EXHIBIT 10.4
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. 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
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO TRINITY LEARNING CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, TRINITY LEARNING CORPORATION, a Utah corporation (the
"Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., (the "Holder"),
at the offices of c/o M&C Corporate Services Ltd., X.X. Xxx 000 XX, Xxxxxx
House, South Church Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax:
000-000-0000 or its registered assigns or successors in interest, or order, the
sum of Five Million Five Hundred Thousand Dollars ($5,500,000), together with
any accrued and unpaid interest hereon, on August 31, 2007 (the "Maturity Date")
if not sooner paid. The original principal amount of this Note subject to
amortizing payments pursuant to Section 1.2 hereof is hereinafter referred to as
the "Amortizing Principal Amount" and the remaining original principal amount of
this Note is hereinafter referred to as the "Non-Amortizing Principal Amount."
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "Purchase Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1 (a) Interest Rate. Subject to Sections 1.1(b), 4.11 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the "Interest
Rate") equal to the "prime rate" published in The Wall Street Journal from time
to time, plus two percent (2%). The prime rate shall be increased or decreased
as the case may be for each increase or decrease in the prime rate in an amount
equal to such increase or decrease in the prime rate; each change to be
effective as of the day of the change in such rate. Subject to Sections 1.1(b)
and 5.6 hereof, the Interest Rate shall not be less than six percent (6%).
Interest shall be calculated on the basis of a 360 day year. Interest shall
accrue but not be payable during the period commencing on the date hereof and
ending on August 31, 2004. Interest on the Amortizing Principal Amount shall be
payable monthly, in arrears, commencing on September 1, 2004 and on the first
day of each consecutive calendar month thereafter (each, a "Repayment Date") and
on the Maturity Date, whether by acceleration or otherwise. Accrued interest on
the Non-Amortizing Principal Amount shall be payable only on the
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Maturity Date or, in the event of the redemption or conversion of all or any
portion of the Non-Amortizing Principal Amount, accrued interest on the amount
so redeemed or converted shall be paid on the date of redemption or conversion,
as the case may be.
1.1 (b) Interest Rate Adjustment. The Interest Rate shall be subject to
adjustment on the last business day of each month hereafter until the Maturity
Date (each a "Determination Date"). If on any Determination Date (i) the
Borrower shall have registered under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of the Warrant issued on a registration statement
declared effective by the Securities and Exchange Commission (the "SEC"), and
(ii) the market price (the "Market Price") of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined below) for the ten (10)
consecutive trading days immediately preceding such Determination Date exceeds
the then applicable Fixed Conversion Price by at least twenty five percent
(25%), the Interest Rate for the succeeding calendar month shall automatically
be reduced by 200 basis points (200 b.p.) (2.0.%) for each incremental twenty
five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price. If on any Determination Date (i) the
Borrower shall not have registered under the Securities Act the shares of Common
Stock underlying the conversion of this Note and the exercise of the Warrant on
a registration statement declared effective by the SEC or the Borrower shall
have registered such shares under the Securities Act but on such Determination
Date the related registration statement is not effective, and (ii) the Market
Price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market
for the ten (10) consecutive trading days immediately preceding such
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be decreased by 100 basis points (100 b.p.) (1.0.%)
for each incremental twenty five percent (25%) increase in the Market Price of
the Common Stock above the then applicable Fixed Conversion Price.
Notwithstanding the foregoing (and anything to the contrary contained in
herein), in no event shall the Interest Rate be less than zero percent (0%).
1.2 Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note not contained in the Restricted
Account (as defined in the Restricted Account Agreement) shall begin on November
1, 2004 and shall recur on each succeeding Repayment Date thereafter until the
Amortizing Principal Amount has been repaid in full, whether by the payment of
cash or by the conversion of such principal into Common Stock pursuant to the
terms hereof. Subject to Section 2.1 and Article 3 below, on each Repayment
Date, the Borrower shall make payments to the Holder in the amount of $22,058.82
(the "Monthly Principal Amount"), together with any accrued and unpaid interest
then due on such portion of the Amortizing Principal Amount plus any and all
other amounts which are then owing under this Note that have not been paid (the
Monthly Principal Amount, together with such accrued and unpaid interest and
such other amounts, collectively, the "Monthly Amount"); provided that,
following a release of an amount of funds from the Restricted Account (as
defined in the Restricted Account Agreement) for the purposes set forth in the
Restricted Account Side Letter (other than with respect to a release that occurs
as a result of a conversion of any Principal Amount) (each, a "Release Amount")
each Monthly Principal Amount due on any Repayment Date following any such
release shall be increased by an amount equal to (x) such Release Amount divided
by (y) the sum of (I) the number
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of Repayment Dates remaining until the Maturity Date plus (II) one (1). Any
Amortizing Principal Amount that remains outstanding on the Maturity Date shall
be due and payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the Monthly
Amount (or a portion thereof of such Monthly Amount if such portion of the
Monthly Amount would have been converted into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Borrower shall pay the Holder an amount equal to 102% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Borrower to the Holder on such Repayment Date (in
respect of such portion of the Monthly Amount converted into in shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(x) the portion of the Monthly Amount converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion Price. For purposes hereof, the initial
"Fixed Conversion Price" means $0.72.
(b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Holder shall convert into shares of Common Stock
all or the maximum portion of the Monthly Amount due on each Repayment Date
according to the following guidelines (collectively, the "Conversion Criteria"):
(i) the average closing price of the Common Stock as reported by Bloomberg, L.P.
on the Principal Market for the ten (10) consecutive trading days immediately
preceding such Notice Date shall be greater than or equal to 110% of the Fixed
Conversion Price and (ii) the amount of such conversion does not exceed twenty
five percent (25%) of the aggregate dollar trading volume of the Common Stock
for the twenty two (22) day trading period immediately preceding the applicable
Repayment Date. If the Conversion Criteria are not met, the Holder shall convert
only such part of the Monthly Amount that meets the Conversion Criteria. Any
part of the Monthly Amount due on a Repayment Date that the Holder has not been
able to convert into shares of Common Stock due to failure to meet the
Conversion Criteria, shall be paid by the Borrower in cash at the rate of 102%
of such Monthly Amount otherwise due on such Repayment Date, within three (3)
business days of the applicable Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted by the
Holder pursuant to Section 2.1(b) shall be deemed to constitute payments of, or
applied against, (i) first, outstanding fees, (ii) second, accrued interest on
the Amortizing Principal Amount, (iii) third, accrued interest on the
Non-Amortizing Principal Amount and (iv) fourth, the Amortizing Principal
Amount.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, no amount payable hereunder may be converted into Common Stock unless
(a) either (i) an effective current Registration Statement (as defined in the
Registration Rights Agreement) covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
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registration of the Common Stock is available pursuant to Rule 144 of the
Securities Act, and (b) no Event of Default hereunder exists and is continuing,
unless such 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.
2.3 Optional Redemption of Amortizing Principal Amount. The Borrower will
have the option of prepaying the outstanding Amortizing Principal Amount
("Optional Amortizing Redemption"), in whole or in part, by paying to the Holder
a sum of money equal to one hundred thirty percent (130%) of the Amortizing
Principal Amount to be redeemed, together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder arising
under this Note, the Purchase Agreement or any Related Agreement (the
"Amortizing Redemption Amount") on the day written notice of redemption (the
"Notice of Amortizing Redemption") is given to the Holder. The Notice of
Amortizing Redemption shall specify the date for such Optional Amortizing
Redemption (the "Amortizing Redemption Payment Date"), which date shall be not
less than seven (7) business days after the date of the Notice of Amortizing
Redemption (the "Redemption Period"). A Notice of Amortizing Redemption shall
not be effective with respect to any portion of the Amortizing Principal Amount
for which the Holder has a pending election to convert pursuant to Section 3.1,
or for conversions initiated or made by the Holder pursuant to Section 3.1
during the Redemption Period. The Amortizing Redemption Amount shall be
determined as if such Holder's conversion elections had been completed
immediately prior to the date of the Notice of Amortizing Redemption. On the
Amortizing Redemption Payment Date, the Amortizing Redemption Amount shall be
paid in good funds to the Holder. In the event the Borrower fails to pay the
Amortizing Redemption Amount on the Amortizing Redemption Payment Date as set
forth herein, then such Notice of Amortizing Redemption will be null and void.
2.4 Optional Redemption of Non-Amortizing Principal Amount. The Borrower
will have the option of repaying the outstanding Non-Amortizing Principal Amount
("Optional Non-Amortizing Redemption"), in whole or in part, by paying the
Holder a sum of money equal to one hundred twenty percent (120%) of the
Non-Amortizing Principal Amount to be redeemed, together with accrued but unpaid
interest thereon (the "Non-Amortizing Redemption Amount") on the day written
notice of redemption (the "Notice of Non-Amortizing Redemption") is giving to
the Holder. The Notice of Non-Amortizing Redemption shall specify the date for
such Optional Non-Amortizing Redemption (the "Non-Amortizing Redemption Date"),
which date shall be not less than seven (7) business days after the date of the
Notice of Non-Amortizing Redemption (the "Non-Amortizing Redemption Period"). A
Notice of Non-Amortizing Redemption shall not be effective with respect to any
portion of the Non-Amortizing Principal Amount for which the Holder has a
pending election to convert pursuant to Section 3.1, or for conversions
initiated or made by the Holder pursuant to Section 3.1 during the
Non-Amortizing Redemption Period. The Non-Amortizing Redemption Amount shall be
determined as if the Holder's conversion elections had been completed
immediately prior to the date of the Notice of Non-Amortizing Redemption. On the
Non-Amortizing Redemption Date, the Non-Amortizing Redemption Amount shall be
paid (i) in good funds to the Holder, (ii) by furnishing the Holder written
direction to notify the bank holding the Restricted Account to release from the
Restricted Account and deliver to the Holder a sum of money equal to the
Non-Amortizing Redemption Amount, or (iii) if the amount on deposit in the
Restricted Account is less than the Non-Amortizing Redemption Amount, by
furnishing the Holder
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written direction to notify the bank holding the Restricted Account to release
all amounts on deposit in the Restricted Account to the Holder and delivering to
the Holder good funds in an amount equal to the balance of the Non-Amortizing
Redemption Amount.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. Subject to Section 2.2 and the mandatory
conversion provisions therein, the Holder shall have the right, but not the
obligation, to convert all or any portion of the then aggregate outstanding
Principal Amount of this Note, together with interest and fees due hereon, into
shares of Common Stock, subject to the terms and conditions set forth in this
Article III. The Holder may exercise such right by delivery to the Borrower of a
written Notice of Conversion pursuant to Section 3.3.
3.2 Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between the number of shares of Common
Stock beneficially owned by such Holder or issuable upon exercise of Warrants
held by such Holder and 4.99% of the outstanding shares of Common Stock. For the
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and Regulation
13d-3 thereunder. The Holder may void the Conversion Share limitation described
in this Section 3.2 upon 75 days prior notice to the Borrower or without any
notice requirement upon an Event of Default.
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 fees being converted. 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 and shall provide written notice
thereof to the Borrower within two (2) business days after the Conversion Date.
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 transfer agent, within one (1)
business day of the date of the delivery to Borrower of the Notice of Conversion
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
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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.
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 Fixed Conversion Price. In the event
of any conversions of outstanding obligations under this Note in part pursuant
to this Article III, such conversions shall be deemed to constitute conversions
(i) first, of the Monthly Amount for the current calendar month, (ii) then of
the accrued interest on the Non-Amortizing Principal Amount, (iii) then, of
outstanding Non-Amortizing Principal Amount and (iv) after the Non-Amortizing
Principal Amount has been paid in full, of outstanding Amortizing Principal
Amount, by applying the conversion amount to Monthly Amounts for the remaining
Repayment Dates in chronological order.
(b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion is subject to adjustment from time
to time upon the occurrence of certain events, as follows:
A. 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 Fixed Conversion Price or the Conversion
Price, as the case may be, 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.
B. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full
conversion of this Note. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. The
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.
C. Share Issuances. Subject to the provisions of this Section 3.4,
if the Borrower shall at any time prior to the conversion or repayment in
full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the Holder
(except (i) pursuant to Subsections A or B above; (ii) pursuant to
options, warrants or other obligations to issue shares outstanding on the
date hereof as disclosed to Holder in writing; or (iii) pursuant to
options that may be issued under
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any employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower) for a consideration per share (the "Offer Price")
less than the Fixed Conversion Price in effect at the time of such
issuance, then the Fixed Conversion Price shall be immediately reset to
such lower Offer Price at the time of issuance of such securities. For
purposes hereof, the issuance of any security of the Borrower convertible
into or exercisable or exchangeable for Common Stock shall result in an
adjustment to the Fixed Conversion Price at the time of issuance of such
securities.
D. 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, this Note, as to
the unpaid Principal Amount 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.
3.5 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Borrower to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid. Subject to the provisions of
Article IV, the Borrower will pay no costs, fees or any other consideration to
the Holder for the production and issuance of a replacement Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, the amount
due and owing to the Holder shall be 120% of the outstanding principal amount of
the Note (plus accrued and unpaid interest and fees, if any) (the "Default
Payment"). The Default Payment shall be applied first to any fees due and
payable to Holder pursuant to this Note, the Purchase Agreement or the Related
Agreements, then to accrued and unpaid interest due on the Note and then to
outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "Event of Default":
4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails
to pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower, and in any such case, such failure
shall continue for a period of three (3) days following the date upon which any
such payment was due.
4.2 Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of
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its Subsidiaries breaches any covenant or any other term or condition of any
Related Agreement in any material respect and, any such case, such breach, if
subject to cure, continues for a period of fifteen (15) days after the
occurrence thereof.
4.3 Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the date that such
representation or warranty was made or deemed made.
4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries 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.
4.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of thirty (30) days.
4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries.
4.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTCBB, NASDAQ SmallCap Market, NASDAQ
National Market System, American Stock Exchange, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock, or any securities exchange or other securities
market on which the Common Stock is then being listed or traded.
4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
4.9 Default Under Related Agreements or Other Agreements. The occurrence
and continuance of any Event of Default (as defined in the Purchase Agreement or
any Related Agreement) or any event of default (or similar term) under any other
indebtedness of the Borrower or any of its Subsidiaries in excess of $50,000 in
the aggregate.
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4.10 Change in Control. (i) Any "Person" or "group" (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the
date hereof) is or becomes the "beneficial owner" (as defined in Rules 13(d)-3
and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a
fully diluted basis of the then outstanding voting equity interest of the
Borrower or (ii) the Board of Directors of the Borrower shall cease to consist
of a majority of the Board of Directors of the Borrower on the date hereof (or
directors appointed by a majority of the Board of Directors in effect
immediately prior to such appointment).
DEFAULT RELATED PROVISIONS
4.11 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, interest on this Note shall automatically be
increased by two percent (2%) per month, and all outstanding obligations under
this Note, including unpaid interest, shall continue to accrue interest from the
date of such Event of Default at such interest rate applicable to such
obligations until such Event of Default is cured or waived.
4.12 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
4.13 Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
the 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. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.
5.3 Amendment Provision. The term "Note" and all reference thereto, as
used
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throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented, and any
successor instrument issued pursuant to Section 3.5 hereof, as it may be 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, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.
5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. 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 Note 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. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
5.6 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.
5.7 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated
as of the date hereof.
5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
5.9 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
name effective as of this 31st day of August, 2004.
TRINITY LEARNING CORPORATION
By:________________________________
Name:
Title:
WITNESS:
______________________________
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by Trinity
Learning Corporation dated August 31, 2004 by delivery of Shares of Common Stock
of Trinity Learning Corporation on and subject to the conditions set forth in
Article III of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT B
CONVERSION NOTICE
(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)
[Name and Address of Holder]
Holder hereby converts $_________ of the Monthly Amount due on [specify
applicable Repayment Date] under the Convertible Term Note issued by Trinity
Learning Corporation dated August 31, 2004 by delivery of Shares of Common Stock
of Trinity Learning Corporation on and subject to the conditions set forth in
Article III of such Note.
1. Fixed Conversion Price: $_______________________
2. Amount to be paid: $_______________________
3. Shares To Be Delivered (2 divided by 1): ______________________
4. Cash payment to be made by Borrower: $_____________________
Date: ________________ LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
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