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 AEGIS ASSESSMENTS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.


 


FORM OF SECURED CONVERTIBLE NOTE


 


FOR VALUE RECEIVED, AEGIS ASSESSMENTS, INC., a Delaware corporation
(hereinafter called “Borrower”), hereby promises to pay to
                                                                                                                                                                                        
(the “Holder”), without demand, the sum of                                                                                           ,
with simple interest accruing on February       ,
2007 (the “Maturity Date”), if not paid sooner.


 


This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, 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


 


GENERAL
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 fifteen percent
(15%) 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 regardless
of the occurrence of an Event of Default. 
The Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article II
hereof; provided, that if an Event of Default has occurred, the Borrower may
not pay this Note, without the consent of the Holder, until one year after the
later of the date the Event of Default has been cured or one year after the
Maturity Date.


 


1.3                                 Interest
Rate.   Simple interest payable on
this Note shall accrue at the annual rate of ten percent (10%) and be payable
upon each Conversion, 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.


 


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ARTICLE II


 


CONVERSION RIGHTS


 


The Holder shall have the right to convert the principal due under this
Note into Shares of the Borrower’s Common Stock, $.001 par value per share (“Common
Stock”) as set forth below.


 


2.1.                              Conversion
into the Borrower’s Common Stock.


 


(a)                                  The
Holder shall have the right from and after the date of 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 accrued interest, at
the election of the Holder (the date of giving of such notice of conversion
being a “Conversion Date”) into fully paid and nonassessable shares of Common
Stock as such stock exists on the date of issuance of this Note, or any shares
of capital stock of Borrower into which such Common Stock shall hereafter be
changed or reclassified, at the conversion price as defined in Section 2.1(b) hereof
(the “Conversion Price”), determined as provided herein.  Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto, Borrower shall issue
and deliver to the Holder within 10 business days from the Conversion Date
(such third day being the “Delivery 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 Borrower
will deliver accrued but unpaid interest on the Note in the manner provided in Section 1.3
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 of the Note and interest 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 equal to $0.15.


 


(c)                                  The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion determined pursuant to Section 2.1(a), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:


 


A.                                   Merger,
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 that may be issued or
outstanding, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities 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.


 


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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 Conversion 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.   So long as this Note is
outstanding, if the Borrower shall issue or agree to issue any shares of Common
Stock except for the Excepted Issuances (as defined in the Subscription
Agreement) for a consideration less than the Conversion Price in effect at the
time of such issue, then, and thereafter successively upon each such issue, the
Conversion Price shall be reduced to such other lower issue price.  For purposes of this adjustment, the issuance
of any security carrying the right to convert such security into shares of
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Conversion Price upon the issuance of the
above-described security and again upon the issuance of shares of Common Stock
upon exercise of such conversion or purchase rights if such issuance is at a
price lower than the then applicable Conversion Price.  The reduction of the Conversion Price
described in this paragraph is in addition to other rights of the Holder
described in this Note and the Subscription Agreement.


 


(d)                                 Whenever the Conversion Price is adjusted
pursuant to Section 2.1(c) above, the Borrower shall promptly mail to
the Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a statement of the facts requiring such adjustment.


 


(e)                                  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 issuable 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.  Borrower 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 date and
provisions of this Note shall, at the request of the Holder, 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.                              Mandatory
Conversion.  Provided an Event of
Default (or an event that with the passage of time or the giving of notice
could become an Event of Default) is not continuing or was not extant during
the prior twenty business days, then commencing after the Actual Effective Date
(as defined in Section 11.1(iv) of the Subscription Agreement), the
Borrower will have the option by written notice to the Holder (“Notice of
Mandatory Conversion”) of compelling the Holder to convert the outstanding and
unpaid principal of this Note into Common Stock at the Fixed Conversion Price
then in affect (“Mandatory Conversion”). 
The Notice of Mandatory Conversion must be given, if at all, on the
first business day following a consecutive twenty (20) day trading period (“Mandatory
Conversion Lookback Period”) during which the closing bid price for the
Borrower’s Common Stock as reported by Bloomberg, LP for the Principal Market
is more than $0.65 each day during the Mandatory Conversion Lookback Period and
there is a minimum daily trading volume of $75,000 during the Mandatory
Conversion Lookback Period.  The date the
Notice of Mandatory Conversion is given is the “Mandatory Conversion Date.” The
Notice of


