EXHIBIT 2
Execution Copy
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
December 19, 2005, by and among FUTUREMEDIA PLC, a corporation organized and
existing under the laws of England and Wales (the "Company"), and the Buyers
listed on Schedule I attached hereto (individually, a "Buyer" or collectively
"Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase Two Million Five Hundred
Thousand Dollars ($2,500,000) of convertible notes (the "Convertible Notes"),
which shall be convertible into the Company's Ordinary Shares (as evidenced by
American Depositary Shares, as evidenced by American Depositary Receipts (the
"Ordinary Shares") (as converted, the "Conversion Shares"), which shall be
funded on the fifth (5th) business day following the date hereof (the
"Closing"), for a total purchase price of Two Million Five Hundred Thousand
Dollars ($2,500,000), (the "Purchase Price") in the respective amounts set forth
opposite each Buyer(s) name on Schedule I (the "Subscription Amount");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (the "Investor
Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
WHEREAS, the aggregate proceeds of the sale of the Convertible Notes
contemplated hereby shall be held in escrow pursuant to the terms of an escrow
agreement substantially in the form of the Escrow Agreement attached hereto as
Exhibit B (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE NOTES.
(a) Purchase of Convertible Notes. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer agrees,
severally and not jointly, to purchase at the Closing and the Company agrees to
sell and issue to each Buyer, severally and not jointly, at the Closing,
Convertible Notes in amounts corresponding with the Subscription Amount set
forth opposite each Buyer's name on Schedule I hereto. Upon execution hereof by
a Buyer, the Buyer shall wire transfer the Subscription Amount set forth
opposite his name on Schedule I in same-day funds or a check payable to "▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq., as Escrow Agent for Futuremedia PLC/Cornell Capital Partners,
LP", which Subscription Amount shall be held in escrow pursuant to the terms of
the Escrow Agreement (as hereinafter defined) and disbursed in accordance
therewith.
(b) Closing Date. The Closing of the purchase and sale of the
Convertible Notes shall take place at 10:00 a.m. Eastern Standard Time on the
first (1st) business day following the date hereof, subject to notification of
satisfaction of the conditions to the Closing set forth herein and in Sections 6
and 7 below (or such other date as is mutually agreed to by the Company and the
Buyer(s)) (the "Closing Date"). The Closing shall occur on the respective
Closing Dates at the offices of Yorkville Advisors, LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (or such other place as is mutually
agreed to by the Company and the Buyer(s)).
(c) Escrow Arrangements; Form of Payment. Upon execution hereof by
Buyer(s) and pending the Closing, the aggregate proceeds of the sale of the
Convertible Notes to Buyer(s) pursuant hereto shall be deposited in a
non-interest bearing escrow account with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., as escrow agent
(the "Escrow Agent"), pursuant to the terms of the Escrow Agreement. Subject to
the satisfaction of the terms and conditions of this Agreement, on the Closing
Date, (i) the Escrow Agent shall deliver to the Company in accordance with the
terms of the Escrow Agreement such aggregate proceeds for the Convertible Notes
to be issued and sold to such Buyer(s), minus the One Hundred Eighty Seven
Thousand Five Hundred Dollars ($187,500) commitment fee referenced in Section 4
herein, which shall be paid directly from the gross proceeds held in escrow of
the Closing and (ii) the Company shall deliver to each Buyer, Convertible Notes
which such Buyer(s) is purchasing in amounts indicated opposite such Buyer's
name on Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Convertible
Notes and, upon conversion of Convertible Notes, the Buyer will acquire the
Conversion Shares then issuable, for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
such Buyer reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement (the
"Registration Statement"), filed pursuant to the Registration Rights Agreement,
covering such Conversion Shares or an available exemption under the Securities
Act.
(b) Accredited Investor Status. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the
Convertible Notes are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
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(d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Convertible Notes and the Conversion Shares, which have been requested by such
Buyer. Each Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and its management. Neither such inquiries nor
any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer's right
to rely on the Company's representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Convertible Notes and
the Conversion Shares involves a high degree of risk. Each Buyer is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Buyer to
obtain information from the Company in order to evaluate the merits and risks of
this investment. Each Buyer has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Convertible Notes and the Conversion Shares.
