Exhibit 10.121
[FORM OF SENIOR SECURED CONVERTIBLE
NOTE]
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS
3(c)(ii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE NUMBER OF SECURITIES ISSUABLE
UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON
THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS
NOTE.
VCAMPUS CORPORATION
SENIOR SECURED CONVERTIBLE NOTE
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Issuance Date: September 25,
2006
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|
Original Principal Amount: U.S.
$3,000,000
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FOR VALUE RECEIVED, VCampus
Corporation, a Delaware corporation (the “ Company
”), hereby promises to pay to Gottbetter Capital Master, Ltd.
or registered assigns (“ Holder ”) the amount
set out above as the Original Principal Amount (as reduced pursuant
to the terms hereof pursuant to redemption, conversion or
otherwise, the “ Principal ”) when due, whether
upon the Maturity Date (as defined below), on any Installment Date
with respect to the Installment Amount due on such Installment
Date, acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest (“
Interest ”) on any outstanding Principal at a rate per
annum equal to the Interest Rate (as defined below), from the date
set out above as the Issuance Date (the “ Issuance
Date ”) until the same becomes due and payable, whether
upon an Interest Date (as defined below), any Installment Date, or
the Maturity Date, acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof).
This Senior Secured Convertible Note (including all Senior
Secured Convertible Notes issued in exchange, transfer or
replacement hereof, this “ Note ”) issued
pursuant to the Securities Purchase Agreement (as defined below).
Certain capitalized terms are defined in Section
28.
1.
PAYMENTS OF PRINCIPAL; MATURITY . On each Installment
Date commencing
,
2007, the Company shall pay to the Holder an amount equal to the
Installment Amount due on such Installment Date in cash by wire
transfer of immediately available funds. The “
Maturity Date ” shall be
,
2009.
2.
INTEREST; INTEREST RATE .
(a) Interest on this Note
shall commence accruing on the Issuance Date and shall be computed
on the basis of a 360-day year and actual days elapsed and shall be
payable in arrears for each Calendar Month during the period
beginning on the Issuance Date and ending on, and including, the
Maturity Date (each, an “ Interest Date ”) with
the first Interest Date being [ ], 2006.
Interest shall be payable on each Interest Date, to the
record holder of this Note on the applicable Interest Date, in cash
(“ Cash Interest ”).
(b) From and after the
occurrence of an Event of Default, the Interest Rate shall be
increased to fifteen percent (15%). In the event that such
Event of Default is subsequently cured, the adjustment referred to
in the preceding sentence shall cease to be effective as of the
date of such cure; provided that the Interest as calculated at such
increased rate during the continuance of such Event of Default
shall continue to apply to the extent relating to the days after
the occurrence of such Event of Default through and including the
date of cure of such Event of Default.
3.
CONVERSION OF NOTES . This Note shall be convertible
into shares of common stock of the Company, par value $0.01 per
share (the “ Common Stock ”), on the terms and
conditions set forth in this Section 3.
(a) Conversion Right .
Subject to the provisions of Section 3(d), at any time or
times on or after the Issuance Date, the Holder shall be entitled
to convert any portion of the outstanding and unpaid Conversion
Amount (as defined below) into fully paid and nonassessable shares
of Common Stock in accordance with Section 3(c), at the Conversion
Rate (as defined below). The Company shall not issue any
fraction of a share of Common Stock upon any conversion. If
the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share
of Common Stock up to the nearest whole share. The Company
shall pay any and all taxes that may be payable with respect to the
issuance and delivery of Common Stock upon conversion of any
Conversion Amount.
(b) Conversion Rate .
The number of shares of Common Stock issuable upon conversion
of any Conversion Amount pursuant to Section 3(a) shall be
determined by dividing (x) such Conversion Amount by (y) the
Conversion Price (the “ Conversion Rate
”).
(i)
“ Conversion Amount ” means the portion of the
Principal to be converted, redeemed or otherwise with respect to
which this determination is being made.
(ii)
“ Conversion Price ” means, as of any Conversion
Date (as defined below) or other date of determination, $0.30
(appropriately adjusted for any stock split, stock dividend, stock
combination or other similar transaction that proportionately
decreases or increases the Common Stock).
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(c) Mechanics of
Conversion .