 


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Mandatory Conversion shall specify the aggregate principal amount of
the Note which is subject to Mandatory Conversion.  Mandatory Conversion Notices must be given
proportionately to all Holders of Notes who received Notes similar in terms and
tenure as this Note.  The maximum
aggregate amount for all Notices of Mandatory Conversion that may be given for
each Mandatory Conversion Date may not exceed 25% of the daily trading volume
for the seven (7) trading days preceding the Mandatory Conversion Date
multiplied by the volume weighted average prices (“VWAP”) as reported by
Bloomberg L.P. for the Principal Market for such seven day trading period.   A Notice of Mandatory Conversion may not be
given unless the Registration Statement (as defined in the Subscription
Agreement) has been effective for the unrestricted public resale of the
Registrable Securities (as defined in the Subscription Agreement) each day
during the Mandatory Conversion Lookback Period.  The Borrower shall reduce the amount of Note
principal subject to a Notice of Mandatory Conversion by the amount of Note
Principal for which the Holder had delivered a Notice of Conversion to the
Borrower during the twenty (20) trading days preceding the Mandatory Conversion
Date.  The amount of Note principal
included in a Mandatory Redemption Notice shall be further reduced to an amount
that would not cause the Holder to exceed the limitation described in Section 2.4
of this Note.  A further Mandatory
Conversion Notice may not be given until twenty (20) trading days have elapsed
from the preceding Mandatory Conversion Date. 
Each Mandatory Conversion Date shall be a deemed Conversion Date and the
Borrower will be required to deliver the Common Stock issuable pursuant to a
Mandatory Conversion Notice in the same manner and time period as described in Section 2.1
herein.


 


2.4                                 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, (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 provisions of 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 2.3
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 waive the conversion limitation described in this Section 2.3,
in whole or in part, upon and effective after 61 days prior written notice to
the Borrower.  The Holder may allocate
which of the equity of the Borrower deemed beneficially owned by the Holder
shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.


 


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 all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:


 


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3.1                                 Failure
to Pay Principal or Interest.  The
Borrower fails to pay any installment of principal, interest or other sum due
under this Note when due and such failure continues for a period of ten (10) days
after the due date.  The ten (10) day
period described in this Section 3.1 is the same ten (10) day period
described in Section 1.1 hereof.


 


3.2                                 Breach
of Covenant.  The Borrower breaches
any material covenant or other term or condition of the Subscription Agreement
or this Note in any material respect resulting in a Material Adverse Effect and
such breach, if subject to cure, continues for a period of ten (10) business
days after written notice to the Borrower from the Holder.


 


3.3                                 Breach
of Representations and Warranties. 
Any representation or warranty of the Borrower made herein, in the
Subscription Agreement, or in any agreement, statement or certificate given in
writing pursuant hereto or in connection therewith shall be false or misleading
as of the date made and the Closing Date resulting in a Material Adverse Effect.


 


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.


 


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 $100,000, 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 for relief under any bankruptcy
law or any other law for the relief of debtors, or the issuance of any notice
in relation to such event 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; failure to comply with the requirements for continued listing
on the Bulletin Board for a period of 10 consecutive trading days; or
notification from the Principal Market that the Borrower is not in compliance
with the conditions for such continued listing on the Principal Market.


 


3.8                                 Non-Payment.   A default by the Borrower under any one or
more obligations in an aggregate monetary amount in excess of $75,000 for more
than twenty days after the due date, unless the Borrower is contesting the
validity of such obligation in good faith.


