EXHIBIT 10.70
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made and entered
into on July 29, 2004, by and between Trinity Learning Corporation, a
corporation organized under the laws of the State of Utah, with its principal
place of business located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the
"Company"), and Oceanus Value Fund, L.P. (the "Buyer").
Recitals
A. The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemptions from securities registration afforded by (i) the
provisions of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), and (ii) Section 4(2) under the ▇▇▇▇ ▇▇▇.
B. The Buyer desires to purchase from the Company, and the Company desires
to sell to the Buyer, for the amount and upon the terms and conditions stated in
this Agreement, in a closing (the "Closing") as herein described, the following
securities of the Company:
(i) The Company's 12% Senior Secured Promissory Note, the form of which is
attached as Exhibit A (the "Note"), which may be converted into the Company's no
par value common stock (the "Common Stock") and/or other securities on the terms
and conditions set forth in the Note. The principal amount of the Note shall be
Five Hundred Thousand Dollars ($500,000).
(ii) As additional consideration for the Buyer's purchase of the Note, the
Company shall also issue to the Buyer a warrant (the "Warrant") to purchase
125,000 shares of Common Stock with an exercise price of $1.00 per share, which
Warrant must be exercised (if at all) within five (5) years after the date of
issuance. The Warrant shall be in the form attached as Exhibit B.
Any Common Stock or other securities issuable pursuant to Section 5 of the
Note shall be referred to herein as the "Conversion Shares." The Common Stock
receivable upon exercise of the Warrant shall be referred to herein as the
"Warrant Shares." The Note, the Conversion Shares, the Warrant and the Warrant
Shares may be collectively referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement, the
Company is executing and delivering a Security Agreement (the "Security
Agreement") in the form of the attached Exhibit C, pursuant to which the Company
has agreed to secure its obligations under the Note with a security interest in
substantially all tangible and intangible assets (including intellectual
property) owned by the Company (the "Collateral"). Pursuant to an Intercreditor
Agreement with SBI Advisors, LLC (the "Agent"), as agent for Hong Kong League
Central Credit Union and HIT Credit Union (collectively, the "Lenders"), in the
form attached as Exhibit D (the "Intercreditor Agreement"), the Buyer shall
share a first-priority security interest in the Collateral with the Agent and
the Lenders.
D. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are also executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") in the form of the attached Exhibit E,
pursuant to which the Company has, among other things, agreed to provide certain
registration rights for the Conversion Shares and the Warrant Shares under the
1933 Act and applicable state securities laws.
Agreements
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. Purchase and Sale of the Securities.
(a) Purchase. At the Closing, the Buyer agrees to purchase the Note from
the Company and the Company agrees to sell the Note to the Buyer. The purchase
price for the Note shall be $500,000 (the "Purchase Price"), out of which shall
be paid (i) $14,795 in pre-paid interest (as provided in the Note), (ii) an
origination fee of $15,000 and (iii) such other amounts as may be included in
the Disbursement Instructions attached as Exhibit F (the "Disbursement
Instructions"). The disbursements specified in the Disbursement Instructions
(including disbursement to the Company of the remainder of the Purchase Price)
shall be made on the Closing Date (as defined below).
(b) The Closing. The date of the Closing (the "Closing Date") shall be July
29, 2004, or such other date as the parties may agree in writing. On or before
the Closing Date, (i) the Purchase Price shall be delivered to the Escrow Agent
(as defined in the Escrow Agreement in the form of the attached Exhibit G (the
"Escrow Agreement")) and (ii) the Company shall deliver to the Escrow Agent on
behalf of the Company the originals of this Agreement, the Note, the Warrant,
the Security Agreement, the Intercreditor Agreement, the Registration Rights
Agreement, the Disbursement Instructions and the Escrow Agreement, each duly
authorized and executed by the Company and/or any other parties thereto (other
than the Buyer), together with such other items as may be required by this
Agreement (collectively, the "Closing Documents").