(i)
Optional Conversion . To convert any Conversion Amount
into shares of Common Stock on any date (a “ Conversion
Date ”), the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 p.m., New York
Time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the “
Conversion Notice ”) to the Company and (B) if
required by Section 3(c)(iv), surrender this Note to a nationally
recognized overnight delivery service for delivery to the Company
(or an indemnification undertaking with respect to this Note in the
case of its loss, theft or destruction). On or before the
next Trading Day following the date of receipt of a Conversion
Notice, the Company shall transmit by facsimile a confirmation of
receipt of such Conversion Notice to the Holder and the Transfer
Agent. On or before the second (2 nd )
Trading Day following the date of receipt of a Conversion Notice
(the “ Share Delivery Date ”), the Company shall
(1) (X) provided the shares are then eligible to be issued without
a restrictive legend and that the Transfer Agent is participating
in the Fast Automated Securities Transfer Program of DTC credit
such aggregate number of shares of Common Stock to which the Holder
shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program or the shares
are not then eligible to be issued without a restrictive legend,
issue and deliver to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the
Holder shall be entitled. If this Note is physically
surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than three
Business Days after receipt of this Note and at its own expense,
issue and deliver to the holder a new Note (in accordance with
Section 18(d)) representing the outstanding Principal not
converted. The Person or Persons entitled to receive the
shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date. In the
event of a partial conversion of this Note pursuant hereto, the
principal amount converted shall be deducted from the Installment
Amounts relating to the next earliest Installment Dates.
(ii)
Company’s Failure to Timely Convert . If within
three (3) Trading Days after the Company’s receipt of the
facsimile copy of a Conversion Notice, the Company shall fail to
issue and deliver a certificate to the Holder or credit the
Holder’s balance account with DTC for the number of shares of
Common Stock to which the Holder is entitled upon such
holder’s conversion of any Conversion Amount (a “
Conversion Failure ”), and if on or after such Trading
Day the Holder purchases (in an open market transaction or
otherwise) a number of shares of Common Stock equal to the number
of shares subject to the Conversion Failure in order to deliver
same in satisfaction of a sale by the Holder of the number of
shares of Common Stock issuable upon such conversion that the
Holder anticipated receiving from the Company (a “
Buy-In ”), then the Company shall, within three (3)
Business Days after the Holder’s request and provision of
trade confirmations and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including customary brokerage commissions and
other actual and reasonable out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (the “ Buy-In
Price ”), at which point the Company’s obligation
to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such
Common
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Stock and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the
Closing Bid Price on the Conversion Date.
(iii)
Registration; Book-Entry . The Company shall maintain
a register (the “ Register ”) for the
recordation of the names and addresses of the holders of each Note
and the principal amount of the Notes held by such holders (the
“ Registered Notes ”). The entries in the
Register shall be conclusive and binding for all purposes absent
manifest error. The Company and the holders of the Notes
shall treat each Person whose name is recorded in the Register as
the owner of a Note for all purposes, including, without
limitation, the right to receive payments of principal and interest
hereunder, notwithstanding notice to the contrary. A
Registered Note may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register. Upon
its receipt of a request to assign or sell all or part of any
Registered Note by a Holder, to the extent permitted by applicable
securities laws the Company shall record the information contained
therein in the Register and issue one or more new Registered Notes
in the same aggregate principal amount as the principal amount of
the surrendered Registered Note to the designated assignee or
transferee pursuant to Section 17. Notwithstanding anything
to the contrary set forth herein, upon conversion of any portion of
this Note in accordance with the terms hereof, the Holder shall not
be required to physically surrender this Note to the Company unless
(A) the full Conversion Amount represented by this Note is being
converted or (B) the Holder has provided the Company with prior
written notice (which notice may be included in a Conversion
Notice) requesting physical surrender and reissue of this Note.
The Holder and the Company shall maintain records showing the
Principal, Interest and Late Charges converted and the dates of
such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon conversion.
(iv)
Disputes . In the event of a dispute as to the number
of shares of Common Stock issuable to the Holder in connection with
a conversion of this Note, the Company shall issue to the Holder
the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 23.
(d) Limitations on
Conversions .
(i)
Beneficial Ownership . The Company shall not effect
any conversion of this Note, and the Holder of this Note (including
any successor, transferee or assignee) shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the
extent that after giving effect to such conversion, the Holder
(together with the Holder’s affiliates) would beneficially
own in excess of 4.99% (the “ Maximum Percentage
”) of the number of shares of Common Stock outstanding
immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of
such sentence is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) conversion of the
remaining, nonconverted portion of this Note beneficially owned by
the Holder or any of its affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other
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securities of the Company
(including, without limitation, any warrants) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 3(d)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this
Section 3(d)(i), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company’s most
recent Form 10-KSB, Form 10-K, Form 10-QSB, Form 10-Q or Form 8-K,
as the case may be (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, during regular
business hours of the Company and upon the written request of the
Holder, the Company shall within two (2) Business Days confirm in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Note, by the Holder or its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported.
By written notice to the Company, the Holder may increase or
decrease the Maximum Percentage to any other percentage specified
in such notice; provided that (i) any such increase will not be
effective until the sixty-first (61 st )
day after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the Holder and not to
any other holder of Notes.
4.
RIGHTS UPON EVENT OF DEFAULT .
(a) Event of Default .
Each of the following events shall constitute an “Event
of Default “:
(i)
the failure of the applicable Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared
effective by the SEC on or prior to the date that is thirty (30)
days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable
Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop
order but excluding by reason of any fault, breach or omission of
the Holder) or is unavailable to any holder of the Notes but
excluding by reason of any fault, breach or omission of the Holder
for sale of all of such holder’s Registrable Securities (as
defined in the Registration Rights Agreement) in accordance with
the terms of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of ten (10) consecutive days
or for more than an aggregate of thirty (30) days in any 365-day
period (other than days during an Allowable Grace Period (as
defined in the Registration Rights Agreement));
(ii)
the suspension from trading or failure of the Common Stock to be
listed on the Principal Market or on an Eligible Market for a
period of five (5) consecutive
5
Trading Days or for more than an
aggregate of ten (10) Trading Days in any 365-day
period;
(iii)
the Company’s (A) failure to cure a Conversion Failure by
delivery of the required number of shares of Common Stock within
ten (10) Business Days after the applicable Conversion Date or (B)
written notice to any holder of the Notes, including by way of
public announcement or through any of its authorized agents, at any
time, of its intention not to comply with a request for conversion
of any Notes into shares of Common Stock that is tendered in
accordance with the provisions of the Notes;
(iv)
at any time following the tenth (10 th )
consecutive Business Day that the authorized number of shares is
less than the number of shares of Common Stock that the Holder
would be entitled to receive upon a conversion of one hundred
percent (100%) of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d)
or otherwise);
(v)
the Company’s failure to pay to the Holder any amount of
Principal (including, without limitation, any redemption payments),
Interest, Late Charges or other amounts when and as due under this
Note or any other Transaction Document (as defined in the
Securities Purchase Agreement) or any other agreement, document,
certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby to which the Holder is
a party, except, in the case of a failure to pay Interest and Late
Charges when and as due, in which case only if such failure
continues for a period of at least five (5) Business
Days;
(vi)
any default under, redemption of or acceleration prior to maturity
of any Indebtedness (other than the Indebtedness owed to SIAR
Capital and related investors in the March 2004 financing and the
August 2006 bridge financing) in excess of $250,000, in the
aggregate, of the Company or any of its Subsidiaries (as defined in
Section 3(a) of the Securities Purchase Agreement);
(vii)
the Company or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, “
Bankruptcy Law ”), (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a “
Custodian ”), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;
(viii)
a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company or
any of its Subsidiaries in an involuntary case, (B) appoints a
Custodian of the Company or any of its Subsidiaries or (C) orders
the liquidation of the Company or any of its
Subsidiaries;
(ix)
a final judgment or judgments for the payment of money aggregating
in excess of $500,000 are rendered against the Company or any of
its Subsidiaries and
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which judgments are not, within
sixty (60) days after the entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within sixty (60) days
after the expiration of such stay; provided, however, that any
judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the
$500,000 amount set forth above so long as the Company provides the
Holder a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to the
Holder) to the effect that such judgment is covered by insurance or
an indemnity and the Company will be entitled to receive the
proceeds of such insurance or indemnity promptly after the issuance
of such judgment;
(x)
the Company breaches any material representation, warranty,
covenant or other term or condition of any Transaction Document,
except, in the case of a breach of a covenant which is curable,
only if such breach continues for a period of at least ten (10)
consecutive Business Days after receipt of notice of such
breach;
(xi)
any breach or failure in any respect to comply with (x) Section 15
of this Note or (y) any of the Potential Partner Conditions;
or
(xii)
the inability of the Common Stock to be transferred with DTC
through the Deposit Withdrawal at Custodian system.
