Exhibit 2.7
EXHIBIT A
to Securities Purchase Agreement
--------------------------------
Dated: July 21, 2005
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY U.S. STATE OR OTHER
JURISIDICTION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
No. $
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FUTUREMEDIA PLC
CONVERTIBLE DEBENTURE
DUE OCTOBER 31, 2006
THIS DEBENTURE is issued by Futuremedia PLC a Corporation organized under the
laws of England and Wales (the "Company"). This Debenture is designated as the
Company's 2005 Convertible Debenture, due on the date set forth above, in the
aggregate principal amount of ($ ) (the "Debenture").
FOR VALUE RECEIVED, the Company promises to pay to ,
or its registered assigns (the "Holder"), the principal sum of $ ,
on or before the due date, or such earlier date as the Debenture is required to
be repaid as provided hereunder (the "Maturity Date") and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture as provided herein.
Commencing on the Original Issue Date (as defined in Section 5) until
payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts, which may become due hereunder, has been made,
interest shall accrue daily at the annual rate equal to the higher of (a) Wall
Street Journal Prime Rate plus three percent (3%), or 8.5%, adjusted on a
monthly basis, but in no event higher than 10% per annum. Interest shall be
payable monthly in arrears on the last day of each month, in cash, prorated for
any partial month periods. The interest shall be calculated based on a 360 day
year. Interest hereunder will be paid to the Person (as defined in Section 5) in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "Debenture Register").
Commencing on October 1, 2005 and continuing through the Maturity Date,
Company shall make monthly principal payments to Holder in the amount of
$ . (the "Monthly Principal Payments"). The Monthly Principal Payments
shall be due and payable on the last trading day of each calendar month.
Notwithstanding the foregoing, the principal amount of any Debentures which have
been converted into Ordinary Shares shall be credited against the Monthly
Principal Payments. The Monthly Principal Payments shall be made in cash only.
Notwithstanding any other provision in this Debenture, the amount of any Monthly
Principal Payments may be reduced in accordance with the partial mandatory
conversion provisions of Section 4(a)(ii)(B) below.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 5) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on, or
damages in respect of the Debenture, free of any claim of subordination, as and
when the same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise) which is not cured within five
(5) days after the date the payment became due and payable;
(ii) the failure to file a Registration Statement with the
Commission on or before 45 days after the date of this Debenture registering the
resale of the Underlying Shares;
(iii) the failure to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and such
failure or breach shall not have been remedied within 10 Trading Days after the
date on which notice of such failure or breach shall have been given;
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(iv) any of the following which is not dismissed or otherwise cured
within 60 days, the Company shall commence, or there shall be commenced against
the Company a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or there
is commenced against the Company, and any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company suffers any
appointment of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
the Company makes a general assignment for the benefit of creditors; or the
Company shall fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or the Company shall call
a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Company shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company for the
purpose of effecting any of the foregoing;
(v) the Ordinary Shares shall cease to be quoted for trading or
listed for trading on the Nasdaq SmallCap Market ("NASDAQ"), or the National
Association of Securities Dealers OTC Bulletin Board, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a "Subsequent
Market") and shall not again be quoted or listed for trading thereon within five
(5) Trading Days;
(vi) the Company shall fail for any reason to deliver Ordinary
Shares certificates to a Holder no later than the fifth (5th) Trading Day after
a Conversion Date pursuant to and in accordance with Section 4(b) or the Company
shall provide notice to the Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for conversions of the
Debenture in accordance with the terms hereof. If the Company's transfer agent
is not open for business during a Trading Day, such Trading Day shall not be
counted for purposes of determining the number of days for delivery of a
Ordinary Shares certificate;
(vii) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within ten Business Days after
notice is deemed delivered hereunder;
(viii) the Company shall fail for any reason to cause the number of
authorized but unissued shares of its Ordinary Shares to be increased to an
amount sufficient to enable the Company to comply with the reserve requirement
of Section 4(c)(v) within a period of sixty (60) days following its receipt of
any Holder's notice under Section 4(c)(v) that such reserve is not being
satisfied if, at the time of the notice, the number of authorized shares of the
Company's Ordinary Shares is insufficient for this purpose; or
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(ix) the Company shall fail to cause the Commission to deem the
Registration Statement effective within one hundred (100) days after the date on
which it is filed with the Commission or to maintain the effectiveness of the
Registration Statement until the earlier of (a) the date that all of the
Ordinary Shares issued upon conversion of the Debenture have been sold, or (b)
the date that all of the Ordinary Shares issued upon conversion of the Debenture
may be freely traded without registration under the Securities Act, under Rule
144 promulgated under the Securities Act or otherwise (provided that such
failure is not cause by Holder).
