Exhibit 10.13
THIS NOTE AND THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
CONVERTIBLE BRIDGE NOTE
Date: September 1, 2004 $400,000.00
FOR VALUE RECEIVED, iMedia International, Inc., a corporation organized
under the laws of Delaware (the "Borrower"), hereby promises to pay to the order
of Micro Capital Fund LTD, a Delaware limited partnership, or its registered
assigns (the "Holder"), the sum of six hundred thousand dollars ($600,000.00) on
December 29, 2004 (the "Scheduled Maturity Date"), and to pay interest at the
rate of fifteen percent (15%) per annum as set forth in Article I below.
The term "Note" and all references thereto, as used throughout this
instrument, shall mean this instrument as originally executed, or if later
amended or supplemented, then as so amended or supplemented, issued in respect
hereof along with the Warrant between Buyer an Holder of even date hereto (the
"Warrant") both issued pursuant to that certain Securities Purchase Agreement,
of even date herewith, between Borrower and Holder thereto (the "Securities
Purchase Agreement"). The Note, the Warrant, the Securities Purchase Agreement
and the Registration Rights Agreement, of even date herewith, between Borrower
and Holder (the "Registration Rights Agreement") are collectively referred to
herein as the "Transaction Documents." All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Securities Purchase Agreement.
ARTICLE I
PAYMENT OF PRINCIPAL AND INTEREST
A. Payment of Interest. Interest shall accrue on the unpaid principal
balance hereof from the Issuance Date for 120 days until the same is paid,
whether at maturity, or upon prepayment, repayment, conversion or otherwise.
Interest shall be calculated based on a 360-day year and shall be payable in
full on the Scheduled Maturity Date. Payment of interest due hereunder shall be
made in via wire transfer to Holder.
B. Payment of Principal. The principal amount hereof shall be due and
payable on the Scheduled Maturity Date. Payment of principal due hereunder on
the Scheduled Maturity Date shall be made via wire transfer to Holder.
C. Prepayment. Except as and to the extent otherwise provided herein,
no amounts of principal or interest due hereunder may be prepaid by Borrower
without the prior written consent of Xxxxxx. Notwithstanding the foregoing
sentence, Borrower may prepay the principal at anytime subsequent to the date
hereof but will in all cases remain obligated to pay the full amount of
interest as if this Note was held to full term, i.e. $20,000.
X. Xxxxxx of Payments. All cash payments of principal and interest shall
be made in, and all references herein to monetary denominations shall refer to,
lawful money of the United States of America. All payments shall be
made at such address as Holder shall have given or shall hereafter give to
Borrower by written notice made in accordance with the provisions of this Note.
If the interest and principal payments due hereunder are not made on the
Scheduled Maturity Date, Holder shall thereafter be entitled to interest on the
amount of such delinquent payments at a per annum rate equal to the lower of
twenty percent (20%) and the highest interest rate permitted by applicable law
until such amount is paid in full.
ARTICLE II
CONVERSION
A. Conversion at the Option of Holder. Subject to the limitations on
conversions contained in Article VIII, Holder may, following ninety (90) days
after Closing Date, at any time and from time to time, convert (an "Optional
Conversion") all or any portion of the unpaid principal amount hereof into a
number of fully paid and non-assessable shares of Common Stock as is equal to
the quotient obtained by dividing (x) the amount of principal being so converted
by (y) the Conversion Price then in effect. Notice of any Optional Conversion
shall be in the form attached hereto as Exhibit A.
B. Mechanics of Conversion. In order to effect an Optional Conversion,
Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to Borrower (Attention: Secretary) and (y) surrender or cause to
be surrendered this Note, duly endorsed, along with a copy of the Notice of
Conversion as soon as practicable thereafter to Borrower. Upon receipt by
Xxxxxxxx of a facsimile copy of a Notice of Conversion from Holder, Borrower
shall promptly send, via facsimile, a confirmation to Holder stating that the
Notice of Conversion has been received, the date upon which Borrower expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at Borrower regarding the conversion.
Borrower shall not be obligated to issue shares of Common Stock upon a
conversion unless this Note is delivered to Borrower as provided above, or
Holder notifies Borrower that this Note has been lost, stolen or destroyed and
delivers the documentation to Borrower required by Article X.B hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the surrender of
this Note accompanied by a Notice of Conversion, Borrower (itself, or through
its transfer agent) shall, no later than the later of (a) the second business
day following the Conversion Date and (b) the business day following the date of
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of indemnity pursuant to Article X.B) (the "Delivery Period"), issue
and deliver (i.e., deposit with a nationally recognized overnight courier
service postage prepaid) to Holder or its nominee (x) that number of shares of
Common Stock issuable upon conversion of that portion of this Note being
converted and (y) a new Note representing the principal balance of this Note not
being converted, if any. Notwithstanding the foregoing, if Xxxxxxxx's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend (pursuant to the terms of the Securities Purchase Agreement) and
Holder thereof is not then required to return such certificate for the placement
of a legend thereon (pursuant to the terms of the Securities Purchase
Agreement), Borrower shall cause its transfer agent to promptly electronically
transmit the Common Stock issuable upon conversion to Holder by crediting the
account of Holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC
Transfer are not satisfied, Borrower shall deliver as provided above to Holder
physical certificates representing the Common Stock issuable upon conversion.
