CALLABLE SECURED CONVERTIBLE NOTE

 

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED

      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES

      MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE

      REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF

      COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN

      COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT

      OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT.

 

                        CALLABLE SECURED CONVERTIBLE NOTE

 

New York,, New York

October 7, 2005                                                           $______

 

            FOR VALUE RECEIVED, Astrata Group Incorporated, a Nevada corporation

(hereinafter called the "Borrower"), hereby promises to pay to the order of NEW

____________________ or registered assigns (the "Holder") the sum of

$__________, on October 7, 2008 (the "Maturity Date"). Any amount of principal

on this Note which is not paid when due shall bear interest at the rate of

fifteen percent (15%) per annum from the due date thereof until the same is paid

("Default Interest"). All payments due hereunder (to the extent not converted

into common stock, $0.0001 par value per share (the "Common Stock") in

accordance with the terms hereof) shall be made in lawful money of the United

States of America. All payments shall be made at such address as the Holder

shall hereafter give to the Borrower by written notice made in accordance with

the provisions of this Note. Whenever any amount expressed to be due by the

terms of this Note is due on any day which is not a business day, the same shall

instead be due on the next succeeding day which is a business day. As used in

this Note, the term "business day" shall mean any day other than a Saturday,

Sunday or a day on which commercial banks in the city of New York, New York are

authorized or required by law or executive order to remain closed. Each

capitalized term used herein, and not otherwise defined, shall have the meaning

ascribed thereto in that certain Securities Purchase Agreement, dated October 7,

2005, pursuant to which this Note was originally issued (the "Purchase

Agreement").

 

      This Note is free from all taxes, liens, claims and encumbrances with

respect to the issue thereof and shall not be subject to preemptive rights or

other similar rights of stockholders of the Borrower and will not impose

personal liability upon the holder thereof. The obligations of the Borrower

under this Note shall be secured by that certain Security Agreement and

Intellectual Property Security Agreement, each dated October 7, 2005 by and

between the Borrower and the Holder.

<PAGE>

 

      The following terms shall apply to this Note:

 

                          ARTICLE I. CONVERSION RIGHTS

 

      1.1 Conversion Right. The Holder shall have the right from time to time,

and at any time on or prior to the earlier of (i) the Maturity Date and (ii) the

date of payment of the Default Amount (as defined in Article III) pursuant to

Section 1.6(a) or Article III, the Optional Prepayment Amount (as defined in

Section 5.1 in respect of the remaining outstanding principal amount of this

Note to convert all or any part of the outstanding and unpaid principal amount

of this Note into fully paid and non-assessable shares of Common Stock, as such

Common Stock exists on the Issue Date, or any shares of capital stock or other

securities of the Borrower into which such Common Stock shall hereafter be

changed or reclassified at the conversion price (the "Conversion Price")

determined as provided herein (a "Conversion"); provided, however, that in no

event shall the Holder be entitled to convert any portion of this Note in excess

of that portion of this Note upon conversion of which the sum of (1) the number

of shares of Common Stock beneficially owned by the Holder and its affiliates

(other than shares of Common Stock which may be deemed beneficially owned

through the ownership of the unconverted portion of the Notes or the unexercised

or unconverted portion of any other security of the Borrower (including, without

limitation, the warrants issued by the Borrower pursuant to the Purchase

Agreement) subject to a limitation on conversion or exercise analogous to the

limitations contained herein) and (2) the number of shares of Common Stock

issuable upon the conversion of the portion of this Note with respect to which

the determination of this proviso is being made, would result in beneficial

ownership by the Holder and its affiliates of more than 4.99% of the outstanding

shares of Common Stock and provided further that the Holder shall not be

entitled to convert any portion of this Note during any month immediately

succeeding a Determination Date on which the Borrower exercises its prepayment

option pursuant to Section 5.1 of this Note. For 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 Regulations 13D-G thereunder, except as otherwise provided in

clause (1) of such proviso. The number of shares of Common Stock to be issued

upon each conversion of this Note shall be determined by dividing the Conversion

Amount (as defined below) by the applicable Conversion Price then in effect on

the date specified in the notice of conversion, in the form attached hereto as

Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder

in accordance with Section 1.4 below; provided that the Notice of Conversion is

submitted by facsimile (or by other means resulting in, or reasonably expected

to result in, notice) to the Borrower before 6:00 p.m., New York, New York time

on such conversion date (the "Conversion Date"). The term "Conversion Amount"

means, with respect to any conversion of this Note, the sum of (1) the principal

amount of this Note to be converted in such conversion plus (2) Default

Interest, if any, on the amounts referred to in the immediately preceding clause

(1) plus (3) at the Holder's option, any amounts owed to the Holder pursuant to

Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of that certain

Registration Rights Agreement, dated as of October 7, 2005, executed in

connection with the initial issuance of this Note and the other Notes issued on

the Issue Date (the "Registration Rights Agreement"). The term "Determination

Date" means the last business day of each month after the Issue Date.

