FUTUREMEDIA PLC Secured Convertible Note Due April 19, 2009
Exhibit
5
Dated:
April 19, 2006
NEITHER
THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE 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 APPLICABLE STATE
SECURITIES LAWS.
| No. _____ |
$_____
|
Due
April 19, 2009
This
Secured Convertible Note (the “Note”)
is
issued by FUTUREMEDIA
PLC, an
English corporation (the “Obligor”),
to
___________________ (the “Holder”),
pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith.
FOR
VALUE RECEIVED,
the
Obligor hereby promises to pay to the Holder or its successors and assigns
the
principal sum of __________ ($_________) together with accrued but unpaid
interest on or before April 19, 2009 (the “Maturity
Date”)
in
accordance with the following terms:
Interest.
Interest shall accrue on the outstanding principal balance hereof at an annual
rate equal to ten percent (10%) for the period of one (1) year following
the
date hereof. Commencing on April 19, 2007, interest shall accrue on the
outstanding principal balance hereof at an annual rate equal to eight percent
(8%). Commencing on April 19, 2008, interest shall accrue on the outstanding
principal balance hereof at an annual rate equal to seven percent (7%). Interest
shall be calculated on the basis of a 360-day year and the actual number
of days
elapsed, to the extent permitted by applicable law. Interest hereunder will
be
paid to the Holder or its assignee (as defined in Section
4)
in
whose name this Note is registered on the records of the Obligor regarding
registration and transfers of Notes (the “Note
Register”).
The
Obligor shall have the right (but not the obligation) to make monthly interest
payments in cash.
Right
of Redemption.
The
Obligor at its option shall have the right, with three (3) business days
advance
written notice (the “Redemption
Notice”),
to
redeem a portion or all amounts outstanding under this Note prior to the
Maturity Date only if the Closing Bid Price of the Obligor’s ADSs (representing
Ordinary Shares as defined in the Securities Purchase Agreement), as reported
by
Bloomberg, LP, is less than the Fixed Price at the time of the Redemption
Notice
and the Obligor shall pay an amount equal to the principal amount outstanding
and accrued interest being redeemed, plus a redemption premium of twenty
percent
(20%) (“Redemption
Premium”)
of the
amount redeemed (collectively referred to as the “Redemption
Amount”).
The
Obligor shall deliver to the Holder the Redemption Amount on the third
(3rd)
business day after the Redemption Notice.
Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion
of
the outstanding principal amount and accrued interest under this Note the
Holder
shall still be entitled to effectuate Conversions as contemplated hereunder.
Security
Agreements.
This
Note is secured by a Debenture (the “Debenture”)
of
even date herewith between the Obligor and the Holder.
This
Note
is subject to the following additional provisions:
Section
1. This
Note
is exchangeable for an equal aggregate principal amount of Notes 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. 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 other charges
in
respect of this Note, or any other Note issued by the Obligor to the Holder
or
any Note issued to either _________ or ___________, 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), subject
in each case to a cure period of five (5) Trading Days;
(ii) The
Obligor shall fail to observe or perform any other material covenant, agreement
or warranty contained in, or otherwise commit any material breach or default
of
any provision of this Note (except as may be covered by Section
2(a)(i)
hereof)
or any Transaction Document (as defined in Section
4)
which
is not cured with in the time prescribed;
2
(iii) The
Obligor shall commence, or there shall be commenced against the Obligor under
any applicable bankruptcy or insolvency laws as now or hereafter in effect
or
any successor thereto, or the Obligor 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 Obligor or there is commenced against
the
Obligor any such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 61 days; or the Obligor is adjudicated insolvent
or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Obligor suffers any appointment of any custodian,
private or court appointed receiver or the like for it or any substantial
part
of its property which continues undischarged or unstayed for a period of
sixty
one (61) days; or the Obligor makes a general assignment for the benefit
of
creditors; or the Obligor 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
Obligor shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or the Obligor 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 Obligor for the purpose of effecting any of the foregoing;