Further, Holder may instruct Borrower to deliver to Holder physical certificates
representing the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.
(ii) Taxes. Borrower shall pay any and all taxes that may be imposed
upon it with respect to the issuance and delivery of the shares of Common Stock
upon the conversion of this Note.
(iii) No Fractional Shares. If any conversion of this Note would
result in the issuance of a fractional share of Common Stock (aggregating the
entire amount of principal being converted pursuant to a given Notice of
Conversion), such fractional share shall be payable in cash based upon the
Closing Sales Price of the Common Stock at such time, and the number of shares
of Common Stock issuable upon conversion of this Note shall be the next lower
whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with respect to
a conversion, Borrower shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with subparagraph (i) above. If such
dispute involves the calculation of the Conversion Price or Forced Conversion
Price, and such dispute is not promptly resolved by discussion between Xxxxxx
and Borrower, Borrower shall submit the disputed calculations to an independent
outside accountant (which accountant shall be subject to the reasonable approval
of Holder) via facsimile within three business days of receipt of the Notice of
Conversion. The accountant shall promptly audit the calculations and notify
Borrower and Holder of the results no later than three business days from the
date it receives the disputed calculations. The accountant's calculation shall
be deemed conclusive, absent manifest error, and the party whose proposed
calculation is further from the calculation determined by the accountant shall
bear all of the accountant's expenses. Borrower shall then issue the appropriate
number of shares of Common Stock in accordance with subparagraph (i) above.
(v) Payment of Accrued Amounts. Upon conversion of any unpaid
principal amount of this Note, all accrued interest on such amount through and
including the Conversion Date shall be paid on the Conversion Date in accordance
with Article I.A above.
C. Forced Conversion into Common Stock. Subject to the limitations on
conversion contained in Article VIII, if on the Scheduled Maturity Date all of
the Required Conditions are satisfied, then, at the option of Borrower
exercisable by the delivery of written notice to Xxxxxx, delivered at least
seven (7) days prior to the Scheduled Conversion Date, convert all, but not less
than all, of the Note originally issued by Borrower into a number of fully paid
and non-assessable shares of Common Stock equal to the quotient obtained by
dividing (x) the amount of principal being so converted by (y) the Forced
Conversion Price then in effect (a "Forced Conversion"). Thereafter, Borrower
and Holder shall follow the applicable conversion procedures set forth in
Article II.B; provided, however, Holder shall not be required to deliver a
Notice of Conversion to Borrower in order for Borrower to effect a Forced
Conversion. In the event that Borrower is prohibited from issuing shares of
Common Stock upon a Forced Conversion pursuant to this Article II.C as a result
of the operation of the limitations set forth in Article VIII, Borrower shall
pay to each Holder an amount of cash equal to the Closing Sales Price of the
Common Stock on the Conversion Date multiplied by the number of shares of Common
Stock that Borrower is prohibited from issuing to such Holder as a result of the
operation of the limitations set forth in Article VIII.
ARTICLE III
RESERVATION OF SHARES OF COMMON STOCK
Reserved Amount. On or prior to the Issuance Date, Borrower shall reserve a
minimum of 2,778,000 shares of its authorized but unissued shares of Common
Stock for issuance upon conversion of the Note pursuant to Article II, and,
thereafter, the number of authorized but unissued shares of Common Stock so
reserved (the "Reserved Amount") shall at all times be sufficient to provide for
the full conversion of the Note at the then current Conversion Price thereof
(without giving effect to the limitations contained in Article VIII).
ARTICLE IV
FAILURE TO SATISFY CONVERSIONS
Conversion Defaults. If, at any time, (i) Holder submits a Notice of Conversion
and Borrower fails for any reason to deliver, on or prior to the fifth business
day following the expiration of the Delivery Period for such conversion, such
number of shares of Common Stock to which Holder is entitled upon such
conversion, or (ii) Borrower provides written notice to Holder (or makes a
public announcement via press release) at any time of its intention not to issue
shares of Common Stock upon exercise by Holder of their conversion rights in
accordance with the terms of the Note (each of (i) and (ii) being a "Conversion
Default"), then Holder may elect, at any time and from time to time prior to the
Default Cure Date for such Conversion Default, by delivery of a Default Notice
to Borrower, to have all or any portion of the unpaid principal amount hereof
and accrued interest thereto prepaid by Borrower in cash, for an amount per
share equal to the Default Amount (as defined in Article V.B). If Borrower fails
to prepay any portion of this Note as required hereby within five business days
after its receipt of such Default Notice, then Holder shall be entitled to the
remedies provided in Article V.C.