 

 

                                       2

<PAGE>

 

       1.2 Conversion Price.

 

            (a) Calculation of Conversion Price. The Conversion Price shall be

the lesser of (i) the Variable Conversion Price (as defined herein) and (ii) the

Fixed Conversion Price (as defined herein) (subject, in each case, to equitable

adjustments for stock splits, stock dividends or rights offerings by the

Borrower relating to the Borrower's securities or the securities of any

subsidiary of the Borrower, combinations, recapitalization, reclassifications,

extraordinary distributions and similar events). The "Variable Conversion Price"

shall mean the Applicable Percentage (as defined herein) multiplied by the

Market Price (as defined herein). "Market Price" means the average of the lowest

five (5) Trading Prices (as defined below) for the Common Stock during the

twenty (20) Trading Day period ending one Trading Day prior to the date the

Conversion Notice is sent by the Holder to the Borrower via facsimile (the

"Conversion Date"). "Trading Price" means, for any security as of any date, the

intraday trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as

reported by a reliable reporting service ("Reporting Service") mutually

acceptable to Borrower and Holder and hereafter designated by Holders of a

majority in interest of the Notes and the Borrower or, if the OTCBB is not the

principal trading market for such security, the intraday trading price of such

security on the principal securities exchange or trading market where such

security is listed or traded or, if no intraday trading price of such security

is available in any of the foregoing manners, the average of the intraday

trading prices of any market makers for such security that are listed in the

"pink sheets" by the Pink Sheets LLC. If the Trading Price cannot be calculated

for such security on such date in the manner provided above, the Trading Price

shall be the fair market value as mutually determined by the Borrower and the

holders of a majority in interest of the Notes being converted for which the

calculation of the Trading Price is required in order to determine the

Conversion Price of such Notes. "Trading Day" shall mean any day on which the

Common Stock is traded for any period on the OTCBB, or on the principal

securities exchange or other securities market on which the Common Stock is then

being traded. "Applicable Percentage" shall mean 60.0%. The "Fixed Conversion

Price" shall mean $2.50.

 

            (b) Conversion Price During Major Announcements. Notwithstanding

anything contained in Section 1.2(b) to the contrary, in the event the Borrower

(i) makes a public announcement that it intends to consolidate or merge with any

other corporation (other than a merger in which the Borrower is the surviving or

continuing corporation and its capital stock is unchanged) or sell or transfer

all or substantially all of the assets of the Borrower or (ii) any person, group

or entity (including the Borrower) publicly announces a tender offer to purchase

50% or more of the Borrower's Common Stock (or any other takeover scheme) (the

date of the announcement referred to in clause (i) or (ii) is hereinafter

referred to as the "Announcement Date"), then the Conversion Price shall,

effective upon the Announcement Date and continuing through the Adjusted

Conversion Price Termination Date (as defined below), be equal to the lower of

(x) the Conversion Price which would have been applicable for a Conversion

occurring on the Announcement Date and (y) the Conversion Price that would

otherwise be in effect. From and after the Adjusted Conversion Price Termination

Date, the Conversion Price shall be determined as set forth in this Section

1.2(b). For purposes hereof, "Adjusted Conversion Price Termination Date" shall

mean, with respect to any proposed transaction or tender offer (or takeover

scheme) for which a public announcement as contemplated by this Section 1.2(b)

has been made, the date upon which the Borrower (in the case of clause (i)

above) or the person, group or entity (in the case of clause (ii) above)

consummates or publicly announces the termination or abandonment of the proposed

transaction or tender offer (or takeover scheme) which caused this Section

1.2(b) to become operative.