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which
there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor (but not including
trade debt or any other indebtedness arising in the ordinary course of business)
in an amount exceeding $500,000, whether such indebtedness now exists or
shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable;
(v) The
Company’s ADSs representing Ordinary Shares shall cease to be quoted for trading
or listed for trading on either the Nasdaq OTC Bulletin Board (“OTC”),
Nasdaq-CM, 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 of such delisting;
(vi) [Reserved];
(vii) The
Obligor shall fail to file the Underlying Shares Registration Statement (as
defined in Section
4)
with
the Commission (as defined in Section
4),
or the
Underlying Shares Registration Statement shall not have been declared effective
by the Commission, in each case within the time periods set forth in the
Investor Registration Rights Agreement of even date herewith between the
Obligor
and the Holder;
(viii) If
the
effectiveness of the Underlying Shares Registration Statement lapses for
any
reason for more than five (5) consecutive Trading Days or an aggregate of
15
Trading Days (which need not be consecutive Trading Days) in any 12-month
period;
(ix) The
Obligor shall fail for any reason to deliver Ordinary Shares certificates
to a
Holder on or before the fifth (5th)
Trading
Day after a Conversion Date or the Obligor 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 this Note in accordance with the
terms
hereof;
(x) The
Obligor shall fail for any reason to deliver the payment in cash pursuant
to a
Buy-In (as defined herein) within 10 Trading Days after notice is delivered
hereunder;
3
(b) During
the time that any portion of this Note is outstanding, if any Event of Default
has occurred and has not been cured by the Obligor within ten (10) calendar
days
written after notice from the Holder to the Obligor, the full principal amount
of this Note, together with interest and other amounts owing in respect thereof,
to the date of acceleration shall become at the Holder's election, immediately
due and payable in cash, provided
however,
the
Holder may request (but shall have no obligation to request) payment of such
amounts in Ordinary Shares of the Obligor. If an Event of Default occurs
and
remains uncured, the Fixed Price shall be reduced to $0.20 for so long as
such
Event of Default remains uncured. In addition to any other remedies, the
Holder
shall have the right (but not the obligation) to convert this Note at any
time
after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price
then in-effect. The Holder need not provide and the Obligor 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 Xxxxxx
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. Upon
an
Event of Default, notwithstanding any other provision of this Note or any
Transaction Document, the Holder shall have no obligation to comply with
or
adhere to any limitations, if any, on the conversion of this Note or the
sale of
the Underlying Shares.
Section
3. Conversion.
(a) (i) Conversion
at Option of Holder.
(A) This
Note
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
(as
defined in Section 4) (subject to the limitations on conversion set forth
in
Section
3(a)(ii)
hereof).
The number of Ordinary Shares issuable upon a conversion hereunder equals
the
quotient obtained by dividing (x) the outstanding amount of this Note to
be
converted by (y) the Conversion Price (as defined in Section
3(c)(i)).
The
Obligor shall deliver Ordinary Shares certificates to the Holder on or before
to
the Fifth (5th)
Trading
Day after a Conversion Date.
(B) Notwithstanding
anything to the contrary contained herein, if on any Conversion Date: (1)
the
number of shares of Ordinary Shares at the time authorized, unissued and
unreserved for all purposes, or held as treasury stock, is insufficient to
pay
principal and interest hereunder in Ordinary Shares; (2) the Ordinary Shares
are
not listed or quoted for trading on the Nasdaq-CM or on a Subsequent Market;
(3)
the Obligor has failed to timely satisfy its conversion; or (4) the issuance
of
such Ordinary Shares would result in a violation of Section
3(a)(ii),
then,
at the option of the Holder, the Obligor, in lieu of delivering Ordinary
Shares
pursuant to Section
3(a)(i)(A),
shall
deliver, within five Trading Days of each applicable Conversion Date, an
amount
in cash equal to the product of the outstanding principal amount to be converted
plus any interest due therein divided by the Conversion Price and multiplied
by
the closing price of the stock on the date of the conversion
notice.