ARTICLE V
EVENTS OF DEFAULT
A. Events of Default. In the event (each of the events described in
clauses (i)-(xii) below after expiration of the applicable cure period (if
any) being an "Event of Default"):
(i) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of this Note) is suspended from trading on any of, or
is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market the OTC Bulletin Board or in the Pink Sheets for an
aggregate of five (5) or more trading days during the term hereof;
(ii) the registration statement, if so required to be filed by
Borrower pursuant to the Registration Rights Agreement. has not been declared
effective by the Registration Deadline (as defined in the Registration Rights
Agreement) or such registration statement, after being declared effective,
cannot be utilized by Holders for the resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement);
(iii) Borrower fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to Holder upon conversion of
this Note or the Warrants as and when required by the terms hereof and of the
Securities Purchase Agreement or the Registration Rights Agreement (a "Legend
Removal Failure"), and any such failure continues uncured for ten business days
after Borrower has been notified thereof in writing by Holder;
(iv) Borrower provides written notice (or otherwise indicates) to
Holder, or states by way of public announcement distributed via a press release,
at any time, of its intention not to issue, or otherwise refuses to issue,
shares of Common Stock to Holder upon conversion in accordance with the terms of
this Note or the Warrants (other than because such issuance would exceed
Xxxxxx's allocated portion of the Reserved Amount, for which failures
Holder shall have the remedies set forth in Article III);
(v) Borrower or any subsidiary of Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business, or such a receiver or trustee shall otherwise be appointed;
(vi) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against Borrower or any subsidiary of Borrower and if instituted against
Borrower or any subsidiary of Borrower by a third party, shall not be dismissed
within 60 days of their initiation;
(vii) Borrower shall be in default or cause an event of default, or
any event which might become such with notice or the passage of time or both, or
any similar event, with respect to any of the Holder's affiliates or Notes
entered into between Borrower and any of the Purchasers;
(viii) Borrower shall:
(a) sell, convey or dispose of all or substantially all of its
assets (the presentation of any such transaction for stockholder approval being
conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of Borrower), unless Holder has approved such
transaction pursuant to Article VII.B below;
(b) merge or consolidate with or into any person or entity,
which results in either (i) Holder of the voting securities of Borrower
immediately prior to such transaction holding or having the right to direct the
voting of fifty percent (50%) or less of the total outstanding voting securities
of Borrower or such other surviving or acquiring person or entity immediately
following such transaction or (ii) the members of the board of directors or
other governing body of Borrower comprising fifty percent (50%) or less of the
members of the board of directors or other governing body of Borrower or such
other surviving or acquiring person or entity immediately following such
transaction, unless Holder has approved such transaction pursuant to Article
VII.B below;
(c) either (i) fail to pay, when due, or within any applicable
grace period, any payment with respect to any indebtedness of Borrower in excess
of $250,000 due to any third party, other than payments contested by Borrower in
good faith, or otherwise be in breach or violation of any agreement for monies
owed or owing in an amount in excess of $250,000 which breach or violation
permits the other party thereto to declare a default or otherwise accelerate
amounts due thereunder, or (ii) suffer to exist any other default or event of
default under any agreement binding Borrower which default or event of default
would or is likely to have a material adverse effect on the business,
operations, properties, prospects or financial condition of Borrower;
(d) have thirty-five percent (35%) or more of the voting power
of its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended); or
(ix) Borrower otherwise shall breach any material term hereunder or
under the other Transaction Documents, including, without limitation, the
representations and warranties contained therein (i.e., in the event of a
material breach as of the date such representation and warranty was made) and if
such breach is curable, shall fail to cure such breach within ten business
days after Xxxxxxxx has been notified thereof in writing by Xxxxxx;
then, upon the occurrence of any such Event of Default, at the option of Holder,
exercisable in whole or in part at any time and from time to time by delivery of
a written notice to such effect (a "Default Notice") to Borrower while such
Event of Default continues, Borrower shall prepay, in satisfaction of its
obligation to pay the outstanding principal amount of this Note and accrued and
unpaid interest thereon, an amount equal to the Default Amount (as defined in
Section V.B below); provided, however, that (a) in the case of an Event of
Default described in clauses (iv) and (v) of this Article V.A, Xxxxxxxx's
prepayment obligation hereunder shall be automatic and shall not require the
delivery of a Default Notice by Xxxxxx and (b) in the case of an Event of
Default resulting from a Legend Removal Failure, Xxxxxxxx's prepayment
obligation hereunder shall only apply to that portion of the Note affected by
such Legend Removal Failure. Such Default Amount, together with all other
ancillary amounts payable hereunder, shall immediately become due and payable,
all without demand, presentment or notice, all of which are hereby expressly
waived, together with all costs, including, without limitation, legal fees and
expenses of collection, and Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. For the avoidance of doubt,
the occurrence of any event described in clauses (i), (iv), (v), (vi), (vii) and
(viii) above shall immediately constitute an Event of Default and there shall be
no cure period. Upon Xxxxxxxx's receipt of any Default Notice hereunder,
Xxxxxxxx shall immediately (and in any event within one business day following
such receipt) deliver a written notice (a "Default Announcement") to Holder
stating the date upon which Borrower received such Default Notice and the amount
of the Note covered thereby. Following the delivery of a Default Announcement
hereunder, at any time and from time to time, Xxxxxx may request (either orally
or in writing) information from Borrower with respect to the instant default and
Borrower shall furnish (either orally or in writing) as soon as practicable such
requested information to Holder.