(b) Redemption Right .
Upon the occurrence of an Event of Default with respect to
this Note, the Company shall within two (2) Business Days after the
day on which the Company is aware of the Event of Default deliver
written notice thereof via facsimile and overnight courier (an
“ Event of Default Notice ”) to the Holder.
At any time after the earlier of the Holder’s receipt
of an Event of Default Notice and the Holder becoming aware of an
Event of Default, the Holder may require the Company to redeem all
or any portion of this Note by delivering written notice thereof
(the “ Event of Default Redemption Notice ”) to
the Company, which Event of Default Redemption Notice shall
indicate the portion of this Note the Holder is electing to redeem.
Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the
Company at a price equal to 100% of the Conversion Amount to be
redeemed and (y) the Redemption Premium (the “ Event of
Default Redemption Price ”). Redemptions required
by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required
by this Section 4(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the
Company, such redemptions shall be deemed to be voluntary
prepayments. The parties hereto agree that in the event of
the Company’s redemption of any portion of the Note under
this Section 4(b), the Holder’s damages would be uncertain
and difficult to estimate because of the parties’ inability
to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for
the Holder. Accordingly, any Redemption Premium due under
this Section 4(b) is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder’s actual loss of
its investment opportunity and not as a penalty.
5.
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL
.
(a) Assumption .
The Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company
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under this Note and the other
Transaction Documents in accordance with the provisions of this
Section 5(a) pursuant to written agreements including agreements to
deliver to each holder of Notes in exchange for such Notes a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Notes,
including, without limitation, having a principal amount and
interest rate equal to the principal amounts and the interest rates
of the Notes held by such holder, having similar conversion rights
as the Notes and having similar ranking to the Notes, and
reasonably satisfactory to the Required Holders. Upon the
occurrence of any Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this
Note referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of
the Company and shall assume all of the obligations of the Company
under this Note with the same effect as if such Successor Entity
had been named as the Company herein. Upon consummation of
the Fundamental Transaction, the Successor Entity shall deliver to
the Holder confirmation that there shall be issued upon conversion
or redemption of this Note at any time after the consummation of
the Fundamental Transaction, in lieu of the shares of Common Stock
(or other securities, cash, assets or other property) issuable upon
the conversion of the Notes prior to such Fundamental Transaction,
such shares of common stock (or their equivalent) of the Successor
Entity, as adjusted in accordance with the provisions of this Note.
The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and shall be applied
without regard to any limitations on the conversion of this
Note.
(b) Change of Control;
Redemption Right . No sooner than fifteen (15) days nor
later than ten (10) days prior to the consummation of a Change of
Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to the Holder (a “ Change
of Control Notice ”). At any time during the period
beginning after the Holder’s receipt of a Change of Control
Notice and ending ten (10) Trading Days after the consummation of
such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice
thereof (“ Change of Control Redemption Notice
”) to the Company, which Change of Control Redemption Notice
shall indicate the Conversion Amount the Holder is electing to
redeem. The portion of this Note subject to redemption
pursuant to this Section 5 shall be redeemed by the Company in cash
at a price equal to the greater of (i) the product of the Change of
Control Premium and the product of (x) the sum of the Conversion
Amount being redeemed and any accrued and unpaid Interest with
respect to such Conversion Amount and accrued and unpaid Late
Charges with respect to such Conversion Amount and Interest and (y)
the quotient determined by dividing (A) the Closing Sale Price of
the Common Stock immediately following the public announcement of
such proposed Change of Control by (B) the Conversion Price and
(ii) 125% of the sum of the Conversion Amount being redeemed and
any accrued and unpaid Interest with respect to such Conversion
Amount subject to such Change of Control Redemption and accrued and
unpaid Late Charges with respect to such Conversion Amount and
Interest (the “ Change of Control Redemption Price
”). Redemptions required by this Section 5 shall be
made in accordance with the provisions of Section 12 and shall have
priority to payments to shareholders in connection with a Change of
Control. To the extent redemptions required by this Section
5(b) are deemed or determined by a court of competent jurisdiction
to be prepayments of the Note by the Company, such redemptions
shall be deemed to be voluntary prepayments.
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