(e) No Governmental Review. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Convertible Notes
or the Conversion Shares, or the fairness or suitability of the investment in
the Convertible Notes or the Conversion Shares, nor have such authorities passed
upon or endorsed the merits of the offering of the Convertible Notes or the
Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that except as
provided in the Investor Registration Rights Agreement: (i) the Convertible
Notes have not been and are not being registered under the Securities Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the Securities Act (or a successor rule thereto)
("Rule 144") may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. The Company reserves the right
to place stop transfer instructions against the shares and certificates for the
Conversion Shares.
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(g) Legends. Each Buyer understands that the certificates or other
instruments representing the Convertible Notes and or the Conversion Shares
shall bear a restrictive legend in substantially the following form (and a stop
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Debenture, the Investor Registration
Rights Agreement, and the Escrow Agreement; (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company's Form 20-F for the
fiscal year ended April 30, 2005; (iv) all press releases issued by the Company
since April 30, 2005, and (v) answers to all questions each Buyer submitted to
the Company regarding an investment in the Company; and each Buyer has relied on
the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
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(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is
a corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible Notes and is not prohibited from
doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that
it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):
(a) Organization and Qualification. Except as set forth on Schedule
3(a) hereto, the Company and its subsidiaries are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Investor Registration Rights Agreement, the
Escrow Agreement, Warrants and any related agreements (collectively the
"Transaction Documents") and to issue the Convertible Notes and the Conversion
Shares in accordance with the terms hereof and thereof, (ii) the execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Convertible Notes and the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion or
exercise thereof, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. .
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(c) Capitalization. As of the date hereof (and before taking into
account the transactions contemplated by this Agreement including fees to be
paid in shares or warrants to Alegro Capital Limited in connection therewith)
the authorized capital stock of the Company consists of 250,000,000 shares of
Ordinary Shares, par value 11/9 ▇▇▇▇▇, and 2,000,000 shares of Preferred Stock,
par value 2 ▇▇▇▇▇ ("Preferred Stock") of which 93,967,086 Ordinary Shares and
zero shares of Preferred Stock are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed herein or in the SEC Documents (as defined in
Section 3(f)), no Ordinary Shares are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company. As of the date of this Agreement, there are outstanding options to
purchase an aggregate of 7,696,899 Ordinary Shares at exercise process ranging
from $0.085 to $1.622 under the Company's employee share option plans (such
options expire on dates ranging from January 2008 to October 2015) and warrants
to purchase an aggregate of 1,036,885 Ordinary Shares at an exercise price of
$0.61 per share (such warrants expire on July 21, 2010). Except as disclosed
herein or in the SEC Documents, as of the date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement) and (iv) there are no outstanding
registration statements and there are no outstanding comment letters from the
SEC or any other regulatory agency. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Notes as described in this Agreement. The Company
has furnished to the Buyer true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the "Articles of
Association"), , and the terms of all securities convertible into or exercisable
for Ordinary Shares and the material rights of the holders thereof in respect
thereto other than stock options issued to employees and consultants.
(d) Issuance of Securities. The Convertible Notes are duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof. The Conversion Shares issuable upon
conversion of the Convertible Notes have been duly authorized and reserved for
issuance. Upon conversion or exercise in accordance with the Convertible Notes
the Conversion Shares will be duly issued, fully paid and nonassessable.
(e) No Conflicts. Except as disclosed in the SEC Documents, the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby will
not (i) result in a violation of the Articles of Association or (ii) conflict
with or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
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regulations of the NASDAQ-CM on which the Company's ADSs are quoted) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries is bound or affected. Except as disclosed
in the SEC Documents, neither the Company nor its subsidiaries is in violation
of any term of or in default under its Articles of Incorporation or By-laws or
their organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except as
disclosed in the SEC Documents, all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.