B. Definition of Default Amount. The "Default Amount" with respect to
this Note means an amount equal to the greater of:
(i) V
----- x M
C P
and (ii) V x R
where:
"V" means the aggregate principal amount outstanding of the Note
plus all accrued and unpaid interest thereon through the date of payment of the
Default Amount hereunder;
"CP" means the Conversion Price in effect on the date on which
Borrower receives the Default Notice;
"M" means (i) with respect to all Events of Default other than
Events of Default described in subparagraph (a) or (b) of Article V.A(viii)
hereof, the highest Closing Sales Price of Borrower's Common Stock during the
period beginning on the date on which Borrower receives the Default Notice and
ending on the date immediately preceding the date of payment of the Default
Amount hereunder, and (ii) with respect to an Event of Default described in
subparagraph (a) or (b) of Article V.A(viii) hereof, the greater of (a) the
amount determined pursuant to clause (i) of this definition or (b) the fair
market value, as of the date on which Borrower receives the Default Notice, of
the consideration payable to Holder of a share of Common Stock pursuant to the
transaction which triggers the Event of Default. For purposes of this
definition, "fair market value" shall be determined by the mutual agreement of
Borrower and the Holder, or if such agreement cannot be reached within five
business days prior to the date of the Event of Default, by an investment
banking firm selected by Xxxxxxxx and reasonably acceptable to the Holder, with
the costs of such appraisal to be borne by Borrower; and
"R" means 115%.
C. Failure to Pay Default Amounts. If Xxxxxxxx fails to pay Holder the
Default Amount with respect to the Note within five (5) business days after its
receipt of a Default Notice (the "Prepayment Date"), then Holder shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty percent (20%) and the highest interest rate permitted by
applicable law from the date on which Borrower receives the Default Notice until
the date of payment of the Default Amount hereunder. In the event Borrower is
unable to prepay all of the outstanding Note required to be prepaid hereunder,
Borrower shall prepay the outstanding Note from each Holder pro rata, based on
the total amounts due on the Note at the time of prepayment and required on
Prepayment Date relative to the total amounts due under the Note on the
Prepayment Date.
ARTICLE VI
ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price and Forced Conversion Price shall be subject to
adjustment from time to time as follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price and Forced Conversion Price and Forced Conversion
Price shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a reverse stock split, combination,
reclassification or other similar event, the Conversion Price and Forced
Conversion Price shall be proportionately increased. In such event, Borrower
shall notify Xxxxxxxx's transfer agent of such change on or before the effective
date thereof.
X. Xxxxxx, Consolidation, Etc. If, at any time after the Issuance Date,
there shall be (i) any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger of Borrower with any other entity
(other than a merger in which Borrower is the surviving or continuing entity and
its capital stock is unchanged), (iii) any sale or transfer of all or
substantially all of the assets of Borrower or (iv) any share exchange or other
transaction pursuant to which all of the outstanding shares of Common Stock are
converted into other securities or property (each of (i) - (iv) above being a
"Corporate Change"), then Holder shall thereafter have the right to receive upon
conversion, in lieu of the shares of Common Stock otherwise issuable, such
shares of stock, securities and/or other property as would have been issued or
payable in such Corporate Change with respect to or in exchange for the number
of shares of Common Stock which would have been issuable upon conversion had
such Corporate Change not taken place (without giving effect to the limitations
contained in Article VIII), and in any such case, appropriate provisions (in
form and substance reasonably satisfactory to the Holder) shall be made with
respect to the rights and interests of Holder hereunder to the end that the
economic value of this Note is in no way diminished by such Corporate Change and
that the provisions hereof (including, without
limitation, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is not Borrower, an immediate adjustment
of the Conversion Price and Forced Conversion Price so that the Conversion Price
and Forced Conversion Price immediately after the Corporate Change reflects the
same relative value as compared to the value of the surviving entity's common
stock that existed between the Conversion Price and Forced Conversion Price and
the value of Borrower's Common Stock immediately prior to such Corporate Change)
shall thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the conversion
thereof. Borrower shall not effect any Corporate Change unless (i) each Holder
has received written notice of such transaction at least 45 days prior thereto,
but in no event later than 15 days prior to the record date for the
determination of stockholders entitled to vote with respect thereto, and (ii)
the resulting successor or acquiring entity (if not Borrower) assumes by written
instrument (in form and substance reasonable satisfactory to Holder) the
obligations under this Note (including, without limitation, the obligation to
make interest payments accrued but unpaid through the date of such
consolidation, merger or sale and accruing thereafter). The above provisions
shall apply regardless of whether or not there would have been a sufficient
number of shares of Common Stock authorized and available for issuance upon
conversion of this Note as of the date of such transaction, and shall similarly
apply to successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
C. Distributions. If, at any time after the Issuance Date, Borrower shall
declare or make any distribution of its assets (or rights to acquire its assets)
to the holders of Common Stock as a partial liquidating dividend, by way of
return of capital or otherwise (including any dividend or distribution to
Borrower's stockholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then
Holder shall be entitled, upon any conversion of this Note after the date of
record for determining the stockholders entitled to such Distribution (or if no
such record is taken, the date on which such Distribution is declared or made),
to receive the amount of such assets which would have been payable to Holder
with respect to the shares of Common Stock issuable upon such conversion
(without giving effect to the limitations contained in Article VIII) had Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution (or if no such
record is taken, the date on which such Distribution is declared or made).