(b) During the time that any portion of this Debenture is outstanding, if
any Event of Default pursuant to Section 3(a) occurs and following expiry of any
applicable grace or cure period, then the Conversion Price shall be reduced by
10%. In addition, if an Event of Default under Section 3(a)(ii) or (ix) occurs,
the Company shall pay liquidated damages to Holder equal to $___ for each day
during which such Event of Default remains uncured. Any amounts to be paid as
liquidated damages shall be paid in cash monthly in arrears on or before the
30th day following the end of the month or partial month to which they relate.
The Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder.
(A) This Debenture shall be convertible into Ordinary Shares
at the option of the Holder, in whole or in part at any time and from time to
time, after the Original Issue Date (subject to the limitations on conversion
set forth in Section 4(a)(ii) hereof). The number of Ordinary Shares issuable
upon a conversion hereunder equals the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted by (y) the
Conversion Price (as defined in Section 4(c)(i)).
(B) Reserved.
(C) The Holder shall effect conversions by simultaneously
delivering to the Company a completed notice in the form attached hereto as
Exhibit A (a "Conversion Notice"), including a completed Conversion Schedule in
the form of Schedule I to the Conversion Notice (on each Conversion Date, the
"Conversion Schedule"). The Conversion Schedule shall set forth the remaining
principal amount of this Debenture and all accrued and unpaid interest thereon
subsequent to the conversion at issue. The date on which a Conversion Notice is
delivered is the "Conversion Date." Unless the Holder is converting the entire
principal amount outstanding under this Debenture, the Holder is not required to
physically surrender this Debenture to the Company in order to effect
conversions. Subject to Section 4(b), each Conversion Notice, once given, shall
be irrevocable. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture plus all accrued and unpaid
interest thereon in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule. The Holder and the
Company shall maintain records showing the principal amount converted and the
date of such conversions. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error.
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(ii) Mandatory Conversion.
(A) Full Mandatory Conversion. Upon 20 days prior written
notice from Company to Holder (a "Mandatory Conversion Notice"), provided that
the closing price of the Company's ADS's on the NASDAQ Small Cap Market exceeds
$.65 per share for at least the 20 consecutive trading days immediately
preceding delivery of the Mandatory Conversion Notice and the Registration
Statement is effective, Company may require Holder to convert all or a portion
of the then outstanding Debentures. The Mandatory Conversion Notice shall state
the number of Ordinary Shares outstanding and principal amount to be converted.
Any conversion shall be subject to limitation such that the beneficial ownership
of Holder and its affiliates shall remain in the aggregate below 9.99% of the
total Ordinary Shares outstanding at all times. Notwithstanding the foregoing,
in the event that Holder acquires Ordinary Shares or ADSs through open market
purchases (or in any other transaction other than pursuant to this Debenture or
the transactions contemplated by the Purchase Agreement) and such acquisition of
Ordinary Shares or ADSs (or any portion thereof) precludes or limits the
Debentures which may be converted pursuant to a Mandatory Conversion Notice as a
result of the foregoing 9.99% limitation, then Holder shall sell such Ordinary
Shares or ADSs within 20 days after receipt of such Mandatory Conversion Notice
so as to ensure that there is no delay in the conversion of any portion of the
Debentures as a result thereof.
(B) Partial Mandatory Conversion. Provided that (i) the
Registration Statement is effective, (ii) the average daily dollar trading
volume of the Company's ADSs (as defined in Section 5) for the 22 trading days
preceding the due date for a Monthly Principal Payment is greater than or equal
to $325,000, and (iii) the Ordinary Shares to be issued upon conversion are
saleable pursuant to the Registration Statement, then Company may elect to
reduce such Monthly Principal Payment by converting a portion of the then
outstanding Debentures equal to an amount up to the amount of such Monthly
Principal Payment. The number of Ordinary Shares issuable upon a conversion
hereunder shall equal the quotient obtained by dividing (x) the outstanding
principal amount of this Debenture to be converted (not to exceed the amount of
such Monthly Principal Payment) by (y) 88% of the volume weighted average price
of the Company's ADSs for the ten trading days preceding such payment date.
