Exhibit 4.1


 


NEITHER THIS SECURITY NOR ANY SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY U.S. STATE OR OTHER
JURISDICTION OR ANY EXCHANGE OR SELF-REGULATORY ORGANIZATION, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED,
AND SUCH OTHER LAWS AND REQUIREMENTS, AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR LISTING OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
SUCH REGISTRATION AND/OR LISTING REQUIREMENTS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH WILL BE
REASONABLY ACCEPTABLE TO THE ISSUER.


 


	
  ASPYRA, INC.

  
	
   

  	
   

  	
   

  
	
  SECURED, CONVERTIBLE PROMISSORY NOTE

  
	
   

  
	
  $                           

  	
   

  	
  February 12, 2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Calabasas, California

  



 


FOR VALUE RECEIVED,
and upon and subject to the terms and conditions set forth herein, Aspyra, Inc.,
a California corporation (“Issuer”),
hereby promises to pay to the order of                                              ,
a                                   
(together with its permitted successors and assigns, “Holder”),
the principal sum of                                     
UNITED STATED DOLLARS (U.S. $                       )
on the Maturity Date, together with interest as provided herein.  This Note was issued under and is subject to
a Securities Purchase Agreement (the “Purchase Agreement”)
dated as of February 12, 2009 among Issuer, payee and certain other
parties.  Capitalized terms used and not
otherwise defined herein will have the respective meanings given to such terms
in the Purchase Agreement.


 


1.             Maturity
Date.  This
Note will mature, and be due and payable in full, on March 26, 2010 (the “Maturity Date”), unless Holder has elected
to convert this Note pursuant to Section 3 hereof.


 


2.             Interest.  From and after the date hereof, all
outstanding principal of this Note will bear interest at the rate of twelve
percent (12%) per annum. Outstanding interest shall be compounded on each July 15
and January 15 during which any interest on this Note shall be
outstanding. Upon the occurrence and during the continuance of any Event of
Default (as hereinafter defined) under this Note, all outstanding principal of
this Note shall bear interest at the rate of 24% per annum. All accrued
interest on this Note shall be payable on the Maturity Date or on such earlier
date as this Note shall be prepaid or converted into Common Stock.


 





















 


3.             Optional
Conversion of the Note.


 


3.1          By
Holder.  At any time prior to repayment of this Note,
Holder may elect, in lieu of repayment, to convert all or a portion of the
outstanding principal and/or interest on this Note into that number of shares
of Common Stock (as defined in the Purchase Agreement) equal to the quotient
obtained by dividing (a) 100.0% of the amount of principal and/or interest
on this Note being converted, by (b) the Conversion Price (as hereinafter
defined).  Holder will inform Issuer of
such election at least 14 days prior to the date the Note or portion thereof is
converted into Common Stock.  If Holder
delivers such notice to Issuer, Issuer may not elect to pay to Holder the
amount of this Note to be converted without Holder’s written consent. For
purposes of this Note, “Conversion Price” will initially mean $.31 per share.
The Conversion Price will be subject to adjustment as provided in Section 3.3.
The Holder shall effect conversions by delivering to the Issuer a Notice
of Conversion, the form of which is attached hereto as Annex A (a “Notice
of Conversion”), specifying therein the principal amount of this Note to be
converted and the date on which such conversion shall be effected (such date,
the “Conversion Date”), provided that such date is on or after the date
of delivery of the Notice of Conversion. 
If no Conversion Date is specified in a Notice of Conversion, or the
stated conversion date is prior to date of delivery of the Notice of Conversion,
the Conversion Date shall be the date that such Notice of Conversion is deemed
delivered hereunder.  To effect
conversions hereunder, the Holder shall not be required to physically surrender
this Note to the Issuer unless the entire principal amount of this Note, plus
all accrued and unpaid interest thereon, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Note in an amount equal to the applicable conversion.  The Holder and the Issuer shall maintain
records showing the principal amount(s) converted and the date of such
conversion(s).  The Issuer may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such
Notice of Conversion.  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 may be less than
the amount stated on the face hereof.