(C) The
Holder shall effect conversions by delivering to the Obligor a completed
notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).
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
Note, the Holder is not required to physically surrender this Note to the
Obligor in order to effect conversions. Conversions hereunder shall have
the
effect of lowering the outstanding principal amount of this Note plus all
accrued and unpaid interest thereon in an amount equal to the applicable
conversion. The Holder and the Obligor 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.
4
(ii) Certain
Conversion Restrictions.
(A) A
Holder
may not convert this Note or receive shares of 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 4.9% of the
then
issued and outstanding shares of Ordinary Shares, including shares issuable
upon
conversion of, and payment of interest on, this Note held by such Holder
after
application of this Section. Since the Holder will not be obligated to report
to
the Obligor 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 4.9% of the then outstanding shares
of
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 this Note is
convertible shall be the responsibility and obligation of the Holder. If
the
Holder has delivered a Conversion Notice for a principal amount of this Note
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 Obligor 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
3(a)(i)(A)
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. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
shall be unaffected by any such waiver.
(B) Notwithstanding
the foregoing, in the event that a Holder acquires Ordinary Shares or ADSs
through open market purchases (or in any other transaction other than pursuant
to this Note or the transaction contemplated by the Securities Purchase
Agreement) and such acquisition of Ordinary Shares or ADSs (or any portion
thereof) precludes or limits the portion of this Note which may be converted
pursuant to a conversion as a result of the foregoing 4.9% limitation then
such
Holder shall sell such Ordinary Shares or ADSs within 10 days so as to ensure
that there is no delay in the conversion of any portion of this Note as a
result
thereof.
(b) (i) Nothing
herein shall limit a Holder's right to pursue actual damages or declare an
Event
of Default pursuant to Section
2
herein
for the Obligor '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 or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. 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.
5
(ii) In
addition to any other rights available to the Holder, if the Obligor fails
to
deliver to the Holder such certificate or certificates pursuant to Section
3(a)(i)(A)
on or
before the fifth (5th)
Trading
Day 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 Obligor shall (A) pay in cash to 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 shares of Ordinary Shares that such Holder anticipated receiving from
the
conversion at issue multiplied by (2) the closing price of the Ordinary Shares
on the Conversion Date and (B) at the option of the Holder, either reissue
a
Note 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 Obligor timely complied with its delivery requirements
under Section
3(a)(i)(A).
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 Notes
with respect to which the closing price of the Underlying Shares on the
Conversion Date was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Obligor shall be required to pay the Holder $1,000.
The
Holder shall provide the Obligor written notice indicating the amounts payable
to the Holder in respect of the Buy-In.
(c) (i) The
Holder is entitled, at its option, to convert, and sell on the same day,
at any
time, until payment in full of this Note, all or any part of the principal
amount of the Note, plus accrued and unpaid interest, into the Obligor’s
Ordinary Shares at the price per share equal to the lesser of (a) $0.34
(the “Fixed
Price”)
or
(b) an amount equal to ninety five percent (95%) of the average of the
three (3) lowest volume weighted average prices of the Ordinary Shares, as
quoted by Bloomberg, LP, during the thirty (30) trading days immediately
preceding the Conversion Date (the “Discount
Price”)
which
may be adjusted pursuant to the other terms of this Note. The conversion
prices
referred to in sub-clauses (a) and (b) above are individually referred to
as a “Conversion
Price.”
