THIS NOTE, ANY REPLACEMENT NOTES AND ANY SHARES OF COMMON STOCK INTO
WHICH EITHER MAY BE CONVERTED (COLLECTIVELY, THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF
OR OFFERED FOR SALE, IN WHOLE OR IN PART, IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT COVERING THE
SECURITIES, OR AN OPINION OF COUNSEL OF HOLDER THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE
Principal Sum: $550,000
Holder: CARNIVAL CORPORATION
Address: 3655 N.W. 87TH AVENUE, MIAMI, FLORIDA 33178-2428
CONVERTIBLE NOTE
(the "Note")
THE NETWORK CONNECTION, INC.
The Network Connection, Inc., a Georgia corporation (the "Company"), hereby
promises to pay the Principal Sum to the order of Holder, its successors or
permitted assigns, on the date (the "Maturity Date"), which is the first to
occur of (i)one year from the date hereof or (ii) the date on which Holder gives
an Acceleration Declaration (as defined in paragraph 4(b) below). This Note
shall accrue interest on the outstanding principal balance (if any) prior to the
Maturity Date at an annual rate of 8%. This Note shall accrue interest after the
Maturity Date at the rate of 18% per annum (or, if less, the highest rate
permitted by law) ("Default Interest"). Any interest due shall be calculated and
payable quarterly based on the principal balance at the end of the quarter. All
payments shall be made to Holder in immediately available funds at the address
set forth above.
1. CONVERSION RIGHTS.
(a) CONVERSIONS. The outstanding principal balance of this Note is
convertible at the option of Holder at any time and from time to time,
in whole or in part, into shares of common stock of Company ("Common
Stock") at a price per share equal to the Conversion Price (as defined
in the next sentence); provided, however, that Holder may not convert
less than $100,000 of outstanding principal balance in connection with
any conversion. "Conversion Price" shall equal the product of (i) the
average of the closing prices per share of Common Stock as reported by
Nasdaq for each of the five consecutive trading days ending on the day
prior to the Conversion Date (as defined in paragraph 1(b) below) and
(ii) 0.8. The Conversion Price is subject to adjustment from time to
time as set forth in paragraph 2 below.
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(b) MECHANICS. Holder shall effect conversions by delivering to the
Company a notice, together with this Note (collectively, a "Conversion
Notice"). Each Conversion Notice shall specify the amount of the
outstanding principal balance to be converted (which may not be less
than $100,000) and the date on which such conversion is to be
effected, which date may not be prior to the date the Holder delivers
such Conversion Notice (the "Conversion Date"). If no Conversion Date
is specified in a Conversion Notice, the Conversion Date shall be the
date that a Conversion Notice is deemed delivered hereunder. Upon
receipt of a Conversion Notice, the Company shall calculate the
Conversion Price and the number of shares of Common Stock into which
the principal balance to be converted shall convert. If such
calculation results in a fraction of a share, fractional shares less
than one-half shall be disregarded and fractional shares of one-half
or greater shall be rounded up to the next highest whole number of
shares. If the Holder is converting less than the whole of the then
outstanding principal balance, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall deliver to Holder,
together with a certificate for the number of shares of Common Stock
into which the portion of the outstanding principal balance has been
(or could be) converted in connection with such conversion, a new note
identical in all material respects to this Note, except that the
principal amount shall be equal to the principal amount outstanding
immediately prior to the conversion less the amount of the then
outstanding principal balance converted (a "Replacement Note").
(c) ISSUANCE OF CERTIFICATES. Promptly after each Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock being acquired upon
conversion, and (ii) a Replacement Note, if necessary.
2. ADJUSTMENTS.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK AND COMMON STOCK DIVIDEND.
In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares or declare a dividend
upon its Common Stock payable solely in shares of Common Stock, the
Conversion Price in effect immediately prior to such subdivision or
declaration shall be proportionately reduced. Conversely, in case the
outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately
increased.
(b) NOTICE OF ADJUSTMENT. Promptly after adjustment of the Conversion
Price, the Company shall give written notice thereof to the Holder.
The notice shall be signed by an authorized officer of the Company and
shall state the effective date of the adjustment and the Conversion
Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
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<PAGE>
(c) OTHER NOTICES. If at any time (i) the Company shall declare any cash
dividend upon its Common Stock, (ii) the Company shall declare or make
any special dividend or other distribution to the holders of its
Common Stock (other than a dividend payable solely in shares of Common
Stock), (iii) there shall be any reorganization or reclassification of
the Company, consolidation or merger of the Company with another
entity, or a sale of all or substantially all of the Company's assets
to another entity, or (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then, in any
one or more of said cases, the Company shall give to the Holder (A) at
least 10 days prior written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend
or other distribution or for determining rights to vote in respect of
any such dissolution, liquidation or winding-up, (B) at least 10 days
prior written notice of the date on which the books of the Company
shall close or a record shall be taken for determining rights to vote
in respect of any such reorganization, reclassification,
consolidation, merger or sale, and (C) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, at least 10 days prior written
notice of the date when the same shall take place. Any notice given in
accordance with clause (A) above shall also specify, in the case of
any such dividend or distribution, the date on which the holders of
Common Stock shall be entitled thereto. Any notice given in accordance
with clause (C) above shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, as the case may be.