 


3.2          By Issuer.  At any time after August 30, 2009, but prior
to repayment of this Note, if the
volume weighted average price of the Common Stock on the NYSE Alternext exceeds
200% of the Conversion Price then in effect during each day for twenty
consecutive trading days or more (whether or not such volume weighted average
for any day thereafter is 200% or less of the Conversion Price then in effect),
then Issuer may give notice to Holder of its election to convert all or a
portion of the outstanding principal of, but not any outstanding interest on,
this Note into the same number of shares of Common Stock as would be calculated
pursuant to Section 3.1 above in the case of an optional conversion by
Holder.  Upon conversion, Issuer will pay
any outstanding interest on this Note in cash to Holder.  Any
notice of conversion will be delivered at least 15 days prior to the date of
such conversion and the Conversion Price used in calculating the number of
shares of Common Stock to be issued to Holder will be the Conversion Price on
the date of the actual conversion (which will be the first date on which Holder
becomes fully vested with all rights of such holders of shares of Common
Stock). To effect conversions hereunder, the Holder shall not be
required to physically surrender this Note to the Issuer unless the entire
principal amount of this Note, plus all accrued and unpaid interest thereon,
has been so converted. Conversions hereunder shall have the effect of lowering
the 


 

















 


outstanding principal amount of
this Note in an amount equal to the applicable conversion.  The Holder and the Issuer shall maintain
records showing the principal amount(s) converted and the date of such
conversion(s).  The Issuer may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such
Notice of Conversion.  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 may be less than
the amount stated on the face hereof.


 


3.3          Adjustments.


 


(a)           Stock
Dividends, Reclassifications, Recapitalizations, Etc.  In the event the Issuer:  (i) pays a dividend in Common Stock or
makes a distribution in Common Stock, (ii) subdivides its outstanding
Common Stock into a greater number of shares, (iii) combines its
outstanding Common Stock into a smaller number of shares or (iv) increases
or decreases the number of shares of Common Stock outstanding by
reclassification of its Common Stock (including a recapitalization in
connection with a consolidation or merger in which the Issuer is the continuing
corporation), then the Conversion Price on the record date of such division
or distribution or the effective date of such action shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately before such event and
the denominator of which is the number of shares of Common Stock outstanding
immediately after such event.


 


(b)           Notice
of Adjustment.  Whenever the
Conversion Price is adjusted, as herein provided, the Issuer shall deliver to
the holders of the Note in a certificate of the Issuer’s Chief Financial
Officer setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which (i) the Board of Directors determined the fair value
of any evidences of indebtedness, other securities or property or warrants,
options or other subscription or purchase rights and specifying the Conversion
Price after giving effect to such adjustment.


 


(c)           Notice
of Certain Transactions.  In the
event that the Issuer shall propose (i) to pay any dividend payable in
securities of any class to the holders of its Common Stock or to make any other
non-cash dividend or distribution to the holders of its Common Stock, (ii) to
offer the holders of its Common Stock rights to subscribe for or to purchase
any securities convertible into shares of Common Stock or shares of stock of
any class or any other securities, rights or options, (iii) to effect any
capital reorganization, reclassification, consolidation or merger affecting the
class of Common Stock, as a whole, or (iv) to effect the voluntary or
involuntary dissolution, liquidation or winding-up of the Issuer, the Issuer
shall, within the time limits specified below, send to each Holder a notice of
such proposed action or offer.  Such
notice shall be mailed to the Holders at their addresses as they appear in the
records of the Issuer, which shall specify the record date for the purposes of
such dividend, distribution or rights, or the date such issuance or event is to
take place and the date of participation therein by the holders of Common
Stock, if any such date is to be fixed, and shall briefly indicate the effect
of such action on the Common Stock and the Conversion Price Such notice shall
be given as promptly as possible and (x) in the case of any action covered
by clause (i) or (ii) above, at least ten (10) days prior to the
record date for determining holders of the Common Stock for purposes of such
action or (y) in the case of any other such action, at least twenty (20)
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.


 

















 


3.4          No Rights as a Shareholder.  Without limiting any rights that Holder is
entitled to under the Purchase Agreement, and if this Note has not been
converted, Holder will not be entitled to any voting or other rights as a
shareholder of Issuer in connection with this Note.