(c) Payment. The Buyer shall pay the Purchase Price by wire transfer of
immediately available funds in United States Dollars, to be deposited into the
Escrow Account (as defined in the Escrow Agreement), against delivery to the
Escrow Agent of the Closing Documents by the Company. At the Closing, the Escrow
Agent shall be responsible for disbursement of the Purchase Price according to
the Disbursement Instructions and delivery of the Closing Documents to the Buyer
(with copies to the Company duly executed by the Buyer, where required), in each
case in accordance with the terms of the Escrow Agreement.
2. The Buyer's Representations and Warranties. With respect to its purchase
hereunder, the Buyer represents and warrants to the Company, and agrees, as
follows:
(a) Investment Purposes; Compliance With 1933 Act. The Buyer is purchasing
the Securities for its own account for investment only and not with a view
towards, or in connection with, the public sale or distribution thereof, except
pursuant to sales registered, or exempt from registration, under the 1933 Act
and applicable state securities laws. The Buyer is not purchasing the Securities
for the purpose of covering short sale positions in the Common Stock established
on or prior to the Closing Date. The Buyer agrees to offer, sell or otherwise
transfer the Securities only (i) in accordance with the terms of this Agreement,
the Note and the Warrant, as applicable, and (ii) pursuant to registration under
the 1933 Act or an exemption from registration under the 1933 Act and any other
applicable securities laws. The Buyer does not by its representations in this
Section 2(a) agree to hold the Securities for any minimum or other specific
term, and reserves the right to dispose of the Securities at any time pursuant
to a registration statement or in accordance with an exemption from registration
under the 1933 Act, in all cases in accordance with applicable state and federal
securities laws. The Buyer understands that it shall be a condition to the
issuance of the Conversion Shares and the Warrant Shares that such shares be and
are subject to the representations set forth in this Section 2(a).
(b) Accredited Investor Status. The Buyer is a Delaware limited partnership
and is an "accredited investor," as that term is defined in Rule 501(a) of
Regulation D. The Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment made pursuant to this Agreement. The Buyer is aware that it may be
required to bear the economic risk of the investment made pursuant to this
Agreement for an indefinite period of time, and is able to bear such risk.
(c) Reliance on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of applicable federal and state securities laws, and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements and covenants of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities that have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask all questions of the Company as they have in
their discretion deemed advisable. The Buyer understands that its investment in
the Securities involves a high degree of risk. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to an informed
investment decision with respect to the investment made pursuant to this
Agreement.
(e) No Government Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
approved or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities, nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that: (i) except as provided
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold or otherwise transferred unless either (A) subsequently
registered thereunder or (B) the Buyer shall have delivered to the Company an
opinion by counsel reasonably satisfactory to the Company, in form, scope and
substance reasonably satisfactory to the Company, to the effect that the
securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration and (ii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, except as required by this Agreement or the
Registration Rights Agreement).
(g) Legend. Subject to Section 5(b) below, the Buyer understands that the
Note, the Warrant and the stock certificates representing the Conversion Shares
and the Warrant Shares (until such time as the Conversion Shares and the Warrant
Shares have been registered under the 1933 Act pursuant to the Registration
Rights Agreement or otherwise may be sold by the Buyer pursuant to Rule 144 (or
any applicable rule which operates to replace said Rule) promulgated under the
1933 Act ("Rule 144")), will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE "LAWS"). THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE APPLICABLE LAWS.