Partial conversion hereunder shall be subject to limitation such that the
beneficial ownership of Purchaser and its affiliates shall remain below 9.99% of
the total Ordinary Shares outstanding on a converted basis at all times and
shall not be permitted if issuance of the Ordinary Shares would require
shareholder approval. Notwithstanding the foregoing, in the event that Holder
acquires Ordinary Shares or ADSs through open market purchases (or in any other
transaction other than pursuant to this Debenture or the transactions
contemplated by the Purchase Agreement) and such acquisition of Ordinary Shares
or ADSs (or any portion thereof) precludes or limits the Debentures which may be
converted pursuant to this Section 4(a)(ii)(B) as a result of the foregoing
9.99% limitation, then Holder shall sell such Ordinary Shares as soon as
reasonably practicable so as to ensure that there is no delay in the conversion
of any portion of the Debentures as a result thereof.
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(iii) Certain Conversion Restrictions.
(A) A Holder may not convert the Debenture or receive Ordinary
Shares as payment of interest hereunder to the extent such conversion or receipt
of such interest payment would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of
the then issued and outstanding Ordinary Shares, including shares issuable upon
conversion of, and payment of interest on, the Debenture held by such Holder
after application of this Section. Since the Holder will not be obligated to
report to the Company the number of Ordinary Shares it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of Ordinary Shares in excess of 9.999% of the then outstanding Ordinary
Shares without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of the Debenture is
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of the Debenture
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder.
(B) In accordance with the shareholder approval requirements
under the rules of the Nasdaq Stock Market, notwithstanding any other provision
contained in the Debenture, in no event shall the Company be obligated in
connection with the transactions contemplated by the Debenture and/or by the
Purchase Agreement to issue shares representing more than 19.99% of its
outstanding capital stock as of the date hereof (and before giving effect to the
transactions contemplated hereby) without prior approval of its shareholders at
a general meeting called for that purpose.
(b) (i) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 3 herein for the
Company's failure to deliver certificates representing Ordinary Shares upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law. The exercise of any such
rights shall not prohibit the Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.
(ii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder any certificate or certificates
representing Ordinary Shares upon conversion within the period specified herein
no later than the fifth (5th) after the Conversion Date, and if after such fifth
(5th) Trading Day the Holder purchases (in an open market transaction or
otherwise) Ordinary Shares to deliver in satisfaction of a sale by such Holder
of the Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Ordinary Shares so purchased exceeds (y) the product of (1) the
aggregate number of Ordinary Shares that such Holder anticipated receiving from
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the conversion at issue multiplied by (2) the market price of the Ordinary
Shares at the Conversion Date and (B) at the option of the Holder, either
reissue a Debenture in the principal amount equal to the principal amount of the
attempted conversion or deliver to the Holder the number of Ordinary Shares that
would have been issued had the Company timely complied with its delivery
requirements. For example, if the Holder purchases Ordinary Shares having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
[Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder any damages under Section
4(b)(ii) in respect of the certificates resulting in such Buy-In which would
represent a double recovery for harm for which the payments made under this
Section 4(b)(iii) compensated the Holder .
(iii) If the Company's transfer agent is not open for business
during a Trading Day, such Trading Day shall not be counted for purposes of
determining the number of days for delivery of a Ordinary Shares certificate or
similar obligation hereunder.
(c) (i) The "Conversion Price" shall be equal to $0.4858.
(ii) If the Company, at any time while the Debenture is outstanding
shall (a) pay a stock dividend or otherwise make a distribution or distributions
on shares of its Ordinary Shares or any other equity or equity equivalent
securities payable in Ordinary Shares, (b) subdivide outstanding Ordinary Shares
into a larger number of shares, (c) combine (including by way of reverse stock
split) outstanding Ordinary Shares into a smaller number of shares, or (d) issue
by reclassification of shares of the Ordinary Shares any shares of capital stock
of the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of Ordinary Shares (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of Ordinary Shares outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while the Debenture is
outstanding, shall distribute to all holders of Ordinary Shares (and not to the
Holder) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price at which the Debenture shall thereafter be convertible shall be determined
by multiplying the Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value determined as of the record date mentioned above, and of which the
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numerator shall be such Per Share Market Value on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of the
Ordinary Shares as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holder of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Ordinary Shares. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(iv) In case of any reclassification of the Ordinary Shares or any
compulsory share exchange pursuant to which the Ordinary Shares are converted
into other securities, cash or property, the Holder shall have the right
thereafter to convert the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the
Ordinary Shares following such reclassification or share exchange, and the
Holder of the Debenture shall be entitled upon such event to receive such amount
of securities, cash or property as the shares of the Ordinary Shares of the
Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled.
