UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 5, 2006
TRINITY LEARNING CORPORATION
__________________________________________
(Exact name of registrant as specified in its charter)
Utah 0-8924 73-0981865
_____________________ ____________ ______________
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4101 International Parkway Carrollton, Texas 75007
____________________________________________ ___________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 309-4000
Not Applicable
______________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
AUGUST 2006 FINANCING
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On August 31, 2006 (the "Closing Date"), Trinity Learning Corporation (the
"Company") entered into agreements with Laurus Master Fund, Ltd., a Cayman
Islands corporation ("Laurus"), pursuant to which the Company sold debt and
issued preferred stock of the Company to Laurus in a private offering pursuant
to exemption from registration under Section 4(2) of the Securities Act of 1933,
as amended. The securities being sold and issued to Laurus include the
following:
- A secured three-year term note (the "Secured Note") with a principal amount
of $2,500,000 (the "Secured Note Amount"), which matures on August 31, 2009
(the "Maturity Date");
- A secured three-year revolving note with a principal amount of $5,000,000
(the "Revolving Note"; the Revolving Note and the Secured Note shall be
collectively referred to as the "Notes"); and
- 1,500,000 shares (the "Shares") of preferred stock (the "Preferred Stock"),
of the Company, which is redeemable by the Company at a price of $0.10 per
share (the "Set Price") at any time until August 31, 2011, and may be
converted by Laurus at any time into common stock, no par value per share
(the "Common Stock"), of the Company at the Set Price.
Of the Secured Note, net proceeds of $2,173,000 were received by the
Company on the Closing Date. Any proceeds of the Revolving Note will be
deposited in a restricted account with Col Taylor Bank as security for the total
loan amount and for use by us to make acquisitions as approved by Laurus. We
also agreed to pay, out of the Loan proceeds, the sum of $270,000 to Laurus
Capital Management, LLC, the manager of Laurus, the sum of $60,000 to Laurus as
reimbursement for Laurus' legal fees, due diligence fees and expenses incurred
in connection with the transaction, and $2,000 to Loeb & Loeb LLP as escrow
agent fees.
The Notes are secured by a blanket lien on all of the Company's assets, the
assets of the Company's subsidiaries and the cash held in the restricted account
at Col Taylor Bank. The Company pledged its ownership interests in Trinity
Workplace Learning Corporation, its subsidiary, to Laurus in connection with the
aforementioned financing. In the event of a default, Laurus has the right to
accelerate payments under the Notes and, in addition to any other remedies
available to it, to foreclose upon the assets securing the Notes.
The principal amount of the Secured Note carries an interest rate of prime
plus three percent (the "Secured Note Rate"), subject to adjustment, and we must
make monthly amortizing payments of $42,500, commencing January 1, 2007 and with
said monthly amortizing payments increasing to $62,500 commencing on January 1,
2008, toward the outstanding non-restricted principal amount. Furthermore, the
Secured Note Rate shall not at any time be less than nine percent (9.0%). The
Company may prepay the Secured Note at any time by paying Laurus 105% of the
Secured Note Amount if such prepayment occurs prior to the first anniversary of
the Closing Date, 103% if such prepayment occurs on or after the first
anniversary of the Closing Date and prior to the second anniversary of the
Closing Date, or 101% of the Secured Note Amount outstanding at such time if
such prepayment occurs thereafter but prior to the Maturity Date, plus any
accrued but unpaid interest thereon.
The principal amount of the Revolving Note carries an interest rate of
prime plus two percent (the "Revolving Note Rate"), subject to adjustment, and
we must make said monthly interest payments, payable in arrears, commencing
September 1, 2006. Furthermore, the Revolving Note Rate shall not at any time be
less than nine percent (9.0%). This monthly interest payment amount will be
increased proportionately if and when funds are released from the restricted
account. The Company may prepay the May 2006 Revolving Note at any time without
penalty.
In consideration of the foregoing and so long as no Event of Default, as
defined in the Security Agreement entered into by and between the Company,
Laurus and Trinity Workplace Learning Corporation, has occurred and is
continuing, Laurus agreed not to directly or indirectly, sell, offer, contract
or grant any option to sell (including without limitation any short sale),
pledge, transfer, establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the U.S. Securities Exchange Act of 1934, as amended, or
otherwise dispose of any Shares or publicly announce an intention to do any of
the foregoing, for a period of no less than twelve (12) months from the Closing
Date.
The Shares of Preferred Stock are convertible into shares of our common
stock at a price of $0.10 per share, subject to anti-dilution adjustments.
Laurus has contractually agreed to restrict its ability to convert the Shares of
Preferred Stock and receive shares of the Company's Common Stock such that the
number of shares of the Company common stock held by it after such exercise does
not exceed 4.99% of the Company's then issued and outstanding shares of common
stock. Such restriction shall automatically become null and void following
notice to the Company upon occurrence of an event of default under the
agreements with Laurus or upon 61days prior notice to the Company.
We also have granted Laurus a right of first refusal with respect to any debt or
equity financings, with such restriction being in effect for no longer then 2
years after the Closing Date.
The Company is obligated to file a registration statement registering the
resale of shares of the Company's Common Stock issuable upon the conversion of
the Shares. If the registration statement is not filed within 60 days of Closing
Date, or declared effective within 180 days of Closing Date, or if the
registration is suspended other than as permitted, in the registration rights
agreement between the Company and Laurus, the Company is obligated to pay Laurus
certain fees and the obligations may be deemed to be in default.