(h) Authorization; Enforcement. This Agreement, the Registration Rights
Agreement, the Disbursement Instructions, the Security Agreement and the Escrow
Agreement (collectively, the "Agreements") have been duly and validly
authorized, executed and delivered by the Buyer and are each valid and binding
agreements of the Buyer enforceable in accordance with their terms, subject as
to enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. The Company's Representations and Warranties. The Company represents and
warrants to the Buyer, and agrees, as follows:
(a) Organization and Qualification. The Company is a corporation duly
organized and existing in good standing under the laws of the State of Utah, and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. As used herein, "Material Adverse Effect" means any material adverse
effect on the operations, properties or financial condition of the Company taken
as a whole. The Common Stock is quoted on the OTC Bulletin Board. The Company
has received no notice, either written or oral, with respect to the continued
eligibility of the Common Stock for such quotation, the Company has maintained
all requirements for the continuation of such quotation, and the Company does
not reasonably anticipate that the Common Stock will be removed from the OTC
Bulletin Board in the foreseeable future. The Company has complied, and will
timely comply, with all requirements of the SEC, the National Association of
Securities Dealers and the OTC Bulletin Board with respect to the issuance of
the Securities.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform the Agreements, to issue and sell
the Securities in accordance with the terms thereof, and to perform its
obligations under the Note and the Warrant in accordance with their terms. The
Company's execution, delivery and performance of the Agreements, the Note and
the Warrant, and its consummation of the transactions contemplated thereby, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board of Directors, its stockholders, or
any other person or entity is required. The Agreements and, on the Closing Date,
the Note and the Warrant, have been duly and validly authorized, executed and
delivered by the Company, and the Note (when issued), the Warrant (when issued),
and the Agreements constitute the valid and binding obligations of the Company
enforceable in accordance with their terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
(c) Capitalization. As of May 7, 2004, the authorized capital stock of the
Company consisted of 100,000,000 shares of Common Stock, of which 27,728,466
shares were issued and outstanding, and 10,000,000 shares of preferred stock, of
which no shares were issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and non-assessable. No shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances. As of the Closing Date, except as set forth in the attached
Schedule 3(c) or in the SEC Documents (as defined in paragraph (h) below) filed
prior to or for the quarter ended March 31, 2004, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever issued or agreed to by the Company relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of
its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, (ii) there are no outstanding debt
securities of the Company or any of its subsidiaries except those issued to the
Agent and the Lenders and (iii) there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except as provided herein
and in the Registration Rights Agreement). If requested by the Buyer, the
Company has furnished to the Buyer true and correct copies of the Company's
Articles of Incorporation as in effect on the date hereof (the "Articles of
Incorporation"), and the Company's Bylaws as in effect on the date hereof.
(d) Issuance of Warrant and Conversion Shares. The Warrant Shares are all
duly authorized and reserved for issuance, and in all cases upon issuance shall
be validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issuance thereof, and will not be subject to
preemptive rights or other similar rights of stockholders of the Company. Upon
issuance, the Conversion Shares shall be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the
issuance thereof, and will not be subject to preemptive rights or other similar
rights of stockholders of the Company
(e) Acknowledgment Regarding Buyer's Purchase of the Securities. (i) The
Buyer is not acting as a financial advisor to or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement or the transactions
contemplated hereby, (ii) this Agreement and the transactions contemplated
hereby, and the relationship between the Buyer and the Company, are and will be
considered "arms-length" notwithstanding any other or prior agreements or nexus
between the Buyer and the Company, whether or not disclosed, and (iii) any
statements made by the Buyer, or any of its representatives or agents, in
connection with this Agreement and the transactions contemplated hereby are not
to be construed as advice or a recommendation, are merely incidental to the
Buyer's purchase of the Securities and have not been relied upon in any way by
the Company, its officers or directors. The Company's decision to enter into
this Agreement and the transactions contemplated hereby have been based solely
upon an independent evaluation by the Company, its officers and directors.
(f) No Integrated Offering. Neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances which would prevent the parties hereto from consummating the
transactions contemplated hereby pursuant to an exemption from registration
under the 1933 Act and, specifically, in accordance with the provisions of
Regulation D. The transactions contemplated hereby are exempt from the
registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties of the Buyer contained herein.
(g) No Conflicts. Except as set forth in the attached Schedule 3(g),
neither the Company nor any of its subsidiaries is in violation of its Articles
of Incorporation or other organizational documents, and neither the Company nor
any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation, of
any agreement, indenture or other instrument to which the Company or any of its
subsidiaries is a party, except for possible defaults or rights as would not, in
the aggregate or individually, have a Material Adverse Effect. The business of
the Company and its subsidiaries is not being conducted and, so long as the
Buyer owns any of the Securities, shall not be conducted, in violation of any
law, ordinance or regulation of any governmental entity, except for possible
violations which neither singly or in the aggregate would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement or as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, individual
or entity in order for it to execute, deliver and perform any of its obligations
under the Agreements, the Note or the Warrant in accordance with the terms
thereof.