 

 

                                       3

<PAGE>

 

      1.3 Authorized Shares. The Borrower covenants that during the period the

conversion right exists, the Borrower will reserve from its authorized and

unissued Common Stock a sufficient number of shares, free from preemptive

rights, to provide for the issuance of Common Stock upon the full conversion of

this Note and the other Notes issued pursuant to the Purchase Agreement. The

Borrower is required at all times to have authorized and reserved two times the

number of shares that is actually issuable upon full conversion of the Notes

(based on the Conversion Price of the Notes or the Exercise Price of the

Warrants in effect from time to time) (the "Reserved Amount"). The Reserved

Amount shall be increased from time to time in accordance with the Borrower's

obligations pursuant to Section 4(h) of the Purchase Agreement. The Borrower

represents that upon issuance, such shares will be duly and validly issued,

fully paid and non-assessable. In addition, if the Borrower shall issue any

securities or make any change to its capital structure which would change the

number of shares of Common Stock into which the Notes shall be convertible at

the then current Conversion Price, the Borrower shall at the same time make

proper provision so that thereafter there shall be a sufficient number of shares

of Common Stock authorized and reserved, free from preemptive rights, for

conversion of the outstanding Notes. The Borrower (i) acknowledges that it has

irrevocably instructed its transfer agent to issue certificates for the Common

Stock issuable upon conversion of this Note, and (ii) agrees that its issuance

of this Note shall constitute full authority to its officers and agents who are

charged with the duty of executing stock certificates to execute and issue the

necessary certificates for shares of Common Stock in accordance with the terms

and conditions of this Note.

 

      If, at any time a Holder of this Note submits a Notice of Conversion, and

the Borrower does not have sufficient authorized but unissued shares of Common

Stock available to effect such conversion in accordance with the provisions of

this Article I (a "Conversion Default"), subject to Section 4.8, the Borrower

shall issue to the Holder all of the shares of Common Stock which are then

available to effect such conversion. The portion of this Note which the Holder

included in its Conversion Notice and which exceeds the amount which is then

convertible into available shares of Common Stock (the "Excess Amount") shall,

notwithstanding anything to the contrary contained herein, not be convertible

into Common Stock in accordance with the terms hereof until (and at the Holder's

option at any time after) the date additional shares of Common Stock are

authorized by the Borrower to permit such conversion, at which time the

Conversion Price in respect thereof shall be the lesser of (i) the Conversion

Price on the Conversion Default Date (as defined below) and (ii) the Conversion

Price on the Conversion Date thereafter elected by the Holder in respect

thereof. In addition, the Borrower shall pay to the Holder payments ("Conversion

Default Payments") for a Conversion Default in the amount of (x) the sum of (1)

the then outstanding principal amount of this Note plus (2) Default Interest, if

any, on the amounts referred to in clause (1), multiplied by (y) .24, multiplied

by (z) (N/365), where N = the number of days from the day the holder submits a

Notice of Conversion giving rise to a Conversion Default (the "Conversion

Default Date") to the date (the "Authorization Date") that the Borrower

authorizes a sufficient number of shares of Common Stock to effect conversion of

the full outstanding principal balance of this Note. The Borrower shall use its

best efforts to authorize a sufficient number of shares of Common Stock as soon

as practicable following the earlier of (i) such time that the Holder notifies

the Borrower or that the Borrower otherwise becomes aware that there are or

likely will be insufficient authorized and unissued shares to allow full

conversion thereof and (ii) a Conversion Default. The Borrower shall send notice

to the Holder of the authorization of additional shares of Common Stock, the

Authorization Date and the amount of Holder's accrued Conversion Default

Payments. The accrued Conversion Default Payments for each calendar month shall

be paid in cash or shall be convertible into Common Stock (at such time as there

are sufficient authorized shares of Common Stock) at the applicable Conversion

Price, at the Borrower's option, as follows:

 

 

                                       4

<PAGE>

 

            (a) In the event Holder elects to take such payment in cash, cash

payment shall be made to Holder by the fifth (5th) day of the month following

the month in which it has accrued; and

 

            (b) In the event Holder elects to take such payment in Common Stock,

the Holder may convert such payment amount into Common Stock at the Conversion

Price (as in effect at the time of conversion) at any time after the fifth day

of the month following the month in which it has accrued in accordance with the

terms of this Article I (so long as there is then a sufficient number of

authorized shares of Common Stock).

 

      The Holder's election shall be made in writing to the Borrower at any time

prior to 6:00 p.m., New York, New York time, on the third day of the month

following the month in which Conversion Default payments have accrued. If no

election is made, the Holder shall be deemed to have elected to receive cash.

Nothing herein shall limit the Holder's right to pursue actual damages (to the

extent in excess of the Conversion Default Payments) for the Borrower's failure

to maintain a sufficient number of authorized shares of Common Stock, and each

holder shall have the right to pursue all remedies available at law or in equity

(including degree of specific performance and/or injunctive relief).

 

      1.4 Method of Conversion.

 

            (a) Mechanics of Conversion. Subject to Section 1.1, this Note may

be converted by the Holder in whole or in part at any time from time to time

after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion

(by facsimile or other reasonable means of communication dispatched on the

Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to

Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

            (b) Surrender of Note Upon Conversion. Notwithstanding anything to

the contrary set forth herein, upon conversion of this Note in accordance with

the terms hereof, the Holder shall not be required to physically surrender this

Note to the Borrower unless the entire unpaid principal amount of this Note is

so converted. The Holder and the Borrower shall maintain records showing the

principal amount so converted and the dates of such conversions or shall use

such other method, reasonably satisfactory to the Holder and the Borrower, so as

not to require physical surrender of this Note upon each such conversion. In the

event of any dispute or discrepancy, such records of the Borrower shall be

controlling and determinative in the absence of manifest error. Notwithstanding

the foregoing, if any portion of this Note is converted as aforesaid, the Holder

may not transfer this Note unless the Holder first physically surrenders this

Note to the Borrower, whereupon the Borrower will forthwith issue and deliver

upon the order of the Holder a new Note of like tenor, registered as the Holder

(upon payment by the Holder of any applicable transfer taxes) may request,

representing in the aggregate the remaining unpaid principal amount of this

Note. 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 represented by this Note may be less than the amount stated on the face

hereof.

 

 

                                       5

<PAGE>

 

            (c) Payment of Taxes. The Borrower shall not be required to pay any

tax which may be payable in respect of any transfer involved in the issue and

delivery of shares of Common Stock or other securities or property on conversion

of this Note in a name other than that of the Holder (or in street name), and

the Borrower shall not be required to issue or deliver any such shares or other

securities or property unless and until the person or persons (other than the

Holder or the custodian in whose street name such shares are to be held for the

Holder's account) requesting the issuance thereof shall have paid to the

Borrower the amount of any such tax or shall have established to the

satisfaction of the Borrower that such tax has been paid.

 

            (d) Delivery of Common Stock Upon Conversion. Upon receipt by the

Borrower from the Holder of a facsimile transmission (or other reasonable means

of communication) of a Notice of Conversion meeting the requirements for

conversion as provided in this Section 1.4, the Borrower shall issue and deliver

or cause to be issued and delivered to or upon the order of the Holder

certificates for the Common Stock issuable upon such conversion within two (2)

business days after such receipt (and, solely in the case of conversion of the

entire unpaid principal amount hereof, surrender of this Note) (such second

business day being hereinafter referred to as the "Deadline") in accordance with

the terms hereof and the Purchase Agreement (including, without limitation, in

accordance with the requirements of Section 2(g) of the Purchase Agreement that

certificates for shares of Common Stock issued on or after the effective date of

the Registration Statement upon conversion of this Note shall not bear any

restrictive legend).

 

            (e) Obligation of Borrower to Deliver Common Stock. Upon receipt by

the Borrower of a Notice of Conversion, the Holder shall be deemed to be the

holder of record of the Common Stock issuable upon such conversion, the

outstanding principal amount and the amount of accrued and unpaid interest on

this Note shall be reduced to reflect such conversion, and, unless the Borrower

defaults on its obligations under this Article I, all rights with respect to the

portion of this Note being so converted shall forthwith terminate except the

right to receive the Common Stock or other securities, cash or other assets, as

herein provided, on such conversion. If the Holder shall have given a Notice of

Conversion as provided herein, the Borrower's obligation to issue and deliver

the certificates for Common Stock shall be absolute and unconditional,

irrespective of the absence of any action by the Holder to enforce the same, any

waiver or consent with respect to any provision thereof, the recovery of any

judgment against any person or any action to enforce the same, any failure or

delay in the enforcement of any other obligation of the Borrower to the holder

of record, or any setoff, counterclaim, recoupment, limitation or termination,

or any breach or alleged breach by the Holder of any obligation to the Borrower,

and irrespective of any other circumstance which might otherwise limit such

obligation of the Borrower to the Holder in connection with such conversion. The

Conversion Date specified in the Notice of Conversion shall be the Conversion

Date so long as the Notice of Conversion is received by the Borrower before 6:00

p.m., New York, New York time, on such date.