In
the
event the Holder converts at the Discount Price, the Obligor shall be permitted
to limit the Holder’s conversions to 1/12th of the Subscription Amount (as such
term is defined in the Securities Purchase Agreement of even date herewith)
plus
accrued interest in any thirty (30) day period. In addition, notwithstanding
any
other provision herein, the Holder shall convert a minimum of twenty five
percent (25%) of the Subscription Amount (as such term is defined in the
Securities Purchase Agreement of even date herewith), along with a pro rata
amount of accrued but unpaid interest, (x) before the first anniversary hereof
and (y) after the first anniversary hereof but before the second anniversary
hereof, respectively (such that a minimum of fifty percent (50%) of the
Subscription Amount and a pro rata amount of accrued interest shall be converted
before the second anniversary hereof). Any and all amount of outstanding
principal and accrued but unpaid interest of this Note shall be converted
on or
before the Maturity Date. For the avoidance of doubt, the mandatory conversion
provisions of this Section 3(c)(i) shall be subject to the 4.9% limitation
in Section 3(a)(ii)(A) above.
6
(ii) If
the
Obligor, at any time while this Note is outstanding, shall (a) pay a stock
dividend or otherwise make a distribution or distributions on its Ordinary
Shares or any other equity or equity equivalent securities payable in shares
of
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 the Ordinary Shares any shares of capital stock of the
Obligor, then the Fixed Price shall be multiplied by a fraction of which
the
numerator shall be the number of shares 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
Obligor, at any time while this Note is outstanding, shall issue rights,
options
or warrants to all holders of Ordinary Shares (and not to the Holder) entitling
them to subscribe for or purchase Ordinary Shares at a price per share less
than
the Fixed Price, then the Fixed Price shall be multiplied by a fraction,
of
which the denominator shall be the number of Ordinary Shares (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
(plus the number of additional Ordinary Shares offered for subscription or
purchase), and of which the numerator shall be the number of Ordinary Shares
(excluding treasury shares, if any) outstanding on the date of issuance of
such
rights or warrants, plus the number of shares which the aggregate offering
price
of the total number of shares so offered would purchase at the Fixed Price.
Such
adjustment shall be made whenever such rights or warrants are issued, and
shall
become effective immediately after the record date for the determination
of
stockholders entitled to receive such rights, options or warrants. However,
upon
the expiration of any such right, option or warrant to purchase shares of
the
Ordinary Shares the issuance of which resulted in an adjustment in the Fixed
Price pursuant to this Section, if any such right, option or warrant shall
expire and shall not have been exercised, the Fixed Price shall immediately
upon
such expiration be recomputed and effective immediately upon such expiration
be
increased to the price which it would have been (but reflecting any other
adjustments in the Fixed Price made pursuant to the provisions of this Section
after the issuance of such rights or warrants) had the adjustment of the
Fixed
Price made upon the issuance of such rights, options or warrants been made
on
the basis of offering for subscription or purchase only that number of shares
of
the Ordinary Shares actually purchased upon the exercise of such rights,
options
or warrants actually exercised.
(iv) Reserved.
(v) If
the
Obligor, at any time while this Note 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 Fixed Price at which this Note shall thereafter be
convertible shall be determined by multiplying the Fixed 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 Closing Bid Price determined as of the record date mentioned
above,
and of which the numerator shall be such Closing Bid Price 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.
7
(vi) 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, at its option,
convert the then outstanding principal amount, together with all accrued
but
unpaid interest and any other amounts then owing hereunder in respect of
this
Note 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 this Note shall be
entitled upon such event to receive such amount of securities, cash or property
as the shares of the Ordinary Shares of the Obligor 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 Note could have
been
converted immediately prior to such reclassification or share exchange would
have been entitled. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) Prior
to
the Obligor’s next annual general meeting following the date of this Note (the
“2006 AGM”), the Obligor shall maintain a share reserve of not less than 300% of
the Ordinary Shares issuable upon conversion of this Note determined on the
basis of the Fixed Conversion Price; and within five Business Days following
the
receipt by the Obligor of a Holder's notice that such minimum number of
Underlying Shares is not so reserved, the Obligor shall promptly reserve
a
sufficient number of shares of Ordinary Shares to comply with such requirement.