AMENDMENT TO MARCH 2006 FINANCING
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On July 27, 2006, the Company entered into a Letter Agreement (the "Letter
Agreement #1") with Palisades Master Fund LP ("Palisades") pursuant to which
Palisades agreed to waive an Event of Default for the Company's failure to
timely file a registration statement with the SEC in connection with the March
2006 financing with Palisades (the "March 2006 Financing"), and Palisades
further agreed to subordinate its term loan to the Company in the amount of
$4,500,000 to Laurus. Furthermore, Palisades agreed to modify the date by which
the Company had to have the Palisades registration statement effective to
September 27, 2006, and waive an Event of Default for the Company's failure to
timely obtain Shareholder Approval as defined in the Securities Purchase
Agreement entered into in connection with the March 2006 Financing, subject to
the terms of the Registration Rights Agreement dated as of March 31, 2006 by and
between the Company and Palisades. As consideration for the waiver, the Company
agreed to issue Palisades 1,000,000 shares of Preferred Stock having a 7% coupon
which is convertible into Common Stock of the Company at the Set Price per share
(the "Palisades Preferred Stock"). The Palisades Preferred Stock shall pay the
7% coupon semi-annually. Furthermore, at the Company's sole option, it has the
right to redeem the Palisades Preferred Stock at the Set Price at any time on or
before the 5th anniversary of the Palisades Closing Date (as defined below). The
Company also agreed to file a registration statement registering the resale of
the shares issuable upon the conversion of the Palisades Preferred Stock no
later than 210 days after the Palisades Closing Date (as defined below).
Palisades further agreed to file a registration statement registering the resale
of the shares issuable upon the conversion of the Palisades Preferred Stock no
later than 210 days after the Palisades Closing Date (as defined below). The
Company further agreed to enter into a cash collateral lock-box agreement with
Palisades, and also agreed to issue an additional 82,800,000 warrants to
Palisades (the "Additional Warrants") as consideration for the waiver, such that
Palisades would have the right to substitute the Additional Warrants for
Preferred Stock of the Company under similar terms and conditions as any
Preferred Stock that would be issued to Laurus. The effectiveness of the Letter
Agreement #1 was predicated upon the Company agreeing to a financing agreement
with Laurus on or before August 31, 2006. The Palisades Preferred Stock was
issued pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder.
On July 31, 2006 (the "Palisades Closing Date"), the Company entered into a
subsequent Letter Agreement with Palisades (the "Letter Agreement #2") whereby
Palisades and the Company agreed to modify the Letter Agreement #1, such that
Palisades would subordinate its security interest in all of the assets of the
Company and its subsidiaries to Laurus. As consideration for the waiver obtained
by the Company pursuant to Letter Agreement #1 and Letter Agreement #2,
Palisades' agreement to subordinate to Laurus and Palisades agreement to
surrender the 7,500,000 warrants issued in connection with the March 2006
Financing, the Company agreed to issue to Palisades an additional 1,800,000
shares of Preferred Stock of the Company (the "Additional Palisades Preferred
Stock") having a 7% coupon, convertible into Common Stock of the Company at the
Set Price. The Additional Palisades Preferred Stock shall pay the 7% coupon
semi-annually. Furthermore, at the Company's sole option, it has the right to
redeem said Preferred Stock issued to Palisades at the Set Price at any time on
or before the 5th anniversary of the Palisades Closing Date. The effectiveness
of the Letter Agreement #2 was predicated upon the Company agreeing to a
financing agreement with Laurus on or before August 31, 2006. The Additional
Palisades Preferred Stock was issued pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
See Item 1.01
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
See Item 1.01
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
Not applicable
(b) Pro forma financial information.
Not applicable
(c) Shell company transactions.
Not applicable
(d) Index of Exhibits.
Exhibit
Number Description
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3(i).1 Amended and Restated Articles of Incorporation of the Company as filed
with Utah Secretary of State on August 31, 2006.
4.1 Security Agreement dated August 31, 2006 by and among Trinity Learning
Corporation, Laurus Master Fund, Ltd. and Trinity Workplace Learning
Corporation.
4.2 IP Security Agreement dated August 31, 2006 by and between Laurus Master
Fund, Ltd. and Trinity Workplace Learning Corporation.
4.3 Secured Non-Convertible Term Note payable to Laurus Master Fund, Ltd.
4.4 Secured Non-Convertible Revolving Note payable to Laurus Master Fund, Ltd.
4.5 Funds Escrow Agreement dated August 31, 2006 by and among Trinity Learning
Corporation, Laurus Master Fund, Ltd. and Loeb & Loeb LLP.
4.7 Registration Rights Agreement dated August 31, 2006 by and between Trinity
Learning Corporation and Laurus Master Fund, Ltd.
4.8 Stock Pledge Agreement dated August 31, 2006 by and among Laurus Master
Fund, Ltd., Trinity Learning Corporation and Trinity Workplace Learning
Corporation.
4.9 Subordination Agreement dated August 31, 2006 by and among Laurus Master
Fund, Ltd., Palisades Master Fund LP, Trinity Learning Corporation and
Trinity Workplace Learning Corporation.
4.10 Letter Agreement entered into by and between Trinity Learning Corporation
and Palisades Master Fund LP dated July 27, 2006.
4.11 Letter Agreement entered into by and between Trinity Learning Corporation
and Palisades Master Fund LP dated July 31, 2006.
4.12 Lock-up Letter Agreement by and between Trinity Learning Corporation and
Laurus Master Fund, Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Trinity Learning Corporation
September 6, 2006 By: /s/ Patrick R. Quinn
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Name: Patrick R. Quinn
Title: Chief Financial Officer