(h) SEC Documents; Financial Statements. Except as disclosed on Schedule
3(h) hereof, since at least March 31, 2004, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), with all of the foregoing
that were filed prior to the date hereof and all exhibits included therein and
all financial statements and schedules thereto and all documents (other than
exhibits) incorporated by reference therein being hereinafter referred to as the
"SEC Documents." The Company has delivered to the Buyer (to the extent requested
by the Buyer) true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the applicable rules and regulations of the SEC
promulgated thereunder, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements (i) have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved except (A) as may be otherwise
indicated in such financial statements or the notes thereto or (B) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements and (ii) fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). No
information provided by or on behalf of the Company to the Buyer contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein in order to make the statements therein, in the light of
the circumstances under which they are or were made, not misleading. Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to the
date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of
clauses (i) and (ii) above, which, individually or in the aggregate, are not
material to the financial condition, business, operations, properties, operating
results or prospects of the Company. The SEC Documents contain a complete and
accurate description of all written and oral contracts, agreements, leases or
other instruments to which the Company or any subsidiary is a party or by which
the Company or any subsidiary is bound which are required by the rules and
regulations promulgated by the SEC to be disclosed (each a "Contract"). None of
the Company, its subsidiaries or, to the best of the Company's knowledge, any of
the other parties thereto, is in breach or violation of any Contract, which
breach or violation would, or with the lapse of time, the giving of notice, or
both, have a Material Adverse Effect.
(i) Absence of Certain Changes; Bankruptcy. Except as disclosed in the SEC
Documents, since at least March 31, 2004, there has been no material adverse
change or development in the business, properties, operation, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently have any reasonable expectation of
taking any steps, to seek protection pursuant to any bankruptcy law, nor does
the Company have any knowledge that its creditors intend to initiate involuntary
bankruptcy proceedings.
(j) Absence of Litigation. Except as set forth in the attached Schedule
3(j) or in the SEC Documents filed prior to or for the quarter ended March 31,
2004, there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board or governmental body pending or, to the knowledge of
the Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein.
(k) Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in the course of his, her or its actions for or
on behalf of the Company, (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds, (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
(l) Brokers; No General Solicitation. The Company has taken no action that
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement and the transactions
contemplated hereby, other than as set forth in the attached Schedule 3(l) or
the Disbursement Instructions. The Company acknowledges that no broker or finder
was involved with respect to the transactions contemplated hereby, other than as
set forth in the attached Schedule 3(l) or the Disbursement Instructions.
Neither the Company nor any other person or entity participating on the
Company's
behalf in the transactions contemplated hereby, nor any person or entity acting
for the Company or any such other person or entity, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, with respect to
the Securities.
(m) Status of Assets. Except as described on Schedule 3(m) or in the SEC
Documents filed prior to or for the quarter ended March 31, 2004, the Company
has good and marketable title to each of the assets that is material to its
business, free and clear of all liens, claims, restrictions and other
encumbrances.
(n) Eligibility to File Registration Statement. The Company is currently
eligible to file registration statements with the SEC on Form SB-2 under the
1933 Act.
4. Covenants of the Parties.
(a) Best Efforts. Each party shall use its best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
(b) Securities Laws. The Company shall timely file a Form D (and any other
equivalent form or notice required by applicable state law) with respect to the
Securities if and as required under Regulation D and applicable state securities
laws and provide copies thereof to the Buyer upon the Buyer's request. The
Company shall, on or before the Closing Date, take all action necessary in order
to sell the Securities to the Buyer in compliance with federal and applicable
state securities laws, and shall provide written evidence of such action to the
Buyer upon the Buyer's request.
(c) Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall (i) file all reports required to be filed with the
SEC pursuant to the 1934 Act and (ii) maintain its status as an issuer required
to file reports under the 1934 Act, even if the 1934 Act or the rules and
regulations thereunder would permit termination of such status.
(d) Information. So long as the Buyer beneficially owns any of the
Securities, the Company shall send the following items to the Buyer: (i) within
three (3) days after filing with the SEC, a copy of each of its proxy or
information statements, annual reports, quarterly reports and any reports filed
on Form 8-K and (ii) as soon as practicable after release thereof, copies of all
press releases issued by the Company or any of its subsidiaries.