D. Convertible Securities and Purchase Rights. If, at any time after the
Issuance Date, Borrower issues any securities or other instruments which are
convertible into or exercisable or exchangeable for Common Stock ("Convertible
Securities") or options, warrants or other rights to purchase or subscribe for
Common Stock or Convertible Securities ("Purchase Rights") pro rata to the
record holders of the Common Stock, whether or not such Convertible Securities
or Purchase Rights are immediately convertible, exercisable or exchangeable,
then Holder shall be entitled, upon any conversion of this Note after the date
of record for determining stockholders entitled to receive such Convertible
Securities or Purchase Rights (or if no such record is taken, the date on which
such Convertible Securities or Purchase Rights are issued), to receive the
aggregate number of Convertible Securities or Purchase Rights which Holder would
have received with respect to the shares of Common Stock issuable upon such
conversion (without giving effect to the limitations contained in Article VIII)
had Holder been the holder of such shares of Common Stock on the record date for
the determination of stockholders entitled to receive such Convertible
Securities or Purchase Rights (or if no such record is taken, the date on which
such Convertible Securities or Purchase Rights were issued). If the right to
exercise or convert any such Convertible Securities or Purchase Rights would
expire in
accordance with their terms prior to the conversion of this Note, then the terms
of such Convertible Securities or Purchase Rights shall provide that such
exercise or convertibility right shall remain in effect until thirty (30) days
after the date Holder receives such Convertible Securities or Purchase Rights
pursuant to the conversion hereof.
E. Dilutive Issuances.
(i) Adjustment Upon Dilutive Issuance. So long as this Note is
outstanding, if the Borrower shall issue any Common Stock, prior to the complete
conversion of this Note for a consideration less than the Conversion Price that
would be in effect at the time of such issue, then, and thereafter successively
upon each such issue, the Conversion Price and Forced Conversion Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Conversion Price and Forced Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option. The
reduction of the Conversion Price and Forced Conversion Price described in this
paragraph is in addition to the other rights of the Holder described in the
Subscription Agreement.
(ii) Limitation on Adjustments for Dilutive Issuances.
Notwithstanding the foregoing or any other provision of this Note to the
contrary, in no event shall the Conversion Price and Forced Conversion Price be
adjusted as a result of a Dilutive Issuance to the extent (but only to the
extent) that such adjustment would result in this Note, (together with any
portions of the Note that have already been converted into Common Stock) being
convertible into and exercisable for more than an aggregate of 9.9% of the
then-outstanding shares of Common Stock.
F. Exceptions to Adjustment of Conversion Price. Notwithstanding the
foregoing, no adjustment to the Conversion Price and Forced Conversion Price
shall be made upon (i) the issuance of Common Stock upon the exercise or
conversion of any Convertible Securities or purchase rights outstanding on the
Issuance Date and disclosed in the Disclosure Schedule to the Securities
Purchase Agreement in accordance with the terms of such Convertible Securities
and purchase rights as of such date; (ii) the grant of options to purchase
Common Stock, with exercise prices not less than the market price of the Common
Stock on the date of grant, or the grant of restricted shares of Common Stock,
in each case which are issued to employees, officers, directors or consultants
of Borrower for the primary purpose of soliciting or retaining their employment
or service pursuant to an equity compensation plan approved by Borrower's Board
of Directors, and the issuance of shares of Common Stock upon the exercise
thereof; (iii) the issuance of securities pursuant to a bona fide underwritten
public offering; or (iv) the issuance of shares of Common Stock upon conversion
of the Note; or (v) the issuance of securities in a bona fide business
acquisition.
G. Other Action Affecting Conversion Price. If, at any time after the
Issuance Date, Borrower takes any action affecting the Common Stock that would
be covered by Article VI.A through E, but for the manner in which such action is
taken or structured, which would in any way diminish the value of the Note, then
the Conversion Price and Forced Conversion Price shall be adjusted in such
manner as the Board of Directors of Borrower shall in good faith determine to be
equitable under the circumstances.
H. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price and Forced Conversion Price pursuant to
this Article VI amounting to a more than one percent (1%) change in such
Conversion Price and Forced Conversion Price, or any change in the number or
type of stock, securities and/or other property issuable upon conversion of the
Note, Borrower, at its expense, shall promptly compute such adjustment or
readjustment or change and prepare and furnish to Holder a certificate setting
forth such adjustment or readjustment or change and showing in detail the facts
upon which such adjustment or readjustment or change is based. Borrower shall,
upon the written request at any time of Holder, furnish to Holder a like
certificate setting forth (i) such adjustment or readjustment or change, (ii)
the Conversion Price and Forced Conversion Price at the time in effect and (iii)
the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the Note.