After the 2006 AGM, the Obligor shall maintain a share reserve of not less
than
500% of the Ordinary Shares issuable upon conversion of this Note in accordance
with this Section 4(c)(vii); provided that the Obligor’s shareholders shall
have approved at the 2006 AGM any and all resolution relating to an increase
in
authorized share capital as shall have been properly submitted for approval
at
such meeting.
(viii) All
calculations under this Section
3
shall be
rounded up to the nearest $0.001 of a share.
(ix) Whenever
the Fixed Price is adjusted pursuant to Section
3
hereof,
the Obligor shall promptly mail to the Holder a notice setting forth the
Fixed
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
8
(x) If
(A)
the Obligor shall declare a dividend (or any other distribution) on the Ordinary
Shares; (B) the Obligor shall declare a special nonrecurring cash dividend
on or
a redemption of the Ordinary Shares; (C) the Obligor 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 Obligor shall be required in connection
with any reclassification of the Ordinary Shares, any consolidation or merger
to
which the Obligor is a party, any sale or transfer of all or substantially
all
of the assets of the Obligor, of any compulsory share exchange whereby the
Ordinary Shares are converted into other securities, cash or property; or
(E)
the Obligor shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Obligor; then, in each case,
the
Obligor shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Note, and shall cause to be mailed to the Holder
at its last address as it shall appear upon the stock books of the Obligor,
at
least ten 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.
(xi) In
case
of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor
in
one or a series of related transactions, a Holder shall have the right to
(A)
convert the aggregate amount of this Note 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 shares of Ordinary
Shares into which such aggregate principal amount of this Note 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 Note with a principal
amount equal to the aggregate principal amount of this Note then held by
such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Note shall have terms identical (including
with respect to conversion) to the terms of this Note, and shall be entitled
to
all of the rights and privileges of the Holder of this Note set forth herein
and
the agreements pursuant to which this Notes were issued. In the case of clause
(B), the conversion price applicable for the newly issued shares of convertible
preferred stock or convertible Notes 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.
9
(d) The
Obligor covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Ordinary Shares solely for the purpose
of
issuance upon conversion of this Note and payment of interest on this Note,
each
as herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder, not less than such number
of
Ordinary Shares as shall (subject to any additional requirements of the Obligor
as to reservation of such shares set forth in this Note) be issuable (taking
into account the adjustments and restrictions of Sections
2(b) and 3(c))
upon
the conversion of the outstanding principal amount of this Note and payment
of
interest hereunder. The Obligor covenants that all Ordinary Shares that shall
be
so issuable shall, upon issue, be duly and validly authorized, issued and
fully
paid, nonassessable and, if the Underlying Shares Registration Statement
has
been declared effective under the Securities Act, registered for public sale
in
accordance with such Underlying Shares Registration Statement.
(e) Upon
a
conversion hereunder the Obligor 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 Closing Bid Price at such time. If the Obligor 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 Ordinary
Shares.
(f) The
issuance of certificates for Ordinary Shares on conversion of this Note 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 Obligor 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 Note so converted and the Obligor 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 Obligor the amount of such tax or
shall
have established to the satisfaction of the Obligor that such tax has been
paid.
(g) Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms hereof must be in writing and will be deemed to have
been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile (provided confirmation of transmission is mechanically
or
electronically generated and kept on file by the sending party); or (iii)
one
(1) trading day after deposit with an internationally recognized overnight
delivery service, in each case properly addressed to the party to receive
the
same. The addresses and facsimile numbers for such communications shall
be:
|
If
to the Obligor, to:
|
|
|
Nile
House, Nile Street
|
|
|
Brighton,
East Sussex BN1 1HW, United Kingdom
|
|
|
Attention: Xxxxxxx
X. Xxxxxx, CEO
|
|
|
Telephone: x00
0000 000000
|
|
|
Facsimile: x00
0000 000000
|
|
|
With
a copy to:
|
Xxxxx
Xxxxxxx
|
|
0
Xxxxxxxx Xxxxxx
|
|
|
London
W1S 2LQ
|
|
|
Attention: Xxxx
X. Xxxxx
|
|
|
Telephone: x00
00 0000 0000
|
|
|
Facsimile:
x00 00 0000 0000
|
10
|
If
to the Holder:
|
|
|
With
a copy to:
|
Xxxxx
Xxxxxxxx Xxxxx, Esq.