(e) Reservation of Shares. The Company shall at all times have authorized
and reserved for the purpose of issuance that number of shares of Common Stock
which is sufficient to provide for the issuance of all of the Warrant Shares.
Prior to complete exercise of the Warrant, the Company shall not reduce the
number of shares of Common Stock reserved for issuance hereunder without the
written consent of the Buyer, except for a reduction proportionate to a reverse
stock split which affects all shares of Common Stock equally.
(f) Listing or Quotation. The Company shall promptly secure the listing of
the Warrant Shares and the Conversion Shares upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance), and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of the Warrant Shares and the Conversion Shares as may exist from time
to time under the terms of this Agreement and/or the Registration Rights
Agreement. The Company shall at all times comply in all respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers and the OTC Bulletin Board or
such national securities exchange or other market on which the Common Stock may
then be quoted or listed, as applicable.
(g) Prospectus Delivery Requirement. The Buyer understands that the 1933
Act requires delivery of a prospectus relating to the Conversion Shares and the
Warrant Shares in connection with any sale thereof pursuant to a registration
statement under the 1933 Act, and the Buyer shall comply with any applicable
prospectus delivery requirements of the 1933 Act in connection with any such
sale. The Company shall have the right to rely upon the Buyer's agreement
contained in this Section 4(g); therefore, with respect to any resale of the
Conversion Shares and the Warrant Shares by the Buyer pursuant to a registration
statement, any certificate evidencing such Conversion Shares and Warrant Shares
shall not contain a restrictive legend of any kind.
(h) Intentional Acts or Omissions. Neither party shall intentionally
perform or fail to perform any act that, if performed or omitted to be
performed, would prevent or excuse the performance of this Agreement or any of
the transactions contemplated hereby.
(i) Expenses. At the Closing, the Company agrees to pay to, or at the
direction of, the Buyer an amount equal to the attorney's fees and other
expenses incurred by Buyer in connection with the Buyer's due diligence
investigation (including airfare, hotel accommodations and car rental), document
preparation and escrow for the transactions contemplated by this Agreement (with
attorney's fees and related costs not to exceed $10,000).
(j) Corporate Status; Taxes. The Company shall, at least until the Buyer no
longer holds any of the Securities, maintain its corporate existence in good
standing and shall pay all taxes when due except for taxes it reasonably
disputes.
5. Legend; Transfer Instructions; Related Matters.
(a) Transfer Agent Instructions. Promptly after receiving notice of
exercise of the Warrant, and in any event no more than three (3) trading days
after the Company's receipt of such notice of exercise, the Company shall
instruct its transfer agent to issue certificates, registered in the name of the
Buyer or its permitted nominee, for Warrant Shares in such amounts as are
specified in such notice. All such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement only to the extent required
by applicable law and as specified in this Agreement or any documents referenced
herein. The Company represents and warrants that (i) no instructions will be
given by it to its transfer agent other than (A) the
instructions referred to in this Section 5 and (B) any stop transfer
instructions required to give effect to Section 2(f) hereof in the case of the
Warrant Shares prior to their registration under the 1933 Act and (ii) the
Warrant Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent permitted by applicable law and provided by
this Agreement, the Warrant and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Warrant Shares. If
the Buyer (i) provides the Company with an opinion of counsel reasonably
satisfactory to Company that registration by the Buyer of the Securities is not
required under the 1933 Act, (ii) transfers any of the Securities to an
affiliate which is an accredited investor (in accordance with the provisions of
this Agreement) or (iii) transfers any of the Securities in compliance with Rule
144, then, in each instance, the Company shall permit such transfer and, if
applicable, promptly (and in all events within three (3) trading days) instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer.