 


[The following clause is optional at the request of the Purchaser of
this Note, with the choice between 4.99% and 9.99% being at the option of the
Purchaser.]


 


3.5          Limitation on Beneficial Ownership. 
 Issuer will not effect and will have no obligation to effect any
conversion of this Note, and the Holder will have no right to convert any
portion of this Note, to the extent that after giving effect to such
conversion, the beneficial owner of such shares (together with such person’s
affiliates) would have acquired, through conversion of this Note or otherwise,
beneficial ownership of a number of shares of Common Stock that exceeds [4.99%
/ 9.99%] (“Maximum Percentage”) of
the number of shares of Common Stock outstanding immediately after giving
effect to such conversion.    For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by a person
and its affiliates shall include the number of shares of Common Stock issuable
upon conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by such person or any of its affiliates
and (B) exercise or conversion of the unexercised or unconverted portion
of any other securities of Issuer (including, without limitation, any Warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such person or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes
of this Section 3.5, beneficial ownership will be calculated in accordance
with Section 13(d) of the Exchange Act.  For purposes of this Section 3.5,
in determining the number of outstanding shares of Common Stock, a Holder may
rely on the number of shares of outstanding Common Stock as reflected in (1) Issuer’s
most recent Form 8-K, Form 10-Q, Form 10-QSB, Form 10-K or Form 10-KSB
as the case may be, (2) a more recent public announcement by Issuer, or (3) any
other notice by Issuer or its transfer agent setting forth the number of shares
of Common Stock outstanding.  Upon the written request of any Holder,
Issuer will promptly, but in no event later than 2 business days following the
receipt of such notice, confirm orally and in writing to any such Holder the
number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock will be determined after giving
effect to conversions of Preferred Shares by such Holder and its affiliates
since the date as of which such number of outstanding Common Stock was
reported.  By written notice to Issuer, the Holder may increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99%
specified in such notice, but (i) any such increase will not be effective
until the sixty-first (61st) day after such notice is delivered to Issuer, and (ii) any
such increase or decrease will apply only to the Holder and not to any other
Holder.


 


3.6  Shareholder Approval 
 Unless and until
Shareholder Approval has been obtained and deemed effective, the Issuer shall
not upon the conversion of this Note issue shares of Common Stock to the extent
that such issuance, together with all previous issuances of Common Stock
pursuant to the exercise of all Warrants and the conversion of all Notes issued
pursuant to the Purchase Agreement, would in the aggregate exceed a number of
shares of Common Stock equal to more than 19.99% of the Issuer’s issued and
outstanding Common Stock on the Closing Date.


 

















 


4.             Security.  Repayment of this Note is secured, pari passu with Holders of all other Notes issued pursuant
to the Purchase Agreement, by a security interest in substantially all the
assets of Issuer pursuant to a security agreement, related collateral
assignments and such other necessary documents entered into by Issuer in favor
of Jay Weil, as collateral agent for the purchasers.


 


5.             Prepayment.  Issuer may not prepay this Note prior to the
Maturity Date, without the written consent of Holder.


 


6.             Transfer.  Purchaser may transfer this Note in
compliance with applicable U.S. federal and state and/or foreign securities
laws and in accordance with Section 5.1 of the Purchase Agreement.


 


7.             Financial
Covenants. Until this Note has been redeemed or
otherwise satisfied in accordance with its terms the Issuer shall not, unless
the holders of Notes representing at least a majority of the aggregate
principal amount of the Notes then outstanding, shall otherwise consent in
writing, the Issuer shall comply with every financial covenant contained in the
Issuer’s loan agreements, notes and other documents with any person to which
the Issuer owes any Material Indebtedness, including, without limitation,
Western Commercial Bank.