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Jersey
City, NJ 07302
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such change.
Written confirmation of receipt (i) given by the recipient of such notice,
consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (iii)
provided by an internationally recognized overnight delivery service, shall
be
rebuttable evidence of personal service, receipt by facsimile or receipt
from an
internationally recognized overnight delivery service in accordance with
clause
(i), (ii) or (iii) above, respectively.
Section
4. Definitions.
For the
purposes hereof, the following terms shall have the meanings indicated in
this
Section. All other defined terms used herein but not otherwise defined shall
have the meanings provided in the Securities Purchase Agreement.
“Acquisition”
means
the Company’s acquisition of the business of Executive Business Channel Limited
as contemplated by the amended share purchase agreement dated January 13,
2006
between the Company and the shareholder of Lexon Inc.
“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 Kingdom or
a day
on which banking institutions are authorized or required by law or other
government action to close in the U.S. or UK.
“Commission”
means
the Securities and Exchange Commission.
“Closing
Bid Price”
means
the price per share in the last reported trade of the Ordinary Shares on
the
Nasdaq-CM or on the exchange which the Ordinary Shares is then listed as
quoted
by Bloomberg, LP.
“Conversion
Date”
shall
mean the date upon which the Holder delivers the Conversion Notice to the
Obligor to effectuate a conversion of this Note into shares of the Obligor’s
Ordinary Shares as outlined herein.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
11
“Original
Issue Date”
shall
mean the date of the first issuance of this Note regardless of the number
of
transfers and regardless of the number of instruments, which may be issued
to
evidence such Note.
“Ordinary
Shares”
means
the Ordinary Shares (as evidenced by American Depositary Shares, as evidenced
by
American Depositary Receipts) of the Obligor and stock of any other class
into
which such shares may hereafter be changed or reclassified.
“Person”
means
a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“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 shares of Ordinary Shares are quoted on the Nasdaq-CM or
quoted
or traded on such Subsequent Market on which the shares of Ordinary Shares
are
then quoted or listed; provided, that in the event that the shares of Ordinary
Shares are not listed or quoted, then Trading Day shall mean a Business
Day.
“Transaction
Documents”
means
the Securities Purchase Agreement or any other agreement delivered in connection
with the Securities Purchase Agreement, including, without limitation, the
Debenture, the Investor Registration Rights Agreement and the Warrant of
even
date herewith.
“Underlying
Shares”
means
the Ordinary Shares issuable upon conversion of this Note or as payment of
interest in accordance with the terms hereof.
“Underlying
Shares Registration Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a “selling stockholder” thereunder.
Section
5. Except
as
expressly provided herein, no provision of this Note shall alter or impair
the
obligations of the Obligor, which are absolute and unconditional, to pay
the
principal of, interest and other charges (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed. This Note
is a
direct obligation of the Obligor. This Note ranks pari passu with all other
Notes now or hereafter issued under the terms set forth herein. As long as
this
Note is outstanding, the Obligor shall not and shall cause their subsidiaries
not to, without the consent of the Holder, (i) amend its certificate of
incorporation, bylaws 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
other
than to the extent permitted or required under the Transaction Documents;
or
(iii) enter into any agreement with respect to any of the foregoing.
Section
6. This
Note
shall not entitle the Holder to any of the rights of a stockholder of the
Obligor, 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 Obligor, unless and to the extent
converted into Ordinary Shares in accordance with the terms hereof.
12
Section
7. If
this
Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Note, or in lieu of or in substitution for a lost, stolen or destroyed Note,
a
new Note for the principal amount of this Note so mutilated, lost, stolen
or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Note, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Obligor.