(b) Removal of Legend. The Legend shall be removed from any certificate for
a Security, and a certificate for a Security shall be originally issued without
the Legend, if, unless otherwise required by state securities laws, (i) the sale
of such Security is registered under the 1933 Act, (ii) the holder of such
Security provides the Company with an opinion by counsel reasonably satisfactory
to the Company, that is in form, substance and scope reasonably satisfactory to
the Company, to the effect that a public sale or transfer of such Security may
be made without registration under the 1933 Act or (iii) such holder provides
the Company with assurances reasonably satisfactory to the Company and its
counsel that such Security can be sold pursuant to Rule 144. The Buyer agrees
that its sale of all Securities, including those represented by a certificate
from which the Legend has been removed, or which were originally issued without
the Legend, shall be made only pursuant to an effective registration statement
(with delivery of a prospectus in connection with such sale) or in compliance
with an exemption from the registration requirements of the 1933 Act. In the
event the Legend is removed from the certificate for any Security or any
certificate for a Security is issued without the Legend and thereafter the
effectiveness of a registration statement covering the sale of such Security is
suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
the holder of such Security, the Company shall be entitled to require that the
Legend be placed upon such Security, which Legend shall be removed when such
Security may again be sold pursuant to an effective registration statement or
Rule 144 or such holder provides the opinion with respect thereto described in
clause (ii) above.
(c) Exercise of Warrant. The Buyer shall have the right to exercise the
Warrant by delivering a Notice of Exercise as provided in the Warrant. Each date
on which a Notice of Exercise is delivered to the Company in accordance with the
provisions hereof shall be deemed an "Exercise Date." The Company will transmit
the certificates representing the shares of Common Stock issuable upon exercise
of the Warrant (along with a replacement Warrant representing the amount of said
Warrant not so exercised, if applicable) to the Buyer or its designee via
overnight courier within three (3) business days after the relevant Exercise
Date
(with respect to each exercise, the "Deadline"). Time is of the essence with
respect to the requirements of the immediately preceding sentence.
(d) Injunctive Relief for Breach. The Company acknowledges that a breach of
its obligations under Sections 5(a), 5(b) and/or 5(c) above will cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company agrees that the
remedy at law for a breach of its obligations under such Sections would be
inadequate and agrees that, in the event of a breach or threatened breach by the
Company, the Buyer shall be entitled, in addition to all other remedies at law
or in equity, to an injunction restraining any breach and requiring immediate
issuance and/or transfer, without the necessity of showing economic loss and
without any bond or other security being required.
(e) Liquidated Damages for Non-Delivery of Certificates. In addition to the
provisions of Section 5(d) above, the Company understands and agrees that any
delay in the issuance of the certificates beyond the Deadline will result in
substantial economic loss and other damages to the Buyer. As partial
compensation to the Buyer for such loss, the Company agrees to pay liquidated
damages (which the Company acknowledges is not a penalty) to the Buyer for
issuance and delivery of the certificates after the Deadline, in accordance with
the following schedule (where "No. of Business Days Late" is defined as the
number of business days beyond three (3) business days from the date of delivery
by the Buyer to the Company of a Notice of Exercise or, if later, from the date
on which all other necessary documentation duly executed and in proper form
required for exercise of the Warrant has been delivered to the Company:
No. of Business Days Late Liquidated Damages (in US$)
-------------------- --------------------------------
1 $300
2 $400
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,250
10 $1,500
11+ $1,750 + $1,000 for
each Business Day Late
beyond 11 days
Subject to the Buyer's right, in its sole discretion, to add accrued
liquidated damages on to the principal amount of the Note (as provided in the
Note), the Company shall pay the Buyer any liquidated damages incurred under
this Section 5(e) by certified or cashier's check upon the earlier of (i) the
issuance to the Buyer of the certificates with respect to which the damages
accrued or (ii) each monthly anniversary of the receipt by the Company of the
Buyer's Notice of Exercise, as the case may be. Nothing herein shall limit the
Buyer's right to pursue actual
damages for the Company's failure to issue and deliver certificates to the Buyer
in accordance with the terms of this Agreement or for breach by the Company of
this Agreement.
6. Conditions to the Company's Obligation to Sell. The obligation of the
Company hereunder to sell the Note and the Warrant at the Closing is subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions; provided, however, that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion:
(a) The Buyer shall have (i) executed the Agreements (to the extent
required thereby) and (ii) delivered such documents or signature pages thereof
(via facsimile or as otherwise provided in the Escrow Agreement), together with
such other items as may be required by this Agreement, to the Escrow Agent.