 


8.             Events of Default.  An “Event of Default” will occur if:


 


(a)           The Issuer fails to
pay (a) any principal of any Note when such amount becomes due and payable
in accordance with the terms thereof and such payment is not made with three
Business Days of when it is due, or (b) any interest on any Note or any
other payment of money required to be made to any of the Purchaser and such
payment is not made within three Business Days of when it is due; or


 


(b)           Any representation
or warranty made to the Purchasers in any Transaction Document or in any
certificate, agreement or instrument executed and delivered to the Purchasers
by the Issuers or any of its subsidiaries or by its accountants or officers
pursuant to any Transaction Document is false, inaccurate or misleading in any
material respect on the date as of which made, and the Issuer receives notice
thereof from the Placement Agent, a Purchaser, or a third party; or


 


(c)           the Issuer or any of
its subsidiaries defaults in the performance of any term, covenant, agreement,
condition, undertaking or provision of any Transaction Document, including, but
not limited to, its covenants under Section 4.4 of the Purchase Agreement,
or any financial covenants set forth in or referred to in this Note, or, in the
case of any default in the performance of any term, covenant, agreement,
condition, undertaking or provision of any Transaction Document which is
capable of being cured, such default is not cured or waived within five (5) Business
Days after the Issuer receives notice of such default from the Placement Agent,
a Purchaser, or from a third party, or after an officer or director of the Issuer;
or


 

















 


(d)           (i) the Issuer
or any of its subsidiaries fails to pay any principal of or interest on any of
its Material Indebtedness for a period longer than the grace period, if any, provided
for such payment; or (ii) any default, other than one described in (i) of
this Section 8(d), under any instrument or agreement evidencing, creating,
securing or otherwise relating to Material Indebtedness (including, without
limitation, any guaranty or assumption agreement relating to such indebtedness)
or other event occurs and continues beyond any applicable notice and cure
period (for purposes of this Note the term “Material Indebtedness” means mean
indebtedness, in an amount of $100,000  or
more, for borrowed money, under capitalized leases or evidenced by a bond,
debenture, note or similar instrument, and shall include, without limitation,
any such indebtedness assumed or guaranteed); or


 


(e)           (i) One or more
final judgments, decrees or orders shall be entered against the Issuer or any
of its subsidiaries involving in the aggregate a liability (not fully covered
by insurance other than applicable deductibles) of $75,000 or more and all such
judgments, decrees or orders shall not have been vacated, paid or discharged,
dismissed, or stayed or bonded pending appeal (or other contest by appropriate
proceedings) within sixty (60) days from the entry thereof; (ii) pursuant
to one (1) or more judgments, decrees, orders, or other proceedings,
whether legal or equitable, any warrant of attachment, execution or other writ
is levied upon any property or assets of the Issuer or any subsidiary and is
not satisfied, dismissed or stayed (or other contests by appropriate
proceedings without bond or stay) within sixty (60) days; (iii) all or any
substantial part of the assets or properties of the Issuer or any subsidiary are
condemned, seized or appropriated by any government or governmental authority;
or (iv) any order is entered in any proceeding directing the winding up,
dissolution or split-up of the Issuer or any subsidiary; or


 


(f)            The Issuer (i) commences
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or (ii) is the debtor
named in any other case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (ii) remains
undismissed, undischarged or unbonded for a period of sixty (60) days, or (iii) takes
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence to, any order, adjudication or appointment of a nature referred to
in clause (i) or (ii) above, or (iv) shall generally not be
paying, shall be unable to pay, or shall admit in writing its inability to pay
its debts as they become due, or (e) shall make a general assignment for
the benefit of its creditors; or


 

















 


(g)           At
any time there occurs a Change of Control Transaction (for purposes of this
Note, a “Change of Control Transaction” shall mean (i) a sale, lease or
other disposition of assets or properties of the Issuer and it subsidiaries
(calculated on a consolidated basis) having a book value of fifty-one percent
(51%) or more of the book value of all the assets and properties thereof, or (ii) any
transaction in which any person shall directly or indirectly acquire from the
holders thereof, by purchase or in a merger, consolidation or other transfer or
exchange of outstanding capital stock, ownership of or control over capital
stock of the Issuer (or securities exchangeable for or convertible into such
stock or interests) entitled to elect a majority of the Issuer’s Board of
Directors or representing at least fifty-one percent (51%) of the number of shares
of Common Stock outstanding;


 


