Exhibit 4.1
|
|
|
|
|
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, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONOLOG
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
|
|
|
|
|
Principal Amount:
$____________
|
Issue Date: August 3, 2009
|
SECURED CONVERTIBLE NOTE
FOR
VALUE RECEIVED, CONOLOG CORPORATION, a Delaware corporation
(hereinafter called “Borrower”), hereby promises to pay
to ______________________________________,
_________________________________________________________ (the
“Holder”) or its registered assigns or successors in
interest or order, without demand, the sum of
___________________________ Dollars ($__________) (“Principal
Amount”), with simple and unpaid interest thereon, on January
3, 2010, unless the Approval (as defined in Section 9(q) of the
Subscription Agreement) is obtained upon which the Maturity Date
will be extended to January 3, 2011 (the “Maturity
Date”), if not sooner paid.
This
Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower, the Holder and certain other
holders (the “Other Holders”) of secured convertible
promissory notes (the “Other Notes”), dated of even
date herewith (the “Subscription Agreement”), and shall
be governed by the terms of such Subscription Agreement. Unless
otherwise separately defined herein, all capitalized terms used in
this Note shall have the same meaning as is set forth in the
Subscription Agreement. The following terms shall apply to this
Note:
ARTICLE I
INTEREST; AMORTIZATION
1.1.
Interest Rate . Subject to Section 6.7 hereof, interest
payable on this Note shall accrue at a rate per annum (the
“Interest Rate”) of four percent (4%). Upon receipt of
either the Approval or Rejection as described in Section 9(v) of
the Subscription Agreement, interest payable on this Note shall
accrue at a rate per annum of eight percent (8%). Interest on the
Principal Amount shall accrue from the date of this Note and shall
be payable quarterly, in arrears, commencing six months after the
Closing Date and on the Maturity Date, whether by acceleration or
otherwise. Interest shall be payable in cash. However, provided the
Company has timely obtained the Approval (as defined in Section
9(v) of the Subscription Agreement), if the Approval is required by
applicable NASD Market Place Rules and/or Nasdaq’s corporate
governance rules and provided the Shares may be sold pursuant to
Rule 144(b)(1) and further provided no Event of Default is
continuing following a five day cure period, then interest may be
payable, at the option of the Holder in cash or Common Stock at an
applied conversion rate equal to the lessor of (i) the Fixed
Conversion Price (as defined in Section 3.1 hereof), or (ii)
seventy-five percent (75%) of the average of the three lowest
closing bid prices of the Common stock as reported by Bloomberg
L.P. for the ten (10) trading days preceding such interest payment
date. In the event the closing bid price of the Common Stock is
more than 41% premium over the Fixed Conversion Price for each of
the ten (10) days preceding an interest payment date, then interest
for that quarter shall accrue and be payable on the
1
Maturity Date in cash unless
sooner converted into Common Stock at the election of Holder at the
applied conversion rate described above. In the event the closing
bid price is less than 41% premium of the Fixed Conversion Price
for each of the ten (10) days preceding an interest payment date,
then the Holder may elect to either be paid the interest in cash,
or at the applied conversion rate described above or to accrue the
interest payable for that quarter until the Maturity
Date.
1.2.
Repayment . The Note is repayable in full in cash on the
Maturity Date. The foregoing notwithstanding, in the event the
Company fails to obtain the Approval (as defined in Section 9(v) of
the Subscription Agreement), fifty percent (50%) of the outstanding
Principal Amount of the Note will be deemed satisfied.
1.3.
Default Interest Rate . Following the occurrence and during
the continuance of an Event of Default, which, if susceptible to
cure is not cured within five (5) days, otherwise then from the
first date of such occurrence, the annual interest rate on this
Note shall (subject to Section 6.7) automatically be increased to
fifteen percent (15%).
ARTICLE II
CONVERSION REPAYMENT
2.1.
No Effective Registration . Notwithstanding anything to the
contrary herein, no amount payable hereunder may be paid in shares
of Common Stock by the Borrower without the Holder’s consent
unless (a) either (i) an effective current registration statement
covering the shares of Common Stock to be issued in satisfaction of
such obligations exists, or (ii) an exemption from registration of
the Common Stock is available pursuant to Rule 144(b)(1) of the
1933 Act or the rules and regulations promulgated thereunder, and
(b) no Event of Default hereunder (or an event that with the
passage of time or the giving of notice could become an Event of
Default), exists and is continuing, unless such event or Event of
Default is cured within any applicable cure period or is otherwise
waived in writing by the Holder in whole or in part at the
Holder’s option.
2.2.
Mandatory Conversion . Provided an Event of Default has not
occurred, unless such Event of Default has been cured at least
twenty (20) days prior to the delivery of written notice by
Borrower as hereinafter described, then, commencing after the
Actual Effective Date, the Borrower will have the option by written
notice to the Holder (“Notice of Mandatory Conversion”)
of compelling the Holder to convert all or a portion of the
outstanding and unpaid principal of the Note and accrued interest,
thereon, into Common Stock at the Conversion Price then in affect
(“Mandatory Conversion”). The Notice of Mandatory
Conversion, which notice must be given on the first day following a
consecutive twenty (20) day trading period during which the closing
bid price for the Company’s Common Stock as reported by
Bloomberg, LP for the Principal Market shall be more than 200% of
the Conversion Price in effect at such time each day and provided
during the Lookback Period, daily average trading volume is not
less than $100,000. The date the Notice of Mandatory Conversion is
given is the “Mandatory Conversion Date.” The Notice of
Mandatory Conversion shall specify the aggregate principal amount
of the Note which is subject to Mandatory Conversion, which amount
may not exceed in the aggregate, for all Holders who received Notes
similar in term and tenure as this Note, the dollar volume of
Common Stock traded on the Principal Market during the seven (7)
trading days immediately preceding the Mandatory Conversion Date.
Mandatory Conversion Notices must be given proportionately to all
Holders of Notes who received Notes similar in term and tenure as
this Note. The Borrower shall reduce the amount of Note principal
and interest subject to a Notice of Mandatory Conversion by the
amount of Note Principal and interest for which the Holder had
delivered a Notice of Conversion to the Borrower during the twenty
(20) trading
2
days preceding the Mandatory
Conversion Date. Each Mandatory Conversion Date shall be a deemed
Conversion Date and the Borrower and the Holder will be required to
comply with Section 2.1 above.
ARTICLE III
CONVERSION RIGHTS
3.1.
Holder’s Conversion Rights . Subject to Section 3.2,
the Holder shall have the right, but not the obligation at all
times, to convert all or any portion of the then aggregate
outstanding Principal Amount of this Note, into shares of Common
Stock, subject to the terms and conditions set forth in this
Article III at the rate of $0.78, but in no event greater than
$1.00 per share of Common Stock (“Fixed Conversion
Price”) as same may be adjusted pursuant to this Note and the
Subscription Agreement. Commencing on the six months anniversary of
the Closing Date, the Conversion Price shall be the lesser of the
Fixed Conversion Price or 75% of the average of the lowest three
closing bid prices for the ten trading days prior to a Conversion
Date.
3.2.
Conversion Limitation . 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, (ii)
any Common Stock issuable in connection with the unconverted
portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date,
which would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common
Stock of the Borrower on such Conversion Date. For the purposes of
the provision 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 4.99% and aggregate
conversion by the Holder may exceed 4.99%. The Holder shall have
the authority and obligation to determine whether the restriction
contained in this Section 3.2 will limit any conversion hereunder
and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which
portion of the Notes are convertible shall be the responsibility
and obligation of the Holder. The Holder may allocate decide
whether to convert a Note or exercise Warrants to achieve an actual
4.99% ownership position.
3.3.
Mechanics of Holder’s Conversion .
(a)
In the event that the Holder elects to convert any amounts
outstanding under this Note into Common Stock, the Holder shall
give notice of such election by delivering an executed and
completed notice of conversion (a “Notice of
Conversion”) to the Borrower, which Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and amounts being converted. The original
Note is not required to be surrendered to the Borrower until all
sums due under the Note have been paid. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its
records. Each date on which a Notice of Conversion is delivered or
telecopied to the Borrower in accordance with the provisions hereof
shall be deemed a “Conversion Date.” A form of Notice
of Conversion to be employed by the Holder is annexed hereto as
Exhibit A.
(b)
Pursuant to the terms of a Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion
of counsel, if so required by the Borrower’s
3
transfer agent and shall cause
the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of the
Holder’s designated broker with the Depository Trust
Corporation (“DTC”) through its Deposit Withdrawal
Agent Commission (“DWAC”) system within three (3)
business days after receipt by the Borrower of the Notice of
Conversion (the “Delivery Date”). In the case of the
exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of
Conversion. The Holder shall be treated for all purposes as the
record holder of such shares of Common Stock, unless the Holder
provides the Borrower written instructions to the contrary.
Notwithstanding the foregoing to the contrary, the Borrower or its
transfer agent shall only be obligated to issue and deliver the
shares to the DTC on the Holder’s behalf via DWAC (or
certificates free of restrictive legends) if the registration
statement providing for the resale of the shares of Common Stock
issuable upon the conversion of this Note is effective and the
Holder has complied with all applicable securities laws in
connection with the sale of the Common Stock, including, without
limitation, the prospectus delivery requirements. In the event that
Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the
Conversion Shares by the Delivery Date.
3.4.
Conversion Mechanics .
(a)
The number of shares of Common Stock to be issued upon each
conversion of this Note pursuant to this Article III shall be
determined by dividing that portion of the Principal Amount and
interest and fees to be converted, if any, by the then applicable
Conversion Price.
&