(b) The Buyer shall have delivered to the Escrow Agent on behalf of the
Company the Purchase Price by wire transfer of immediately available funds
pursuant to the wiring instructions provided by the Escrow Agent.
(c) The representations and warranties of the Buyer in this Agreement shall
be true and correct in all material respects as of the date made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered or issued by any court or
governmental authority of competent jurisdiction or any self- regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
7. Conditions to the Buyer's Obligation to Purchase. The obligation of the
Buyer to purchase the Note and Warrant is subject to the satisfaction, on or
before the Closing Date, of each of the following conditions; provided, however,
that these conditions are for the sole benefit of the Buyer and may be waived by
the Buyer at any time in its sole discretion:
(a) The Company shall have (i) executed the Agreements and (ii) delivered
such documents and the Intercreditor Agreement or signature pages thereof (via
overnight delivery or as otherwise provided in the Escrow Agreement), together
with such other items as may be required by this Agreement, to the Escrow Agent.
(b) The Company shall have issued and have duly executed by the authorized
officers of the Company, and delivered to the Escrow Agent on behalf of the
Buyer, the original Note and Warrant (via overnight delivery or as otherwise
provided by the Escrow Agreement).
(c) The representations and warranties of the Company in this Agreement
shall be true and correct in all material respects as of the date made and as of
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer may
require a certificate, executed by the Chief Executive Officer of the Company
and dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Buyer.
(d) The Common Stock shall be authorized for quotation on the OTC Bulletin
Board (or listing on a national securities exchange or other market) and trading
in the Common Stock on such market shall not have been suspended by the SEC or
other relevant regulatory agency.
(e) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered or issued by any court or
governmental authority of competent jurisdiction or any self- regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
8. Governing Law; Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Kansas without regard to the principles
of conflict of laws. In the event of any litigation regarding the interpretation
or performance of this Agreement or any agreement entered into in connection
herewith or the transactions contemplated herein, the parties irrevocably
consent to jurisdiction in any of the state or federal courts located in the
State of Kansas and waive their rights to object to venue in any such court,
regardless of the convenience or inconvenience thereof to any party. Service of
process in any civil action relating to or arising out of this Agreement
(including all Exhibits or Schedules or any addenda hereto) or the transactions
contemplated herein may be accomplished in any manner provided by law. The
parties hereto agree that a final, non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
signature pages from such counterparts have been delivered to the Escrow Agent.
(c) Headings; Interpretation. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, and vice versa, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date specified
herein falls on a Saturday, Sunday or public or legal holiday, the date shall be
construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For purposes of this Agreement, a "business day" is any
day other than a Saturday, Sunday or public or legal holiday. Each party intends
that this Agreement be deemed and construed to have been jointly prepared by the
parties. As a result, the parties agree that any uncertainty or ambiguity
existing herein shall not be interpreted against either of them.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the documents
referenced herein (which are incorporated herein by reference) contain the
entire understanding of the parties with respect to the matters covered herein
and supercede all prior agreements, negotiations and understandings, written or
oral, with respect to such subject matter. Except as specifically set forth
herein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement shall be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement. No delay or omission of
either party hereto in exercising any right or remedy hereunder shall constitute
a waiver of such right or remedy, and no waiver as to any obligation shall
operate as a continuing waiver or as a waiver of any subsequent breach.
(f) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be in writing and sent by U. S. Mail or delivered
personally or by overnight courier or via facsimile (if via facsimile, to be
followed within one (1) business day by an original of the notice document via
overnight courier) and shall be effective (i) five (5) days after being placed
in the mail, if mailed, certified or registered, return receipt requested, (ii)
upon receipt, if delivered personally or (iii) one (1) day after facsimile
transmission or delivery to a courier service for overnight delivery, in each
case properly addressed to the party to receive the same. The addresses for such
communications shall be as follows:
If to the Company: Trinity Learning Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
If to the Buyer: Oceanus Value Fund, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Each party shall provide written notice to the other party of any change in
address.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld) and, in any event, any
assignee of the Buyer shall be an accredited investor (as defined in Regulation
D), in the written opinion of counsel who is reasonably satisfactory to the
Company and in form, substance and scope reasonably satisfactory to the Company.