(v) The Company shall maintain a share reserve of not less than 100%
of the Ordinary Shares issuable upon conversion of the Debenture; and within
five (5) Business Days following the receipt by the Company of a Holder's notice
that such minimum number of Underlying Shares is not so reserved, the Company
shall if there are sufficient authorized but unissued shares promptly reserve a
sufficient number of Ordinary Shares to comply with such requirement. If there
are not sufficient authorized but unissued shares, the Company shall use its
commercially reasonable best efforts to call a special shareholders' meeting
within 90 days of such notice to increase the number of authorized Ordinary
Shares.
(vi) All calculations under this Section 4 shall be made to the
nearest ten thousandth. No adjustments in either the Conversion Price shall be
required if such adjustment is less than $0.0001, provided, however, that any
adjustments which by reason of this Section are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(vii) Whenever the Conversion Price is adjusted pursuant to this
Section 4(c), the Company shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(viii) If (A) the Company shall declare a dividend (or any other
distribution) on the Ordinary Shares; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Ordinary Shares; (C) the
Company shall authorize the granting to all holders of the Ordinary Shares
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Ordinary
Shares, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Ordinary Shares is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
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involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debenture, and shall
cause to be mailed to the Holder at its last address as it shall appear upon the
stock books of the Company, at least ten (10) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Ordinary Shares of record to be entitled
to such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Ordinary
Shares of record shall be entitled to exchange their shares of the Ordinary
Shares for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.
(ix) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than one-half (1/2)
of its assets in one or a series of related transactions, a Holder shall have
the right to (A) convert the aggregate principal amount of the Debenture then
outstanding into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Ordinary Shares following
such merger, consolidation or sale, and such Holder shall be entitled upon such
event or series of related events to receive such amount of securities, cash and
property as the Ordinary Shares into which such aggregate principal amount of
the Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (B) in the case of a merger
or consolidation, require the surviving entity to issue to the Holder a
convertible debenture with a principal amount equal to the aggregate principal
amount of the Debenture then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which such newly issued convertible
debenture shall have terms identical (including with respect to conversion) to
the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of the Debenture set forth herein and the agreements
pursuant to which the Debentures were issued. In the case of clause (B), the
conversion price applicable for the newly issued shares of convertible preferred
stock or convertible debentures shall be based upon the amount of securities,
cash and property that each share of Ordinary Shares would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
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(d) Reserved.
(e) Upon a conversion hereunder the Company shall not be required to issue
stock certificates representing fractions of shares of the Ordinary Shares, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Ordinary Shares.
(f) The issuance of certificates for shares of the Ordinary Shares on
conversion of the Debenture shall be made without charge to the Holder thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debenture so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(g) Any notices required or permitted to be given under the terms of this
Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy , and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Futuremedia Plc
Xxxx Xxxxx
Xxxx Xxxxxx
Xxxxxxxx
XX0 0XX
Tel: x00 (0) 0000 000000
Fax: x00 (0) 0000 000000
with a copy to:
Xxxx X. Xxxxx, Esq.
Xxxxx Xxxxxxx / 0 Xxxxxxxx Xxxxxx / Xxxxxx X0X 0XX
Tel: x00-00-0000-0000 (Direct)
Fax: x00-00-0000-0000
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If to a Fund or M.A.G.
M.A.G. Capital, LLC
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
With a copy to
Xxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx
Each party hereto may from time to time change its address or facsimile number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number, in the case of the Funds to
the Company, and in the case of the Company to all of the Funds and M.A.G.
Section 5. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"ADSs" means the Company's American Depositary Shares which trade on the
Nasdaq SmallCap Market under the symbol FMDAY. Each ADS represents the right to
receive one Ordinary Share of the Company. ADSs are evidenced by American
Depositary Receipts ("ADRs"). ADSs evidenced by ADRs are issued by the Bank of
New York as Depositary (the "Depositary") of the Company's ADR facility in
accordance with the terms of a deposit agreement between the Company and the
Depositary.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a legal holiday in the
United Kindgom or a day on which banking institutions in the United States or
United Kingdom are authorized or required by law or other government action to
close.