(h)           On
or at any time after the date of this Note (i) any of the Transaction
Documents for any reason, other than a partial or full release in accordance
with the terms thereof, ceases to be in full force and effect or is declared to
be null and void, (ii) the Security Agreement shall cease to provide the
Purchasers a valid security interest in any of the collateral purported to be
covered thereby, perfected and with the priority required thereby, subject only
to liens permitted under this Agreement and such Security Agreement, and such
default in clause (i) or (ii) is not cured or waived within ten (10) days
after the Issuer receives notice of such default from a Purchaser or from a
third party, or (c) the Issuer or any subsidiary of the Issuer contests
the validity or enforceability of any Transaction Document in writing or denies
that it has any further liability under any Transaction Document to which it is
party, or gives notice to such effect; or


 


(i)            Prior
to April 1, 2009, without the consent of the holders of a majority in
principal amount of all of the notes issued pursuant to the Purchase Agreement,
the Issuer does not extend or renew its line of credit with the Bank until at
least February 28, 2010 and upon terms substantially similar to the Issuer’s
existing agreement with the Bank.


 


9.             Remedies.  At such time that an Event of Default has
occurred and is continuing, then Holder, by written notice to Issuer (the “Notice”),
may declare all amounts hereunder immediately due and payable in cash and
Holder will be entitled to reimbursement of its reasonable costs and expenses
related to collection of all amounts owing in connection thereof.  Except for the Notice, Holder need not
provide, and Issuer hereby waives, any presentment, demand, protest or other
notice of any kind, and Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such election may be
rescinded and annulled by Holder at any time prior to payment hereunder.  No such rescission or annulment will affect
any subsequent Event of Default or impair any right consequent thereon. In the
case of the occurrence of an Event of Default arising out of a breach by the
Issuer of the covenant contained in Section 4.4 of the Purchase Agreement
(but in no other event), in lieu of declaring all amounts immediately due
hereunder, each Purchaser, upon prior written notice to the Issuer, may sell to
the Issuer all of the Notes (or all shares of Common Stock issued to the
Purchaser upon conversion of the Notes) for a price equal to 125% of the
Subscription Price paid by the Purchaser. 
The sale referred to in the preceding sentence shall be consummated at a
closing to be held not later than ten (10) days after such notice is given
and the purchase price shall be paid by the Issuer to the Purchaser at such
closing in full in cash.


 

















 


10.          Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder will be in writing
and will be deemed given and effective on the earliest of (a) the date of
transmission if such notice or communication is delivered by fax prior to 5:30 p.m.
(Eastern Time) on a Business Day, (b) the next Business Day after the date
of transmission if such notice or communication is delivered via fax on a day
that is not a Business Day or later than 5:30 p.m. (Eastern Time) on a
Business Day, (c) the 2nd business day after the date of mailing if sent
by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
facsimile number and address for such notices and communications are as set
forth on the signature pages to the Purchase Agreement or as otherwise
notified by any party in a writing to the others in accordance herewith from
time to time.


 


 


SIGNED, SEALED AND DELIVERED
as of the date first above written.


 


	
   

  	
  ASPYRA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 

















 


ANNEX
A


 


NOTICE OF CONVERSION


 


 


The undersigned hereby elects to convert principal under the Secured
Convertible Promissory Note due March 26, 2010 (the “Note”) of Aspyra, Inc.,
a California corporation (the “Company”), into shares of common stock, no par value per share (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below.  If shares of Common Stock
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith.  No
fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.


 


By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 3.6 of the Note, as determined
in accordance with Section 13(d) of the Exchange Act.


 


The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.


 


	
  Conversion calculations:

  	
   

  
	
   

  	
  Date to Effect Conversion:

  
	
   

  	
   

  
	
   

  	
  Principal Amount of Note to be Converted:

  
	
   

  	
   

  
	
   

  	
  Payment of Interest in Common Stock o
  yes o no

  
	
   

  	
   

  
	
   

  	
  If yes $           of Interest Accrued on Account of Conversion at Issue.

  
	
   

  	
   

  
	
   

  	
  Number of shares of Common Stock to be issued:

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  Name:

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  Or

  
	
   

  	
   

  
	
   

  	
  DWAC Instructions:

  
	
   

  	
  Broker No:                                 

  
	
   

  	
  Account No: