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 COMPANY THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
_________________________
CONVERTIBLE PROMISSORY NOTE
OF
TRINITY COMPANIES, INC.
Up to $55,000 Dated as of June 30, 2002
Trinity Companies, Inc., a Utah corporation (the "Company"), for value
received, hereby promises to pay to Kings Peak Advisors, LLC, a Utah
limited liability company (the "Noteholder"), at 0000 Xxxxx Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, or its assigns, the sum of
Fifty-Five Thousand Dollars ($55,000), or such other greater or lesser
amount as may be outstanding, plus interest accrued on outstanding
principal, at a rate of nine percent (9%) per annum, compounded annually,
and calculated from the date of this convertible promissory note (this
"Note") until the principal amount hereof and all interest accrued thereon
is paid (or converted, as provided in Section 2 hereof). The outstanding
principal amount of this Note, and the interest accrued thereon, shall be
due and payable at the principal offices of the Noteholder or by mail to
the registered address of the holder of this Note on the earliest to occur
of (i) June 29, 2003, ("Maturity Date"), or (ii) when, upon or during the
occurrence of an Event of Default (as defined in paragraph 8 below), such
amounts are declared due and payable by Noteholder 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 is being issued in connection with a
Note and Warrant Purchase Agreement between Company, Noteholder and other
purchasers listed on Schedule A attached thereto dated as of an even date
herewith ("Note and Warrant 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 "Company" shall mean the Company as defined above and
includes any corporation which shall succeed to or assume the obligations
of the Company 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
Company. 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 "Next Equity Financing" shall mean the next equity financing
of the Company in which the Company sells a minimum of 500,000 shares of
the Company's Common Stock.
1.5 "Note Conversion Price" shall be equal to the product of (i)
the price per share paid by investors in the Next Equity Financing
multiplied by (ii) eighty percent (80%).
1.6 "Noteholder," "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.
2. Automatic Conversion of Note. Immediately upon the closing of a
Next Equity Financing, this Note shall automatically be converted in
Conversion Stock at the Note Conversion Price. Noteholder shall receive a
certificate representing the Conversion Stock only upon surrender of this
Note at the principal offices of the Company.
3. Issuance of Conversion Stock. As soon as practicable after
conversion and surrender of this Note, the Company 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 Company), together with any other
securities and property to which the holder is entitled upon such
conversion under the terms of this Note; and (ii) if the conversion is in
connection with the Next Equity Financing, execute and deliver such
agreements and documents that are necessary to afford the Noteholder the
same rights, preferences and privileges, contractual or otherwise, as the
holders of the Common Stock issued in the Next Equity Financing. 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 Company 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 Company 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 Company'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 Company 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 Company 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 Noteholder to any voting rights or other rights as a
stockholder of the Company. 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 Company for any purpose.
7. Corporate Action; No Impairment. The Company 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 Noteholder under this
Note against wrongful impairment.
8. Default. Ten (10) days after written notice from Noteholder to
the Company for monetary defaults and thirty (30) days after written notice
from Noteholder to the Company 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 Company fails to make any payment due
and payable under the terms of this Note, the Note and Warrant Purchase
Agreement or any other document executed in connection therewith.
b. Representations and Warranties. If any of the representations
and warranties made by the Company shall be false or misleading in any
material respect when made.
c. Covenants. If the Company shall be in material default under any
of the material terms, covenants, conditions, or obligations under this
Note, the Note and Warrant Purchase Agreement or any other document
executed in connection therewith.
d. Dissolution. If the Company 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
Company, and such petition is not dismissed within ninety (90) days of
filing, a petition in bankruptcy is filed by the Company or a receiver,
trustee or custodian of any part of the Collateral is appointed; or if the
Company 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.
In the event of an Event of Default under this Section 8, Noteholder shall,
in addition to any other remedies allowed by law, by written notice to the
Company, be entitled to accelerate all unpaid principal and interest under
this Note. Waiver of any Event of Default will not constitute a waiver of
any other or subsequent Event of Default.
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 COMPANY AND THE NOTEHOLDER.
10. Assignment; Binding upon Successors and Assigns. The Company may
not assign any of its obligations hereunder without the prior written
consent of Noteholder. 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 Company 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 Noteholder 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. Noteholder 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 Company, the original holder of this Note and their
respective attorneys and the language hereof will not be construed for or
against either Company or Noteholder. 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 Noteholder:
Kings Peak Advisors, LLC
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxx
(ii) If to Company:
Trinity Companies, Inc.
0000 Xxxxxx Xxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxx
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.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name as of the date first above written.
TRINITY COMPANIES, INC.
By:
Name: Xxxx Xxxx
Its: President
Acknowledgement of Delivery of Note
KINGS PEAK ADVISORS, LLC
By:
Name: Xxxxxx Xxxxxx
Title: Managing Member