ARTICLE VII
CONSENT RIGHTS; NOTICE OF CERTAIN ACTIONS
A. Consent Rights. So long as the Note is outstanding, Borrower shall
not take any of the following corporate actions (whether by merger,
consolidation or otherwise) without first obtaining the approval (by vote or
written consent) of Holder, which consent shall not be unreasonably withheld:
(i) alter or change the rights, preferences or privileges of the
Note;
(ii) issue any additional notes, other than bank notes, operating
leases and similar instruments issued in the ordinary course of business;
(iii) redeem, repurchase or otherwise acquire, or declare or pay any
cash dividend or distribution on, any securities of Borrower, except pursuant to
any equity compensation plan approved by Borrower's Board of Directors;
(iv) issue any debt securities or incur any indebtedness that would
have priority over the Note upon liquidation of Borrower, or redeem, repurchase,
prepay or otherwise acquire any outstanding debt securities or indebtedness of
Borrower, except as expressly required by the terms of such securities or
indebtedness, and except for operating leases and bank notes executed in the
ordinary course of business;
(v) enter into any agreement, commitment, understanding or other
arrangement to take any of the foregoing actions; or
(vi) cause or authorize any subsidiary of Borrower to engage in
any of the foregoing actions.
B. Approval of Certain Transactions. In the event that Borrower desires to
enter into any transaction that would result in (i) the sale, conveyance or
disposition of all or substantially all of its assets (the presentation of any
such transaction for stockholder approval being conclusive evidence that such
transaction involves the sale of all or substantially all of the assets of
Borrower), or (ii) the merger or consolidation of Borrower with or into any
person or entity, which results in either (a) holders of the voting securities
of Borrower immediately prior to such transaction holding or having the right to
direct the voting of fifty percent (50%) or less of the total outstanding voting
securities of Borrower or such other surviving or acquiring person or entity
immediately following such transaction or (b) the members of the board of
directors or other governing body of Borrower comprising fifty percent (50%) or
less of the members of the board of directors or other governing body of
Borrower or such other surviving or acquiring person or entity immediately
following such transaction, then Borrower shall be permitted to seek the
approval of Holder for such transaction in advance of its entering into such
transaction, and if Holder so approves the transaction and Borrower enters into
and consummates such transaction within thirty (30) days following such approval
on terms no less favorable to Borrower than those presented to Holder for
purposes of obtaining such approval, then such transaction shall not constitute
an Event of Default under Section V.A(ix).
C. Notice Rights. In addition to the foregoing consent rights, Borrower
shall provide Holder with prior notification of any meeting of the stockholders
(and copies of proxy materials and other information sent to stockholders). If
Borrower takes a record of its stockholders for the purpose of determining
stockholders entitled to (i) receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or
(ii) to vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of Borrower, or any proposed merger,
consolidation, liquidation, dissolution or winding up of Borrower, Borrower
shall mail a notice to Holder, at least 15 days prior to the record date
specified therein (or 30 days prior to the consummation of the transaction or
event, whichever is earlier, but in no event earlier than public announcement of
such proposed transaction), of the date on which any such record is to be taken
for the purpose of such vote, dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such vote, dividend,
distribution, right or other event to the extent known at such time.
ARTICLE VIII
LIMITATIONS ON CERTAIN CONVERSIONS, REDEMPTIONS AND TRANSFERS
In no event shall Borrower issue Common Stock to Holder in connection with
the repayment of this Note pursuant to Article I.B or Forced Conversion of this
Note pursuant to Article II.C, and in no event shall Holder have the right to
effect an Optional Conversion of this Note into shares of Common Stock or to
dispose of this Note to the extent that such repayment, conversion or right to
effect such conversion or disposition would result in Holder and its affiliates
together beneficially owning more than 9.9% of the outstanding shares of Common
Stock. For purposes of this Article VIII, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder. The restriction contained in
this Article VIII may not be altered, amended, deleted or changed in any manner
whatsoever unless Holder of a majority of the outstanding shares of Common Stock
and Holder shall approve, in writing, such alteration, amendment, deletion or
change. In the event that Borrower is prohibited from issuing shares of Common
Stock in connection with the repayment of this Note pursuant to Article I.B as a
result of the operation of this Article VIII, Borrower shall make such repayment
in cash. In the event that Borrower is prohibited from issuing shares of Common
Stock upon a Forced Conversion pursuant to Article II.C as a result of the
operation of this Article VIII, Borrower shall pay to Holder an amount of cash
equal to the Closing Sales Price of the Common Stock on the Conversion Date
multiplied by the number of shares of Common Stock that Borrower is prohibited
from issuing as a result of the operation of this Article VIII.
ARTICLE IX
SUBORDINATION
Xxxxxxxx's obligation for payment of this Note is subordinated to all
indebtedness as set forth on the Indebtedness Schedule attached hereto as
Exhibit B as of the execution of this Note.
ARTICLE X
CERTAIN DEFINITIONS
For purposes of this Note, in addition to the other terms defined herein,
the following terms shall have the following meanings:
A. "business day" means any day, other than a Saturday or Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law, regulation or executive order to close.
