NON-RECOURSE CONVERTIBLE NOTE
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAWS. THEY ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT THERETO UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ACQUIRER THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
_________________________
NON-RECOURSE CONVERTIBLE PROMISSORY NOTE
OF
TRINITY LEARNING CORPORATION
Up to $500,000 Dated as of March 1, 2004
Trinity Learning Corporation, a Utah corporation (the "Acquirer"), for
value received, hereby promises to pay to Inspire AS (on behalf of the
Shareholder of Virtual Learning Partners AS), (the "Shareholder" or
"holder"), at Inspire AS, Veritasveien 14 P.O. Box 301, N-1323 Xxxxx,
Norway, or its assigns, the sum of Five Hundred Thousand Dollars
($500,000), or such other greater or lesser amount as may be outstanding,
until the principal amount hereof is paid (or converted, as provided in
Section 2 hereof). The outstanding principal amount of this non-recourse
convertible promissory note (this "Note"), shall be due and payable at the
principal offices of the Shareholder or by mail to the registered address
of the holder of this Note on August 5th, 2005, ("Maturity Date"), such
amounts are declared due and payable by Shareholder or made automatically
due and payable in accordance with the terms hereof, unless this Note shall
have been previously converted pursuant to Section 2 hereof or as provided
otherwise in this Note. This Note shall be non-recourse as provided in
Section 16. This Note is being issued in connection with a Securities
Purchase Agreement between Acquirer and Shareholders ("Securities Purchase
Agreement").
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. The following definitions shall apply for all
purposes of this Note:
1.1 "Acquirer" shall mean Trinity Learning Corporation as
defined above and includes any corporation which shall succeed to or assume
the obligations of the Acquirer under this Note.
1.2 "Conversion Date" shall mean the date on which, pursuant to
Sections 2 and 3 hereof, this Note is converted into the Conversion Stock
at the Note Conversion Price.
1.3 "Conversion Stock" shall mean the Common Stock of the
Acquirer. The number and character of shares of Conversion Stock (as
adjusted for stock splits, stock dividends, recapitalizations,
reclassifications, or the like) and the term "Conversion Stock" shall
include shares and other securities and property at any time receivable or
issuable upon conversion of this Note in accordance with its terms.
1.4 "Note Conversion Price" shall be equal to $0.50 per share.
1.5 "Shareholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the
time be the registered holder of this Note.
1.6 "Stock Exchange" shall mean a primary stock exchange that is
subject to financial requirements for listing such as the NASDAQ Small Cap,
AMEX, NASDAQ National, or the NYSE but excluding secondary exchanges such
as OTC BB.
2. Conversion
2.1 (a) Conversion of Note at Shareholder's Option. At any
time prior to payment in full of the entire outstanding principal balance
of this Note, Shareholder shall have the right to convert the principal in
whole, into Conversion Stock at the Note Conversion Price. Conversion
under this Section 2.1 (a) shall occur only upon surrender of this Note for
conversion at the principal offices of the Acquirer.
(b) Conversion of Note at Acquirer's Option. On or about
the Maturity Date, Acquirer shall have the right to convert the principal
in whole, into Conversion Stock at the Note Conversion Price.
(c) Prepayment of Note. This Note may not be prepaid in
full or in part at any time.
3. Issuance of Conversion Stock. As soon as practicable after
conversion and surrender of this Note, the Acquirer will (i) at its
expense, cause to be issued in the name of and delivered to the holder of
this Note, a certificate or certificates for the number of shares of
Conversion Stock to which the holder shall be entitled upon such conversion
(bearing such legends as may be required by applicable state and federal
securities laws in the opinion of legal counsel of the Acquirer), together
with any other securities and property to which the holder is entitled upon
such conversion under the terms of this Note. Such conversion shall be
deemed to have been made (A) under Section 2 above and (B) immediately
prior to the close of business on the Conversion Date. No fractional
shares will be issued upon conversion of this Note. If upon any conversion
of this Note a fraction of a share would otherwise result, then, in lieu of
such fractional share, the Acquirer will pay the cash value of that
fractional share, calculated on the basis of the applicable Note Conversion
Price.
4. Adjustments and Reservation of Shares.
4.1 Notice of Adjustments. The Acquirer shall promptly give
written notice of each adjustment or readjustment of the number of shares
of Conversion Stock or other securities issuable upon conversion of this
Note, by first class mail, postage prepaid, to the registered holder of
this Note at the holder's address as shown on the Acquirer's books. The
notice shall describe the adjustment or readjustment and show in reasonable
detail the facts on which the adjustment or readjustment is based.
4.2 No Change Necessary. The form of this Note need not be
changed because of any adjustment in the number of shares of Conversion
Stock issuable upon its conversion.
4.3 Reservation of Stock. The Acquirer has taken all necessary
corporate action and obtained all necessary government consents and
approvals to authorize the issuance of this Note and, prior to the
conversion hereof, the shares of Conversion Stock issuable upon conversion
of this Note. If at any time the number of authorized but unissued
Conversion Stock or other securities shall not be sufficient to effect the
conversion of this Note, then the Acquirer will take such corporate action
as may, in the opinion of its legal counsel, be necessary to increase its
authorized but unissued Conversion Stock or other securities to such number
of shares of Conversion Stock or other securities as shall be sufficient
for such purpose.
5. Fully Paid Shares. All shares of Conversion Stock issued upon
the conversion of this Note shall be validly issued, fully paid and non-
assessable.
6. No Rights or Liabilities as Stockholder. This Note does not by
itself entitle the Shareholder to any voting rights or other rights as a
stockholder of the Acquirer. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or
privileges of the holder, shall cause such holder to be a stockholder of
the Acquirer for any purpose.