 


3.9                                 Stop
Trade.  An SEC or judicial stop trade
order or Principal Market trading suspension that lasts for five or more
consecutive trading days.


 


3.10                           Failure
to Deliver Common Stock or Replacement Note.  Borrower’s refusal to timely deliver Common
Stock to the Holder pursuant to and in the form required by this Note and
Sections 7 and 11 of the Subscription Agreement, or, if required, a replacement
Note.


 


3.11                           Non-Registration
Event.  The occurrence of a
Non-Registration Event as described in Section 11.4 of the Subscription
Agreement.


 


3.12                           Reservation
Default.   Failure by the Borrower to
have reserved for issuance upon conversion of the Note the amount of Common
Stock as set forth in this Note and the Subscription Agreement.


 


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3.13                           Cross
Default.  A default by the Borrower
of a material term, covenant, warranty or undertaking of any other agreement to
which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period


 


ARTICLE IV


 


SECURITY INTEREST


 


4.                                       Security Interest/Waiver of Automatic Stay.  
This Note is secured by a security interest granted to the Holder
pursuant to a Security Agreement, as delivered by Borrower to Holder.  The Borrower acknowledges and agrees that
should a proceeding under any bankruptcy or insolvency law be commenced by or
against the Borrower, or if any of the Collateral (as defined in the Security
Agreement) should become the subject of any bankruptcy or insolvency
proceeding, then the Holder should be entitled to, among other relief to which
the Holder may be entitled under the Transaction Documents and any other
agreement to which the Borrower and Holder are parties (collectively, “Loan
Documents”) and/or applicable law, an order from the court granting immediate
relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit
the Holder to exercise all of its rights and remedies pursuant to the Loan
Documents and/or applicable law. THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF
THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, THE BORROWER EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF
THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11
U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN
ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. 
The Borrower hereby consents to any motion for relief from stay that may
be filed by the Holder in any bankruptcy or insolvency proceeding initiated by
or against the Borrower and, further, agrees not to file any opposition to any
motion for relief from stay filed by the Holder.  The Borrower represents, acknowledges and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly,
intelligently and voluntarily made, that neither the Holder nor any person
acting on behalf of the Holder has made any representations to induce this
waiver, that the Borrower has been represented (or has had the opportunity to
be represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel.


 


ARTICLE V


 


MISCELLANEOUS


 


5.1                                 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.


 


5.2                                 Notices.  All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein,


 


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shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice.  Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business
day following the
date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur.  The addresses for such
communications shall be: (i) if to the Borrower to: Aegis Assessments, inc.,
7975 N. Hayden Road, Suite D363, Scottsdale, Arizona 85258, Attn: Eric D.
Johnson, CEO, telecopier: (480) 778-1310, with a copy by telecopier only to:
Rogers & Theobald LLP, The Camelback Esplanade, 2425 East Camelback
Road, Suite 850, Phoenix, Arizona 85016, Attn: Daniel M. Mahoney, Esq.,
telecopier: (602) 852-5570, and (ii) if to the Holder, to the name,
address and telecopy number set forth on the front page of this Note, with
a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575.


 


5.3                                 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.


 


5.4                                 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.


 


5.5                                 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.


 


5.6                                 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.


 


5.7                                 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.


 


5.8                                 Shareholder
Status.  The Holder shall not have
rights as a shareholder of the Borrower with respect to unconverted portions of
this Note.  However, the Holder will have
all the rights of a shareholder of the Borrower with respect to the shares of
Common Stock to be received by Holder after delivery by the Holder of a
Conversion Notice to the Borrower.


 


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IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by an authorized officer
as of the          day of February, 2006.


 


	
   

  	
  AEGIS ASSESSMENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  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 AEGIS ASSESSMENTS, INC. on February     ,
2006 into Shares of Common Stock of AEGIS ASSESSMENTS, INC. (the “Borrower”)
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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