice
of conversion being a "Conversion Date") into fully paid and nonassessable
shares of common stock of Borrower as such stock exists on the date of issuance
of this Note, or any shares of capital stock of Borrower into which such stock
shall hereafter be changed or reclassified (the "Common Stock") at the
conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"),
determined as provided herein. Upon delivery to the Company of a Notice of
Conversion as described in Section 9 of the subscription agreement entered into
between the Company and Holder relating to this Note (the "Subscription
Agreement") of the Holder's written request for conversion, Borrower shall issue
and deliver to the Holder within seven business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the Company will
deliver accrued but unpaid interest on the Note through the Conversion Date
directly to the Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal (and interest, at the election of the Holder) of the Note to be
converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be the lower of (i) $.80 (the "Maximum Base
Price"); or (ii) provided same is less than the Conversion Price then in effect,
80% of the average of the three lowest closing prices of the Common Stock as
reported for the Principal Market (as defined in the Subscription Agreement) or
such other principal trading market if not a Principal Market, for the ten
trading days prior to the six month anniversary of the Closing Date (as defined
in the Subscription Agreement) and each three month anniversary thereafter. Each
of the foregoing anniversary dates is an "Anniversary Date."
(c) The Maximum Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows:
▇. ▇▇▇▇▇▇, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time shall,
by reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
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unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of securities
as would have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Maximum Base Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.
D. Share Issuance. Subject to the provisions of this Section,
if the Borrower at any time shall issue any shares of Common Stock prior to the
conversion of the entire principal amount of the Note (otherwise than as: (i)
provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this subparagraph D; (ii)
pursuant to options, warrants, or other obligations to issue shares, outstanding
on the date hereof as described in the Reports and Other Written Information or
pursuant to Securities issued under the Subscription Agreement, as such terms
are defined in the Subscription Agreement; or (iii) Excepted Issuances, as
defined in Section 12(a) of the Subscription Agreement; ((i), (ii) and (iii)
above, are hereinafter referred to as the "Existing Option Obligations")) for a
consideration less than the Conversion Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Conversion Price shall be reduced as follows: (i) the number of shares of Common
Stock outstanding immediately prior to such issue (calculated on a fully-diluted
basis assuming the exercise or conversion of all then exercisable or convertible
options, warrants, purchase rights and other convertible securities) shall be
multiplied by the Conversion Price in effect at the time of such issue and the
product shall be added to the aggregate consideration, if any, received by the
Borrower upon such issue of additional shares of Common Stock; and (ii) the sum
so obtained shall be divided by the number of shares of Common Stock outstanding
immediately after such issue (calculated on a fully-diluted basis assuming the
exercise or conversion of all then exercisable or convertible options, warrants,
purchase rights and other convertible securities). The resulting quotient shall
be the adjusted conversion price. For purposes of this adjustment, the issuance
of any security of the Borrower subject to this Section 2.1(c)D carrying the
right to convert such security into shares of Common Stock or of any warrant,
right or option to purchase Common Stock at an exercise or conversion price less
than the Conversion Price in effect on the date of the issuance of such security
shall result in an adjustment to the Conversion Price upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights.
(d) During the period the conversion right exists, Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. Borrower represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. ▇▇▇▇▇▇▇▇ agrees that its issuance
of this Note shall constitute full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the Holder in
whole or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, a new Note containing the same
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date and provisions of this Note shall be issued by the Borrower to the Holder
for the principal balance of this Note and interest which shall not have been
converted or paid.
2.3. Maximum Conversion. The Holder shall not be entitled to convert on
a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this proviso
is being made on a Conversion Date, which would result in beneficial ownership
by the Holder and its affiliates of more than 9.99% of the outstanding shares of
Common Stock of the Borrower on such Conversion Date. For the purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Holder shall not be limited to aggregate conversions of only 9.99%. The Holder
may void the conversion limitation described in this Section 2.3 upon 75 days
prior notice to the Borrower. The Holder, in the Holder's sole discretion, may
allocate which of the equity of the Borrower deemed beneficially owned by the
Holder shall be included in the 9.99% amount described above and which shall be
allocated to the excess above 9.99%.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make subject to Section
3.12 below, all sums of principal and interest then remaining unpaid hereon and
all other amounts payable hereunder immediately due and payable, all without
demand, presentment or notice, or grace period, all of which hereby are
expressly waived, except as set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of principal or interest hereon when due and such failure continues
for a period of ten (10) days after the due date.
3.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of thirty (30) days after written notice
to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement entered into by the Holder and Borrower in connection with this Note,
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection therewith shall be false or misleading in any material respect.
3.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
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3.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against Borrower or any of its property or other assets for
more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower and if
instituted against Borrower are not dismissed within 45 days of initiation.
3.7 Delisting. Delisting of the Common Stock from the Principal Market
or such other principal exchange on which the Common Stock is listed for
trading.
3.8 Concession. A concession by the Borrower, after applicable notice
and cure periods, under any one or more obligations in an aggregate monetary
amount in excess of $250,000.
3.9 Stop Trade. An SEC stop trade order or NASDAQ trading suspension of
ten or more trading days.
3.10 Failure to Deliver Common Stock or Replacement Note. ▇▇▇▇▇▇▇▇'s
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Subscription Agreement, or if
required a replacement Note.
3.11 Registration Default. The occurrence of a Non-Registration Event
as described in Section 10.4 of the Subscription Agreement that is not cured
within sixty days.
3.12 Approval. The occurrence of an Approval Default as described in
Section 7(e) of the Subscription Agreement but only with respect to that amount
equal to the Note Approval Default Amount, as defined in the Subscription
Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or sent by fax transmission (with
copy sent by regular, certified or registered mail or by overnight courier). For
the purposes hereof, the address and fax number of the Holder is as set forth on
the first page hereof. The address and fax number of the Borrower shall be Osage
Systems Group, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇. Both ▇▇▇▇▇▇ and Borrower may change the
address and fax number for service by service of notice to the other as herein
provided. Notice of Conversion shall be deemed given when made to the Borrower
pursuant to the Subscription Agreement.
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4.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in a transaction
exempt from the registration requirements under the Securities Act of 1933, as
amended, in the opinion of counsel reasonably acceptable to the Borrower.
4.5 Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
4.8 Prepayment. This Note may not be paid prior to the Maturity Date
without the consent of the Holder except as described in the Subscription
Agreement.
4.9 Redemption. This Note may not be redeemed except as described in
the Subscription Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be signed in its
name by its _________________ on this _____ day of September, 2000.
OSAGE SYSTEMS GROUP, INC.
By:________________________________
WITNESS:
_______________________________
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NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by OSAGE SYSTEMS GROUP,
INC. as of September 22, 2000 into Shares of Common Stock of OSAGE SYSTEMS
GROUP, INC. (the "Company") according to the conditions set forth in such Note,
as of the date written below.
Date of Conversion:_________________________________________________________
Conversion Price:___________________________________________________________
Shares To Be Delivered:_____________________________________________________
Signature:__________________________________________________________________
Print Name:_________________________________________________________________
Address:____________________________________________________________________
____________________________________________________________________
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