7. Corporate Action; No Impairment. The Acquirer will not, by
amendment of its Articles of Incorporation or bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, repurchase of securities, sale of assets or any other action,
avoid or seek to avoid the observance or performance of any of the terms of
this Note, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Shareholder under this
Note against wrongful impairment.
8. Default. Ten (10) days after written notice from Shareholder to
the Acquirer for monetary defaults and thirty (30) days after written
notice from Shareholder to the Acquirer for non-monetary defaults, if such
defaults are not cured within such ten (10) day or thirty day (30) periods,
respectively, each of the following shall constitute an event of default
("Event of Default") under this Agreement:
a. Default in Payment. If the Acquirer fails to make any payment
due and payable under the terms of this Note or any other document executed
in connection therewith.
b. Representations and Warranties. If any of the representations
and warranties made by the Acquirer shall be false or misleading in any
material respect when made.
c. Conversion Rights. If the Acquirer fails to honor the conversion
rights of the Note.
d. Dissolution. If the Acquirer is dissolved, suspends its normal
business operations or otherwise fails to continue to operate its business
in the ordinary course.
h. Bankruptcy. If a petition in bankruptcy is filed against the
Acquirer, and such petition is not dismissed within ninety (90) days of
filing, a petition in bankruptcy is filed by the Acquirer or a receiver,
trustee or custodian of any part of the Collateral is appointed; or if the
Acquirer files a petition for reorganization under any of the provisions of
the Bankruptcy Act or any law, State or Federal, or makes an assignment for
the benefit of creditors or is adjudged insolvent by any State or Federal
Court of competent jurisdiction.
i. Listing. If the Acquirer fails to list on a Stock Exchange at a
minimum issue price of US$1.00 (one United States Dollar) per share before
February 5th 2005. The Shareholder will not unreasonably withhold an
extension of up to 6 months for a Stock Exchange listing in progress.
9. Waiver and Amendment. ANY PROVISION OF THIS NOTE MAY BE AMENDED,
WAIVED, MODIFIED, DISCHARGED OR TERMINATED SOLELY UPON THE WRITTEN CONSENT
OF BOTH THE ACQUIRER AND THE SHAREHOLDER.
10. Assignment; Binding upon Successors and Assigns. The Acquirer
may not assign any of its obligations hereunder without the prior written
consent of Shareholder. The terms and conditions of this Note shall inure
to the benefit of and be binding upon the successors and permitted assigns
of the parties.
11. Waiver of Notice; Attorneys' Fees. The Acquirer and all
endorsers of this Note hereby waive notice, demand, notice of nonpayment,
presentment, protest and notice of dishonor. If any action at law or in
equity is necessary to enforce this Note or to collect payment under this
Note, the Shareholder shall be entitled to recover, as an element of the
costs of suit and not as damages, reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which it may be
entitled. Shareholder will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
12. Construction of Note. The terms of this Note have been
negotiated by the Acquirer, the original holder of this Note and their
respective attorneys and the language hereof will not be construed for or
against either Acquirer or Shareholder. Unless otherwise explicitly set
forth, a reference to a Section will mean a Section in this Note. The
titles and headings herein are for reference purposes only and will not in
any manner limit the construction of this Note which will be considered as
a whole.
13. Notices. Any notice or other communication required or permitted
to be given under this Note shall be in writing, shall be delivered by hand
or overnight courier service, by certified mail, postage prepaid, or by
facsimile, and will be deemed given upon delivery, if delivered personally,
one business day after deposit with a national courier service for
overnight delivery, or one business day after transmission by facsimile
with confirmation of receipt, and three days after deposit in the mails, if
mailed, to the following addresses:
(i) If to the Shareholder:
Inspire AS
Veritasveien 14
P.O. Box 301
N-1323 Xxxxx, Norway
Attention: Xxx-Xxxx Xxxxxxx
Telephone Number: x00 0000 0000
Telefacsimile Number: x00 0000 0000
(ii) If to Acquirer:
Trinity Learning Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
With copy to:
Xxxxxxx Xxxxx & Xxxxxxx
000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
or to such other address as may have been furnished to the other party in
writing pursuant to this Section 13, except that notices of change of
address shall only be effective upon receipt.
14. Governing Law. This Note shall be governed by and construed
under the internal laws of the United States and the State of Utah as
applied to agreements among Utah residents entered into and to be performed
entirely within Utah, without reference to principles of conflict of laws
or choice of laws.
15. Collateral. Acquirer hereby grants Shareholder a security
interest in all of the shares of capital stock of Virtual Learning Partners
AS acquired by Acquirer pursuant to the terms of the Securities Purchase
Agreement and deposited into escrow pursuant to the terms of that certain
Escrow Agreement by and between the Shareholder, Acquirer and Escrow Agent.
16. Remedy Upon Event of Default. Notwithstanding anything to the
contrary contained herein, but without in any manner releasing, impairing
or otherwise affecting this Note or the validity thereof or hereof or the
lien thereof in the event of any default under the terms of this Note,
Acquirer shall not be personally liable for repayment of the indebtedness
evidenced by this Note or for any other sums due as a result of any default
under this Note, or for the payment of any deficiency established after
exercise of all rights of the Shareholder, and the sole recourse of
Shareholder for any and all such defaults shall be by the exercise of the
remedies set forth in the Securities Purchase Agreement and the Escrow
Agreement.
IN WITNESS WHEREOF, the Acquirer has caused this Note to be signed in its
name as of the date first above written.
TRINITY LEARNING CORPORATION
By:_______________________________________
Name: Xxxxxxx X. Xxxx
Its: Chief Executive Officer