(f) SEC Documents: Financial Statements. Since January 1, 2003, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and all registration statements required
under the Securities Act (all of the foregoing filed prior to the date hereof or
amended after the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the "SEC Documents"). The Company has
delivered to the Buyers or their representatives, or made available through the
SEC's website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇., true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such Financial Statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
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(g) 10(b)-5. As of their respective dates, the SEC Documents did not
include any untrue statements of material fact, nor did they omit to state any
material fact required to be stated therein necessary to make the statements
made, in light of the circumstances under which they were made, not misleading.
(h) Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Ordinary Shares or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the Convertible
Notes. The Company acknowledges and agrees that the Buyer(s) is acting solely in
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Notes or the Conversion Shares. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Convertible Notes or the Conversion Shares.
(k) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Convertible Notes or the Conversion Shares under the Securities Act or cause
this offering of the Convertible Notes or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the Securities Act.
(l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
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(m) Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might reasonably be expected to give rise to any of the
foregoing.
(n) Environmental Laws. The Company and its subsidiaries are (i) in
compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received
all material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance in all material respects with all terms and conditions of any
such permit, license or approval.
(o) Title. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
(p) Insurance. The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(q) Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(s) No Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
(t) Tax Status. Except as set forth in the SEC Documents, the
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(u) Certain Transactions. Except as set forth in the SEC Documents,
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed in the SEC Documents or herein, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) Rights of First Refusal. Except for fees to be paid in shares or
warrants to Alegro Capital Limited in connection with the transactions
contemplated by this Agreement (as disclosed to the Buyers), the Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
10
4. COVENANTS.
(a) Best Efforts. Each party shall use its commercially reasonable
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the
transactions contemplated hereby as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall take
such action as the Company shall reasonably determine is necessary to qualify
the Conversion Shares, or obtain an exemption for the Conversion Shares for sale
to the Buyers pursuant to this Agreement under applicable securities or "Blue
Sky" laws of the states of the United States, and shall provide evidence of any
such action so taken to the Buyers.
(c) Reporting Status. Until the earlier of (i) the date as of which
the Buyer(s) may sell all of the Conversion Shares without restriction pursuant
to Rule 144(k) promulgated under the Securities Act (or successor thereto), or
(ii) the date on which (A) the Buyer(s) shall have sold all the Conversion
Shares and (B) none of the Convertible Notes are outstanding, the Company shall
file in a timely manner all reports required to be filed with the SEC pursuant
to the Exchange Act and the regulations of the SEC thereunder, and the Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Convertible Notes for general corporate and working capital purposes.
(e) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Ordinary Shares as shall be
necessary to effect the issuance of the Conversion Shares. If at any time the
Company does not have available such shares of Ordinary Shares as shall from
time to time be sufficient to effect the conversion of all of the Conversion
Shares, the Company shall call a special meeting of the shareholders within 60
days of such occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Ordinary Shares authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Ordinary Shares.
(f) Listings or Quotation. The Company shall promptly secure the
listing or quotation of ADSs representing Conversion Shares upon each national
securities exchange, automated quotation system or other market, if any, upon
which Ordinary Shares are then listed or quoted (subject to official notice of
issuance) and shall use its commercially reasonable efforts to maintain, so long
as any other ADSs or Ordinary Shares shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this Agreement.
11
(g) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay all costs
and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction Documents.
The Company shall pay Yorkville Advisors Management LLC a commitment fee equal
to One Hundred Eighty Seven Thousand Five Hundred Dollars ($187,500), which
shall be paid directly from the proceeds of the Closing.
(ii)At the Closing, the Company shall issue to the Buyers an
aggregate of 187,500 Ordinary Shares (the "Investor's Shares"). The Investor's
Shares shall be deemed fully earned on the date hereof. The Investor's Shares
shall have "piggy-back" and demand registration rights.
(iii) At the Closing, the Company shall issue to the Buyer
warrants (the "Warrants") to purchase 250,000 Ordinary Shares exercisable for a
period of five (5) years at an exercise price of $0.70 per share (the "Warrant
Shares") . The Warrant Shares shall have "piggy-back" and demand registration
rights.
