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EXHIBIT 4.2
FORM OF 8% CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO
REGISTERED OR AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT IS
AVAILABLE.
8% CONVERTIBLE PROMISSORY NOTE
$120,000.00
December __, 2005
As consideration
for the surrender and cancellation of that certain 12%
Promissory Note, dated April 6, 2005, in
the principal amount of One Hundred
Twenty Thousand Dollars ($120,000.00) (the
"12% Note"), issued by ELCOM
INTERNATIONAL, INC., a Delaware
corporation, whose principal address is 10
Oceana Way, Norwood, Massachusetts 02062
("Maker"), to _________________, an
individual, residing at __________________,
_____, ___________________
("Payee"), the undersigned Maker, hereby
promises to pay to the order of Payee
the entire aggregate principal amount of
One Hundred Twenty Thousand Dollars
($120,000.00), pursuant to the terms and
conditions contained herein, together
with interest thereon at the rate
hereinafter provided from the date of each
advance hereunder or under the 12%
Note.
[FORM OF CROWELL NOTE PRINCIPAL AND
INTEREST]
1. Principal and
Interest. The principal amount of this Note, as well as
all interest accrued hereunder and interest
accrued on advances under the 12%
Note, all at a rate of Eight Percent (8.0%)
per annum from the date of advances
hereunder and thereunder (such interest
referred to collectively hereinafter as
"Accrued Interest") shall be due and
payable in one installment within five
business days after Maker notifies Payee
that it has adequate funds to repay
this note (the "Maturity Date"), unless and
to the extent that this Note shall
have been previously converted pursuant to
Section 3 hereof, in which case all
outstanding principal under this Note and
all Accrued Interest that is converted
shall be satisfied in full by virtue of
such conversion and issuance and
delivery of fully paid and non-assessable
shares of Maker's common stock, par
value $.01 per share ("Common Stock"), to
Payee, all as set forth in Section 3
hereof. Interest on the principal amount of
this Note shall accrue at the rate
of Eight Percent (8.0%) per annum
commencing as of the date hereof and
continuing until all principal and accrued
interest owing under this Note is
paid in full. Interest shall be calculated
upon a year of 360 days for the
actual number of days elapsed.
[FORM OF SMITH NOTE PRINCIPAL AND
INTEREST]
1. Principal and
Interest. The principal amount of this Note, as well as
all interest accrued hereunder and interest
accrued on advances under the 12%
Note, all at a rate of Eight Percent (8.0%)
per annum from the date of advances
hereunder and thereunder (such interest
referred to collectively hereinafter as
"Accrued Interest") shall be due and
payable in one installment upon the Company
achieving two sequential quarters of
positive cash flow from operations (the
"Maturity Date"), unless and to the extent
that this Note shall have been
previously converted pursuant to Section 3
hereof, in which case all outstanding
principal under this Note and all Accrued
Interest that is converted shall be
satisfied in full by virtue of such
conversion and issuance and delivery of
fully paid and non-assessable shares of
Maker's common stock, par value $.01 per
share ("Common Stock"), to Payee, all as
set forth in Section 3 hereof. Interest
on the principal amount of this Note shall
accrue at the rate of Eight Percent
(8.0%) per annum
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commencing as of the date hereof and
continuing until all principal and accrued
interest owing under this Note is paid in
full. Interest shall be calculated
upon a year of 360 days for the actual
number of days elapsed.
2. Payment.
Subject to prior conversion of this Note pursuant to Section 3
hereof, all principal and all Accrued
Interest due hereunder shall be payable on
the Maturity Date in lawful money of the
United States of America (or by Maker's
check payable in such money) to Payee in
person or at Payee's address (as given
above) or at such other place as Payee or
any other holder of this Note may
designate in writing to Maker.
Alternatively, Payee may designate a bank account
into which Maker shall wire transfer
payments of principal and Accrued Interest.
To the extent payment becomes due and
payable under this Note on a day which is
not a business day, such payment is and
shall be due and payable on the next
succeeding business day.
3. Optional
Conversion
(a) Conversion. The outstanding principal on this Note and all
Accrued
Interest, or any portion of such amounts as
Payee may elect, may be converted at
the option of the Payee into fully-paid and
non-assessable shares of Common
Stock (the "Shares"), as soon as
practicable, after the pricing of the AIM
Financing (as defined below), at a per
share price equal to the weighted average
price of (i) the average of the prior 50
trading day average closing bid and ask
prices of the existing AIM common shares
(issued in 2004) and (ii) the per share
purchase price of the Common Stock in the
AIM Financing (the "AIM Offering
Price"); provided that, in no event shall
the price be equal to or less than the
AIM Offering Price. The term "AIM
Financing" as used herein shall refer to the
sale by Maker of Common Stock in a single
transaction or a series of related
transactions outside the U.S., to non-U.S.
investors which is exempt from
registration pursuant to Regulation S
promulgated under the Securities Act of
1933, as amended (the "Securities
Act").
(b) Fractional Shares. Maker shall not be required to issue
fractional
shares of Common Stock upon the conversion
of this Note. If Payee would be
entitled, upon the exercise of any rights
evidenced hereby, to receive a
fractional interest in a share of Common
Stock, in lieu thereof Payee shall be
entitled to receive from Maker an amount in
cash equal to that portion
attributable to such fractional share.
(c) Other Matters. Maker covenants that the Shares issued upon
the
conversion of this Note will (i) when
issued upon such conversion, be validly
issued, fully paid and non-assessable and
(ii) be issued in reliance upon an
exemption from the registration
requirements of the Securities Act.
4.
Representations and Warranties of Maker. Maker hereby represents
and
warrants that: (a) Maker is duly organized,
validly existing and in good
standing under the laws of the state of
Delaware; (b) the execution, delivery
and performance of this Note by Maker have
been duly authorized by all necessary
action, corporate or otherwise, of Maker
and are not in contravention of any of
its Certificate of Incorporation, Bylaws or
any agreements to which it is a
party or by which any of its property is
bound; and (c) this Note is the legal,
valid and binding obligation of Maker,
enforceable against Maker in accordance
with its terms.
5.
Representations and Warranties of Payee. Payee hereby represents
and
warrants to the Company that:
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(a) Investment. Payee is acquiring this Note, and any Shares
issued
upon conversion of this Note, for his own
account for investment and not with a
view to, or for sale in connection with,
any distribution thereof, nor with any
present intention of distributing or
selling same; and Payee has no present or
contemplated agreement, undertaking,
arrangement, obligation, indebtedness or
commitment providing for the disposition
thereof. Payee is an "accredited
investor" as defined in Rule 501(a) of the
Securities Act.
(b) Experience. Payee has made detailed inquiry concerning the
Company, its business and its personnel;
the officers of the Company have made
available to Payee any and all written
information which he has requested and
have answered to Payee's satisfaction all
inquiries made by Payee; and Payee has
sufficient knowledge and experience in
finance and business that he is capable
of evaluating the risks and merits of his
investment in the Company and Payee is
able financially to bear the risks
thereof.
6. Events of
Default. The then-outstanding principal and accrued i