"Commission" means the Securities and Exchange Commission.
"Ordinary Shares" means the Ordinary Shares, of the Company and stock of
any other class into which such shares may hereafter be changed or reclassified.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Market Price" on any given date shall equal the volume weighted average
price of the Company's Ordinary Shares during the five (5) immediately preceding
trading days (which may include trading days prior to the Original Issue Date),
provided, that such 5 trading day period shall be extended by the number of
trading days during such period on which (i) trading in the Ordinary Shares is
suspended by, or not traded on, the NASDAQ or a subsequent market on which the
Ordinary Shares is then traded, or (ii) after the date the Registration
Statement is declared effective by the SEC, the prospectus included in the
Registration Statement for the underlying shares may not be used by the Holder
for the resale of underlying Ordinary Shares (provided such inability to use the
prospectus is not (a) caused by the Holder or (b) as a result of the Company's
filing of post-effective amendments to the Registration Statement).
"Original Issue Date" shall mean the date of the first issuance of the
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
"Per Share Market Value" means the price per share in the last reported
trade of the ADSs on the NASDAQ or on a Subsequent on which the Ordinary Shares
is then listed.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Purchase Agreement" means that Securities Purchase Agreement, of even
date herewith to which the Company and the original Holder are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Rights Agreement" means the Registration Rights Agreement,
of even date herewith, to which the Company and the original Holder are parties,
as amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Statement" means the registration statement to be filed by
the Company with the SEC pursuant to the Registration Rights Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means a day on which the Ordinary Shares are quoted on the
NASDAQ or quoted or traded on such Subsequent Market on which the Ordinary
Shares are then quoted or listed; provided, that in the event that the Ordinary
Shares are not listed or quoted, then Trading Day shall mean a Business Day.
"Underlying Shares" means the Ordinary Shares issuable upon conversion of
the Debenture or as payment of interest in accordance with the terms hereof.
Section 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Company, which are
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This Debenture
ranks pari passu with all other Debentures previously issued or issued
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concurrently herewith and shall be senior to Debentures issued in the future. As
long as the Debenture is outstanding, the Company shall not and shall cause
their subsidiaries not to, without the consent of the Holder, (i) amend its
articles of association or other charter documents so as to adversely affect any
rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase or
otherwise acquire shares of its Ordinary Shares or other equity securities; or
(iii) enter into any agreement with respect to any of the foregoing.
Section 7. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into Ordinary Shares in accordance
with the terms hereof.
Section 8. If this Debenture is mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section 9. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 10. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 11. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that they shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
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Section 12. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 13. Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of Holder. Holder may
assign this Agreement, in whole or in party, and any rights or obligation
hereunder without the prior written consent of Company by delivery of written
notice to Company of such assignment. Holder will not assign its rights
hereunder except in compliance with federal and state securities laws.
Section 14. Commencing 90 days after the effective date of the
Registration Statement, the Company may at its option, pre-pay all or a portion
of the Debentures at a price equal to 125% of the original principal amount plus
any accrued interest thereon.
Section 15. Commencing on the date hereof and continuing until such time
as the Debentures are no longer outstanding, Holder, on behalf of itself and its
affiliates, hereby covenants and agrees not to, directly or indirectly, offer to
"short sell", contract to "short sell" or otherwise "short sell" the securities
of the Company, including, without limitation, Ordinary Shares that will be
received as a result of the conversion of the Debentures.
IN WITNESS WHEREOF, the Company has caused this 2005 Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
Futuremedia PLC
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into Ordinary
Shares, $0. par value per share (the "Ordinary Shares"), of
. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
------------------------------------
Date to Effect Conversion
------------------------------------
Principal Amount of Debentures to be Converted
$ of Interest Accrued on
Account of Conversion
at Issue
Payment of Interest in Kind |_| Yes
|_| No
If yes, $ of Interest Accrued on
Account of Conversion
at Issue
------------------------------------
Number of Ordinary Shares to be Issued
------------------------------------
Applicable Conversion Price
------------------------------------
Signature
------------------------------------
Name
------------------------------------
------------------------------------
Address
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Schedule 1
CONVERSION SCHEDULE
------------------------------
% Convertible Debenture due , 20 _, in the aggregate
principal amount of $ _ issued by . This
Conversion Schedule reflects conversions made under Section 4(a)(i) of the above
referenced Debenture.
Dated:
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Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Conversion
Original Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
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