B. "Closing Sales Price" means, for any security as of any date, the last
sales price of such security on the principal trading market where such security
is listed or traded as reported by Bloomberg Financial Markets (or a comparable
reporting service of national reputation selected by Borrower and reasonably
acceptable to the Holder if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (in any case, "Bloomberg"), or if the
foregoing does not apply, the last reported sales price of such security on a
national exchange or in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no such price is
reported for such security by Bloomberg, the average of the bid prices of all
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc., in each case for such date or, if such date was not a
trading day for such security, on the next preceding date which was a trading
day. If the Closing Sales Price cannot be calculated for such security as of
either of such dates on any of the foregoing bases, the Closing Sales Price of
such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by Borrower and reasonably
acceptable to the Holder, with the costs of such appraisal to be borne by
Borrower.
C. "Common Stock" means the common stock of Borrower, no par value per
share.
D. "Conversion Price" means sixty cents ($0.60), and shall be subject to
adjustment as provided herein or in the Securities Purchase Agreement.
E. "Default Cure Date" means, as applicable, (i) with respect to a
Conversion Default described in clause (i) of Article IV.A, the date Borrower
effects the conversion of the full amount of this Note being converted, (ii)
with respect to a Conversion Default described in clause (ii) of Article IV.A,
the date Borrower issues freely tradable shares of Common Stock in satisfaction
of the conversion of the full amount of this Note being converted in accordance
with Article II, or (iii) with respect to either type of a Conversion Default,
the date on which Borrower prepay this Note pursuant to Article IV.A.
F. "Issuance Date" means the date of the closing under the Securities
Purchase Agreement, pursuant to which Borrower issued, and such purchasers
purchased, the Note.
G. "Forced Conversion Price" means twenty cents ($0.20), and shall be
subject to adjustment as provided herein or in the Securities Purchase
Agreement.
H. "Required Conditions" means all of the following: (i) the registration
statement, if required to be filed by Borrower pursuant to the Registration
Rights Agreement shall have been filed with the Securities and Exchange
Commission; (ii) the Closing Sales Price of the Common Stock is greater than
twenty five cents ($0.25) per share (subject to price adjustments, if any, as
provided herein) for ten (10) consecutive trading days; (iii) all shares of
Common Stock issuable upon conversion of the Note
and Warrants are then (a) authorized and reserved for issuance and (b) listed or
traded on any of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, the Nasdaq SmallCap Market, the OTC Bulletin Board or in
the Pink Sheets (or the successor to any of them); (iv) no Event of Default (as
defined in Article V.A) shall have occurred without having been cured; and (v)
all amounts, if any, then accrued or payable under the Note (including, without
limitation, all interest) or the Registration Rights Agreement shall have been
paid.
I. "trading day" means any day on which the principal United States
securities exchange or trading market where the Common Stock is then listed or
traded, is open for trading.
ARTICLE XI
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of
any Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. Lost or Stolen Note. Upon receipt by Xxxxxxxx of (i) evidence of the
loss, theft, destruction or mutilation of any Note and (ii) (y) in the case of
loss, theft or destruction, of indemnity (without any bond or other security)
reasonably satisfactory to Borrower, or (z) in the case of mutilation, the Note
(surrendered for cancellation), Borrower shall execute and deliver a new Note of
like tenor and date. However, Xxxxxxxx shall not be obligated to reissue such
lost, stolen, destroyed or mutilated Note if Holder contemporaneously requests
Borrower to convert such Note.
C. Allocation of Reserved Amount. The initial Reserved Amount shall be
allocated pro rata among Holders of the Note based on the principal amount of
Note issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among Holders of the Note based on the principal amount of
Note held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such Holder's Note,
each transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount that remains allocated to
any person or entity that does not hold any Note shall be allocated to the
remaining Holder of the Note, pro rata based on the principal balance of Note
then held by such Holder.
D. Intentionally Omitted.
E. Status as Stockholder. Upon submission of a Notice of Conversion by
Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed Holder's allocated portion
of the Reserved Amount) shall be deemed converted into shares of Common Stock
and (ii) Holder's rights as a holder of such converted Note shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to Holder because of a failure by Borrower to comply with the terms
of this Note. Notwithstanding the foregoing, if Xxxxxx has not received
certificates for all shares of Common Stock prior to the sixth business day
after the expiration of the Delivery Period with respect to a conversion of this
Note for any reason, then (unless Holder otherwise elects to retain its status
as a holder of Common Stock by so notifying Borrower within five business days
after the expiration of such six business day period after expiration of the
Delivery Period) Holder shall regain the rights of a
holder of this Note and Borrower shall, as soon as practicable, return such
unconverted Note to Holder. In all cases, Holder shall retain all of its rights
and remedies for Xxxxxxxx's failure to convert this Note.
F. Remedies Cumulative. The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under this Note, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit Holder's right to pursue
actual damages for any failure by Borrower to comply with the terms of this
Note. Borrower acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to Xxxxxx and that the remedy at law for any such
breach may be inadequate. Xxxxxxxx therefore agrees, in the event of any such
breach or threatened breach that Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
X. Xxxxxx. Notwithstanding any provision in this Note to the contrary,
any provision contained herein and any right of the Holders granted hereunder
may be waived as to all Note (and Holders thereof) only upon the written
consent of all of the Holders.