3. PREPAYMENT. The Company may at any time and from time to time prepay the
outstanding principal balance represented by this Note, in whole or in
part; provided, however, that the Company shall not be permitted to make
any such prepayments in increments of less than $50,000. Any such
prepayment shall be by wire transfer of immediately available funds in
accordance with the wire instructions provided by Holder that are attached
hereto as Exhibit "A", together with written notice to Holder advising it
of such prepayment.
4. EVENTS OF DEFAULT AND ACCELERATION.
(a) An "event of default" with respect to this Note shall exist if any of
the following shall occur, if:
(i) The Company shall breach or fail to comply with any material
provision of this Note and such breach or failure to comply shall
continue for ten days after written notice by Holder to the
Company for a monetary default, and 30 days after written notice
by Holder to the Company for a non-monetary default, or the
Company shall breach or fail to comply in any material respect
with the Master Settlement Agreement and Mutual Release or the
Convertible Note Subscription Agreement, each of even date
herewith as set forth therein.
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<PAGE>
(ii) A receiver, liquidator or trustee of the Company or of a
substantial part of its properties shall be appointed by court
order and such order shall remain in effect for more than 60
days; or the Company shall be adjudicated bankrupt or insolvent;
or a substantial part of the property of the Company shall be
sequestered by court order and such order shall remain in effect
for more than 60 days; or a petition to reorganize the Company
under any bankruptcy, reorganization or insolvency law shall be
filed against the Company and shall not be dismissed within 60
days after such filing.
(iii) The Company shall file a petition in voluntary bankruptcy or
request reorganization under any provision of any bankruptcy,
reorganization or insolvency law, or shall consent to the filing
of any petition against it under any such law.
(iv) The Company shall make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts
generally as they become due, or consent to the appointment of a
receiver, trustee or liquidator of the Company, or of all or any
substantial part of its properties.
(b) If an event of default referred to in paragraph 4(a) above shall
occur, the Holder may at any time thereafter, in addition to Holder's
other remedies, by written notice to the Company (an "Acceleration
Declaration"), declare the principal amount of this Note, plus any
accrued interest, Default Interest and any other amounts due hereunder
to be due and payable immediately.
(c) In addition to and without limitation on any other rights of the
Holder under any applicable laws upon and upon any event of default,
the Holder shall have the right to offset and apply any amounts owing
from the Company to Holder under any agreement or obligation between
Company and Holder, or any subsidiaries or affiliates thereof.
5. OTHER OBLIGATIONS. The Company shall at all times reserve for issuance on
conversion of this Note the number of shares of Common Stock which are then
issuable on conversion hereof. The Company covenants and agrees that all
shares of Common Stock that may be issued upon conversion of this Note
will, upon issuance, be duly and validly issued, fully paid and
non-assessable.
6. MISCELLANEOUS.
(a) All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt by the intended recipient
thereof) by delivery in person, by telegram, by facsimile, recognized
overnight courier, e-mail, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows: (i) if to the
Holder, to such address as is set forth in the heading hereof or as
the Holder shall furnish to the Company in accordance with this
paragraph, and (ii) if to the Company, to it at its headquarters
office, or to such other address as the Company shall furnish to the
Holder in accordance with this paragraph.
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<PAGE>
(b) This Note shall be governed and construed in accordance with the laws
of the State of Florida applicable to agreements made and to be
performed entirely within such State. The federal and state courts in
Philadelphia, Pennsylvania and Miami, Florida shall have exclusive
jurisdiction over this instrument and the enforcement hereof.
(c) The Company waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand.
(d) If any provision of this Note shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, but this Note shall be
construed as if such invalid or unenforceable provision had never been
contained herein.
(e) The waiver of any event of default or the failure of the Holder to
exercise any right or remedy to which it may be entitled shall not be
deemed a waiver of any subsequent event of default or of the Holder's
right to exercise that or any other right or remedy to which the
Holder is entitled.
(f) The Holder of this Note shall be entitled to recover its legal and
other costs of collecting on this Note, and such costs shall be deemed
added to the principal amount of this Note.
(g) This Note may be changed, terminated or otherwise modified only in
writing executed by the party against whom such modification is sought
to be enforced.
(h) In addition to restrictions on transfer under federal and state
securities laws, this Note shall not be transferable by either party
to any third party without the prior written consent of the other
party, which may be withheld for any reason whatsoever or no reason at
all
(i) Any notices required hereunder to the Company shall be sent to the
Company's principal business address at:
The Network Connection, Inc.
The Belgravia
1811 Chestnut Street, Suite 110
Philadelphia, PA 19103
Attention: President
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on
the date set forth below.
Dated: September 25, 2000
THE NETWORK CONNECTION, INC.
By: /s/ Robert Pringle
-------------------------------
Name: Robert Pringle
-----------------------------
Title: President
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EXHIBIT A
WIRE INSTRUCTIONS
