Exhibit 10.2
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
TIME AMERICA, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM
NOTE
FOR VALUE RECEIVED, TIME AMERICA,
INC., a Nevada corporation (the “ Company ”),
promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, Ugland House, South Church
Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (the “ Holder ”) or its registered
assigns or successors in interest, sum of Two Million Dollars
($2,000,000), together with any accrued and unpaid interest hereon,
on January 3, 2009 (the “ Maturity Date ”)
if not sooner paid.
Capitalized terms used herein
without definition shall have the meanings ascribed to such terms
in that certain Security and Purchase Agreement dated as of the
date hereof by and between the Companies and the Holder (as
amended, modified and/or supplemented from time to time, the
“ Security Agreement ”).
The following terms shall apply to
this Secured Convertible Term Note (this “ Note
”):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1
Contract Rate . Subject to Sections 4.2 and 5.10,
interest payable on the outstanding principal amount of this Note
(the “ Principal Amount ”) shall accrue at a
rate per annum equal to the “prime rate” published in
The Wall Street Journal from time to time (the “
Prime Rate ”), plus two percent (2.0%) (the “
Contract Rate ”). The Contract 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 the Prime Rate. The Contract Rate shall
not at any time be less than seven and one quarter percent
(7.25%). Interest shall be (i) calculated on the basis
of a 360 day year, and (ii) payable monthly, in arrears,
commencing on February 1, 2006, on the first business day of
each consecutive calendar month thereafter through and including
the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.
1.2
Principal Payments . Amortizing payments of the
aggregate principal amount outstanding under this Note at any time
(the “ Principal Amount ”) shall be made by the
Company on July 1, 2006 and on the first business day of each
succeeding month thereafter through and including the Maturity Date
(each, an “ Amortization Date ”). Subject
to Article III below, commencing on the first Amortization
Date, the Company shall make monthly payments
to the Holder on each Repayment Date, each such
payment in the amount of $66,666.67 together with any accrued and
unpaid interest on such portion of the Principal Amount plus any
and all other unpaid amounts which are then owing under this Note,
the Security Agreement and/or any other Ancillary Agreement
(collectively, the “ Monthly Amount ”).
Any outstanding Principal Amount together with any accrued and
unpaid interest and any and all other unpaid amounts which are then
owing by the Company to the Holder under this Note, the Security
Agreement and/or any other Ancillary Agreement shall be due and
payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1
Payment of Monthly Amount.
(a)
Payment in Cash or Common Stock . 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 cash
pursuant to Section 2.1(b), then the Company shall pay the
Holder an amount in cash equal to 100% of the Monthly Amount (or
such portion of such Monthly Amount to be paid in cash) due and
owing to the Holder on the Amortization Date. 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 Company to the Holder on such
Amortization Date (in respect of such portion of the Monthly Amount
converted into shares of Common Stock pursuant to
Section 2.1(b)), shall be the number determined by dividing
(i) the portion of the Monthly Amount converted into shares of
Common Stock, by (ii) the then applicable Fixed Conversion
Price. For purposes hereof, subject to Section 3.6
hereof, the initial “ Fixed Conversion Price ” means $
0.65.
(b)
Monthly Amount Conversion Conditions . Subject to
Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall convert
into shares of Common Stock all or a portion of the Monthly Amount
due on each Amortization Date if the following conditions (the
“ Conversion
Criteria ”) are satisfied:
(i) the average closing price of the Common Stock as reported
by Bloomberg, L.P. on the Principal Market for the five
(5) trading days immediately preceding such Amortization 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 percent (20%) of the aggregate dollar trading volume of the
Common Stock for the period of twenty-two (22) trading days
immediately preceding such Amortization Date. If
subsection (i) of the Conversion Criteria is met but
subsection (ii) of the Conversion Criteria is not met as
to the entire Monthly Amount, the Holder shall convert only such
part of the Monthly Amount that meets subsection (ii) of
the Conversion Criteria. Any portion of the Monthly Amount
due on an Amortization Date that the Holder has not been able to
convert into shares of Common Stock due to the failure to meet the
Conversion Criteria, shall be paid in cash by the Company at the
rate of 100% of the Monthly Amount otherwise due on such
Amortization Date, within three (3) business days of such
Amortization Date.
2.2
No Effective Registration . Notwithstanding anything
to the contrary herein, none of the Company’s obligations to
the Holder may be converted into Common Stock
2
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 connection with satisfaction of such
obligations exists or (ii) an exemption from registration for
resale of all of the Common Stock issued and issuable is available
pursuant to Rule 144 of the Securities Act and (b) no
Event of Default (as hereinafter defined) exists and is continuing,
unless such Event of Default is cured within any applicable cure
period or otherwise waived in writing by the Holder.
2.3
Optional Redemption in Cash . The Company may prepay
this Note (“ Optional
Redemption ”) by paying to the
Holder a sum of money equal to one hundred fifteen percent (115%)
of the Principal Amount outstanding at such time 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
Security Agreement or any other Ancillary Agreement (the
“ Redemption
Amount ”) outstanding on the
Redemption Payment Date (as defined below). The Company shall
deliver to the Holder a written notice of redemption (the
“ Notice of
Redemption ”) specifying the date
for such Optional Redemption (the “ Redemption Payment Date ”), which date shall be
ten (10) business days after the date of the Notice of
Redemption (the “ Redemption Period ”). A Notice of
Redemption shall not be effective with respect to any portion of
this Note for which the Holder has previously delivered a Notice of
Conversion (as hereinafter defined) or for conversions elected to
be made by the Holder pursuant to Section 3.3 during the
Redemption Period. The Redemption Amount shall be determined
as if the Holder’s conversion elections had been completed
immediately prior to the date of the Notice of Redemption. On
the Redemption Payment Date, the Redemption Amount must be paid in
good funds to the Holder. In the event the Company fails to
pay the Redemption Amount on the Redemption Payment Date as set
forth herein, then such Redemption Notice will be null and
void.
ARTICLE III
HOLDER’S CONVERSION RIGHTS
3.1
Optional Conversion . Subject to the terms set forth
in this Article III, the Holder shall have the right, but not
the obligation, to convert all or any portion of the issued and
outstanding Principal Amount and/or accrued interest and fees due
and payable into fully paid and nonassessable shares of Common
Stock at the Fixed Conversion Price. The shares of Common
Stock to be issued upon such conversion are herein referred to as,
the “ Conversion
Shares. ”
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 (i) 4.99% of the outstanding
shares of Common Stock and (ii) the number of shares of Common
Stock beneficially owned by the Holder. For 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 Conversion
Shares limitation described in this Section 3.2 shall
automatically become null and void following notice to any Company
upon the occurrence and during the continuance of an Event of
Default, upon 75 days prior notice to the Parent, or upon receipt
by the Holder of a Notice of Redemption.
3
Notwithstanding anything
contained herein to the contrary, the provisions of this
Section 3.2 are irrevocable and may not be waived by the
Holder or any Company.
3.3
Mechanics of Holder’s Conversion . In the event
that the Holder elects to convert this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed
and completed notice of conversion in substantially the form of
Exhibit A hereto (appropriately completed)
(“ Notice of
Conversion ”) to the Company and
such Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees that are
being converted. On each Conversion Date (as hereinafter
defined) and in accordance with its
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