H. Notices. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally, by responsible overnight carrier or by confirmed
facsimile, 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
responsible overnight carrier or confirmed facsimile, in each case addressed to
a party. The addresses for such communications are:
(i) if to Borrower, to:
iMedia International, Inc.
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx XxxXxxxxxx, Chairman & Chief Executive
Officer
(ii) if to Holder, to the address set forth under Xxxxxx's name on
the execution page to the Securities Purchase Agreement, or such other address
as may be designated in writing hereafter, in the same manner, by such person.
I. Amendment Provision. This Note and any provision hereof may be
amended only by an instrument in writing signed by Xxxxxxxx and Xxxxxx.
J. Assignability. This Note shall be binding upon Borrower and its
successors and assigns and shall inure to the benefit of Xxxxxx and its
successors and assigns. Notwithstanding anything to the contrary contained in
this Note or the Transaction Documents, this Note may be pledged and all rights
of Holder under this Note may be assigned to any affiliate or to any other
person or entity without the consent of Borrower.
K. Cost of Collection. If an Event of Default occurs hereunder,
Borrower shall pay Holder hereof costs of collection, including reasonable
attorneys' fees.
L. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. Borrower
irrevocably consents to the jurisdiction of the United States federal courts
and the state courts located in the City and County of San Francisco,
California, in any suit or proceeding based on or arising under this Note and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. Borrower irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
Xxxxxxxx further agrees that service of process upon Borrower mailed by first
class mail shall be deemed in every respect effective service of process upon
Borrower in any such suit or proceeding. Nothing herein shall affect the right
of Holder to serve process in any other manner permitted by law. Xxxxxxxx agrees
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
M. Denominations. At the request of the Holders, upon surrender of this
Note, Borrower shall promptly issue new Note in the aggregate outstanding
principal amount hereof, in the form hereof, in such denominations of at least
$25,000 as Holder shall request.
N. Certain Waivers. Borrower and each endorser hereby waive presentment,
notice of nonpayment or dishonor, protest, notice of protest and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of payment of this Note, and hereby waive all notice or right of
approval of any extensions, renewals, modifications or forbearances which may be
allowed.
O. Severability. If any provision of this Note shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Note or the
validity or enforceability of this Note in any other jurisdiction.
P. Maximum Interest Rate. If the effective interest rate on this Note
would otherwise violate any applicable usury law, then the interest rate shall
be reduced to the maximum permissible rate and any payment received by Holder in
excess of the maximum permissible rate shall be treated as a prepayment of the
principal of this Note.
Q. Counterparts. This Note may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Note, once executed by a party, may be delivered to the other
parties hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement. In the event any signature
is delivered by facsimile transmission, the party using such means of delivery
shall cause the manually executed execution page(s) hereof to be physically
delivered to the other party within five days of the execution hereof, provided
that the failure to so deliver any manually executed execution page shall not
affect the validity or enforceability of this Note.
IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be executed by its duly
authorized officer as of the date first written above.
iMEDIA INTERNATIONAL, INC.
By: /s/ Xxxxx XxxXxxxxxx
--------------------------------
Name: Xxxxx XxxXxxxxxx
Title: Chairman & Chief Executive Officer
[SIGNATURE PAGE TO CONVERTIBLE BRIDGE NOTE- LP]
Exhibit A
NOTICE OF OPTIONAL CONVERSION
iMedia International, Inc.
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx XxxXxxxxxx, Chairman & Chief Executive Officer
The undersigned hereby irrevocably elects to convert $____________ of the
outstanding principal balance of, and accrued interest on, the Note (the
"Conversion"), into shares of common stock ("Common Stock") of iMedia
International, Inc. (the "Corporation") according to the conditions of the
Convertible Bridge Note dated August ____, 2004 (the "Note"), as of the date
written below. If securities 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. No fee will be charged to Holder for any conversion, except for
transfer taxes, if any. A copy of the Note is attached hereto (or evidence of
loss, theft or destruction thereof).
Except as may be provided below, the Corporation shall electronically transmit
the Common Stock issuable pursuant to this Notice of Conversion to the account
of the undersigned or its nominee (which is ________________) with DTC through
its Deposit Withdrawal Agent Commission System ("DTC Transfer").
In the event of partial exercise, please reissue an appropriate Note(s) for the
principal balance that shall not have been converted.
The undersigned acknowledges and agrees that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Note have been or will be made only pursuant to an effective registration of the
transfer of the Common Stock under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an exemption from registration under the Act.
Check Box if Applicable:
[ ] In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned or its
nominee (if applicable) physical certificates representing such shares of
Common Stock.
Date of Conversion:__________________________
Applicable Conversion Price: __________________________
Number of Shares of
Common Stock to be Issued: ____________________________
Signature: ________________________
Name: _____________________________
Address: __________________________
Exhibit B
INDEBTEDNESS SCHEDULE