 

 

                                       6

<PAGE>

 

            (f) Delivery of Common Stock by Electronic Transfer. In lieu of

delivering physical certificates representing the Common Stock issuable upon

conversion, provided the Borrower's transfer agent is participating in the

Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")

program, upon request of the Holder's broker and the Holder's compliance with

the provisions contained in Section 1.1 and in this Section 1.4, the Borrower

shall use its best efforts to cause its transfer agent to electronically

transmit the Common Stock issuable upon conversion to the Holder by crediting

the account of Holder's Prime Broker with DTC through its Deposit Withdrawal

Agent Commission ("DWAC") system.

 

            (g) Failure to Deliver Common Stock Prior to Deadline. Without in

any way limiting the Holder's right to pursue other remedies, including actual

damages and/or equitable relief, the parties agree that if delivery of the

Common Stock issuable upon conversion of this Note is more than two (2) business

days after the Deadline (other than a failure due to the circumstances described

in Section 1.3 above, which failure shall be governed by such Section) the

Borrower shall pay to the Holder $500 per day in cash, for each day beyond the

Deadline that the Borrower fails to deliver such Common Stock. Such cash amount

shall be paid to Holder by the fifth day of the month following the month in

which it has accrued or, at the option of the Holder (by written notice to the

Borrower by the first day of the month following the month in which it has

accrued), shall be added to the principal amount of this Note, in which event

interest shall accrue thereon in accordance with the terms of this Note and such

additional principal amount shall be convertible into Common Stock in accordance

with the terms of this Note.

 

      1.5 Concerning the Shares. The shares of Common Stock issuable upon

conversion of this Note may not be sold or transferred unless (i) such shares

are sold pursuant to an effective registration statement under the Act or (ii)

the Borrower or its transfer agent shall have been furnished with an opinion of

counsel (which opinion shall be in form, substance and scope customary for

opinions of counsel in comparable transactions) to the effect that the shares to

be sold or transferred may be sold or transferred pursuant to an exemption from

such registration or (iii) such shares are sold or transferred pursuant to Rule

144 under the Act (or a successor rule) ("Rule 144") or (iv) such shares are

transferred to an "affiliate" (as defined in Rule 144) of the Borrower who

agrees to sell or otherwise transfer the shares only in accordance with this

Section 1.5 and who is an Accredited Investor (as defined in the Purchase

Agreement). Except as otherwise provided in the Purchase Agreement (and subject

to the removal provisions set forth below), until such time as the shares of

Common Stock issuable upon conversion of this Note have been registered under

the Act as contemplated by the Registration Rights Agreement or otherwise may be

sold pursuant to Rule 144 without any restriction as to the number of securities

as of a particular date that can then be immediately sold, each certificate for

shares of Common Stock issuable upon conversion of this Note that has not been

so included in an effective registration statement or that has not been sold

pursuant to an effective registration statement or an exemption that permits

removal of the legend, shall bear a legend substantially in the following form,

as appropriate:

 

 

                                       7

<PAGE>

 

      "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED

      UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE

      SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION

      STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN

      FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE

       TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD

      PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT."

 

      The legend set forth above shall be removed and the Borrower shall issue

to the Holder a new certificate therefor free of any transfer legend if (i) the

Borrower or its transfer agent shall have received an opinion of counsel, in

form, substance and scope customary for opinions of counsel in comparable

transactions, to the effect that a public sale or transfer of such Common Stock

may be made without registration under the Act and the shares are so sold or

transferred, (ii) such Holder provides the Borrower or its transfer agent with

reasonable assurances that the Common Stock issuable upon conversion of this

Note (to the extent such securities are deemed to have been acquired on the same

date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock

issuable upon conversion of this Note, such security is registered for sale by

the Holder under an effective registration statement filed under the Act or

otherwise may be sold pursuant to Rule 144 without any restriction as to the

number of securities as of a particular date that can then be immediately sold.

Nothing in this Note shall (i) limit the Borrower's obligation under the

Registration Rights Agreement or (ii) affect in any way the Holder's obligations

to comply with applicable prospectus delivery requirements upon the resale of

the securities referred to herein.

 

      1.6 Effect of Certain Events.

 

            (a) Effect of Merger, Consolidation, Etc. Except as permitted by

Sections 4(e) and 4(j) of the Securities Purchase Agreement, the sale,

conveyance or disposition of all or substantially all of the assets of the

Borrower, the effectuation by the