Notwithstanding the foregoing, if applicable, the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined in Rule 405 of the
1933 Act, without the consent of the Company; provided, however, that (i) any
such assignment shall not release the Buyer from its obligations hereunder
unless such obligations are assumed by such affiliate and (ii) no such
assignment shall be made unless it is made in accordance with any applicable
securities laws. Any request for consent to an assignment made hereunder by the
Buyer shall be accompanied by a legal opinion in form, substance and scope
reasonably satisfactory to the Company that such assignment is proper under
applicable law. Notwithstanding anything herein to the contrary, the Buyer may
pledge all or any part of the Securities as collateral for a bona fide loan
pursuant to a security agreement with a third party lender, and such pledge
shall not be considered an assignment in violation of this Agreement so long as
it is made in compliance with all applicable laws.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. Unless this Agreement is terminated under Section 8(l) below,
the representations and warranties of the Company and the Buyer contained
herein, and the agreements and covenants set forth herein, shall survive the
Closing.
(j) Publicity. The Company and the Buyer shall have the right to review,
before issuance by the other, any press releases or other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without prior consultation with or approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions that is required by applicable law or regulations.
(k) Further Assurance. Each party shall do and perform, or cause to be done
and performed, at its expense, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred on
or before July 29, 2004, this Agreement may be terminated at any time thereafter
by written notice from one party to the other. Such termination shall not be the
sole remedy for a breach of this Agreement by the non-breaching party, and each
party shall retain all of its rights hereunder at law or in equity.
Notwithstanding anything herein to the contrary, a party whose breach of a
covenant or representation and warranty or failure to satisfy a condition
prevented the Closing shall not be entitled to terminate this Agreement.
(m) Remedies. No provision of this Agreement providing for any specific
remedy to a party shall be construed to limit such party to the specific remedy
described, and that any other remedy that would otherwise be available to such
party at law or in equity shall also be available. The parties also intend that
the rights and remedies hereunder be cumulative, so that exercise of any one or
more of such rights or remedies shall not preclude the later or concurrent
exercise of any other rights or remedies.
(n) Attorney's Fees. If any party to this Agreement shall bring any action
for relief against the other arising out of or in connection with this
Agreement, in addition to all other remedies to which the prevailing party may
be entitled, the losing party shall be required to pay to the prevailing party a
reasonable sum for attorney's fees and costs incurred in bringing such action
and/or enforcing any judgment granted therein, all of which shall be deemed to
have accrued upon the commencement of such action and shall be paid whether or
not such action is prosecuted to judgment. Any judgment or order entered in such
action shall contain a specific provision providing for the recovery of
attorney's fees and costs incurred in enforcing such judgment. For the purposes
of this Section, attorney's fees shall include, without limitation, fees
incurred with respect to the following: (i) post-judgment motions, (ii) contempt
proceedings, (iii) garnishment, levy and debtor and third party examinations,
(iv) discovery and (v) bankruptcy litigation.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Agreement to
be duly executed by their respective authorized persons on the date first
written above.
THE COMPANY:
TRINITY LEARNING CORPORATION
By:____________________________
President
By:____________________________
Secretary
THE BUYER:
OCEANUS VALUE FUND, L.P.
By: Oceanus Asset Management, L.L.C.,
General Partner
By:____________________________
Title:
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Warrant to Purchase Common Stock
Exhibit C Security Agreement
Exhibit D Intercreditor Agreement
Exhibit E Registration Rights Agreement
Exhibit F Disbursement Instructions
Exhibit G Escrow Agreement
Schedule 3(c)
Schedule 3(g)
Schedule 3(h)
Schedule 3(j)
Schedule 3(l)
Schedule 3(m)
SCHEDULE 3(c)
NONE
SCHEDULE 3(g)
NONE
SCHEDULE 3(h)
NONE
SCHEDULE 3(j)
NONE
SCHEDULE 3(l)
NONE
SCHEDULE 3(m)
NONE