Section
8. Except
for the Obligor’s existing arrangements with HSBC (as disclosed to the Holder),
no indebtedness of the Obligor is senior to this Note in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution
or
otherwise. Without the Holder’s consent, the Obligor will not and will not
permit any of their subsidiaries to, directly or indirectly, enter into,
create,
incur, assume or suffer to exist any additional indebtedness of any kind,
on or
with respect to any of its property or assets now owned or hereafter acquired
or
any interest therein or any income or profits there from that is senior in
any
respect to the obligations of the Obligor under this Note.
Section
9. This
Note
shall be governed by and construed in accordance with the laws of the State
of
New Jersey, without giving effect to conflicts of laws thereof. Each of the
parties consents to the jurisdiction of the Superior Courts of the State
of New
Jersey sitting in Xxxxxx County, New Jersey and the U.S. District Court for
the District of New Jersey sitting in Newark, New Jersey in connection with
any
dispute arising under this Note and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non conveniens
to the
bringing of any such proceeding in such jurisdictions.
Section
10. If
the
Obligor fails to strictly comply with the terms of this Note, then the Obligor
shall reimburse the Holder promptly for all fees, costs and expenses, including,
without limitation, attorneys’ fees and expenses incurred by the Holder in any
action in connection with this Note, including, without limitation, those
incurred: (i) during any workout, attempted workout, and/or in connection
with
the rendering of legal advice as to the Holder’s rights, remedies and
obligations, (ii) collecting any sums which become due to the Holder, (iii)
defending or prosecuting any proceeding or any counterclaim to any proceeding
or
appeal; or (iv) the protection, preservation or enforcement of any rights
or
remedies of the Holder.
Section
11. Any
waiver by the Holder of a breach of any provision of this Note 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 Note. The failure of the Holder
to
insist upon strict adherence to any term of this Note 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 Note.
Any
waiver must be in writing.
Section
12. If
any
provision of this Note is invalid, illegal or unenforceable, the balance
of this
Note 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 Obligor covenants (to the
extent that it may lawfully do so) that it 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 Obligor from paying all or any portion of the principal of or interest
on
this Note 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 Obligor (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.
13
Section
13. 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
14. THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR
THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
Section
15. Neither
the Holder nor any of its affiliates have had (directly or indirectly) an
open
short position in the ADSs or Ordinary Shares of the Obligor during the period
from November 8, 2005 up to and including the date hereof, and the Holder
agrees
that it shall not, and that it will cause its affiliates not to, directly
or
indirectly, engage in any short sales of or hedging transactions with respect
to
any securities of the Obligor as long as any portion of this Note shall remain
outstanding.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
14
IN
WITNESS WHEREOF,
the
Obligor has caused this Secured Convertible Note to be duly executed by a
duly
authorized officer as of the date set forth above.
|
By:
|
|
|
Name: Xxxxxxx
Xxxxxx
|
|
|
Title: CEO
|
15
EXHIBIT
“A”
NOTICE
OF CONVERSION
(To
be executed by the Holder in order to convert the Note)
|
TO:
|
The
undersigned hereby irrevocably elects to convert
$ of
the
principal amount of the above Note into Shares of Ordinary Shares of Futuremedia
PLC, according to the conditions stated therein, as of the Conversion Date
written below.
|
Conversion
Date:
|
|
|
Applicable
Conversion Price:
|
|
|
Signature:
|
|
|
Name:
|
|
|
Address:
|
|
|
Amount
to be converted:
|
$
|
|
Amount
of Note unconverted:
|
$
|
|
Conversion
Price per share:
|
$
|
|
Number
of shares of Ordinary Shares to be issued:
|
|
|
Please
issue the shares of Ordinary Shares in the following name and to
the
following address:
|
|
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Issue
to:
|
|
|
Authorized
Signature:
|
|
|
Name:
|
|
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Title:
|
|
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Phone
Number:
|
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Broker
DTC Participant Code:
|
|
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Account
Number:
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