(h) Corporate Existence. So long as any of the Convertible Notes
remain outstanding, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, reverse stock split consolidation, sale
of all or substantially all of the Company's assets or any similar transaction
or related transactions (each such transaction, an "Organizational Change")
unless, prior to the consummation of an Organizational Change, the Company
ensures (to the reasonable satisfaction of the Buyers) that the definitive
agreements relating thereto contain appropriate provision with respect to the
Buyers' rights and interests to insure that the provisions of this Agreement and
the Convertible Notes (with appropriate modifications to take into account the
Organizational Change, as applicable) will continue to apply after such
Organizational Change.
(i) Transactions With Affiliates. So long as any Convertible Notes
are outstanding, the Company shall not, and shall cause each of its subsidiaries
not to, enter into, amend, modify or supplement, or permit any subsidiary to
enter into, amend, modify or supplement any agreement, transaction, commitment,
or arrangement with any of its or any subsidiary's officers, directors, person
who were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Ordinary
Shares, or Affiliates (as defined below) or with any individual related by
blood, marriage, or adoption to any such individual or with any entity in which
any such entity or individual owns a five percent (5%) or more beneficial
interest (each a "Related Party"), except for (a) customary employment
arrangements and benefit programs on reasonable terms, (b) any investment in the
Company or in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement, transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company; for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
12
(j) Reserved.
(k) Restriction on Issuance of the Capital Stock. So long as any
Convertible Notes are outstanding, the Company shall not, without the prior
written consent of the Buyer(s) (such consent not to be unreasonably withheld),
(i) issue or sell Ordinary Shares or Preferred Stock without consideration or
for a consideration per share less than the closing bid price (the "Bid Price")
of the Ordinary Shares, as reported by Bloomberg, LP, determined immediately
prior to its issuance (except for Ordinary Shares issued pursuant to options or
other rights to acquire Ordinary Shares outstanding on the date hereof, Ordinary
Shares to be issued to Alegro Capital Limited in connection with the transaction
completed by the Agreement, Ordinary Shares issued pursuant to options or other
rights to acquire Ordinary Shares issued to employees, directors or consultants
pursuant to the Company's equity incentive plans as such plans exist on the date
hereof, and Ordinary Shares issuable pursuant to the transactions contemplated
by the Securities Purchase Agreement dated July 21, 2005 between the Company and
M.A.G. Capital LLC and certain of its affiliates), (ii) issue any warrant,
option, right, contract, call, or other security instrument granting the holder
thereof, the right to acquire Ordinary Shares without consideration or for a
consideration less than such Bid Price of the Ordinary Shares value determined
immediately prior to it's issuance (except for options or other rights to
acquire Ordinary Shares issued to employees, directors or consultants pursuant
to the Company's equity incentive plans as such plans exist on the date hereof
and warrants to be issued to Alegro Capital Limited in connection with the
transaction completed by the Agreement), or (iii) file any registration
statement on Form S-8 (other than in connection with the Company's equity
incentive plans existing on the date hereof).
(l) Restriction on Short Selling. Neither the Buyer(s) nor any of
its affiliates have had (directly or indirectly) an open short position in the
ADSs or Ordinary Shares of the Company during the period from November 8, 2005
up to and including the date hereof, and the Buyer(s) 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
Company as long as any Convertible Notes or warrants to purchase the Warrant
Shares shall remain outstanding.
(m) Rights of First Refusal. During the period of twelve (12) months
from the date hereof, if the Company intends to raise additional capital by the
issuance or sale of capital stock of the Company, including without limitation
Ordinary Shares, any class of preferred stock, options, warrants or any other
securities convertible or exercisable into Ordinary Shares (whether the offering
is conducted by the Company, underwriter, placement agent or any third party)
the Company shall be obligated to offer to the Buyers such issuance or sale of
capital stock, by providing in writing the principal amount of capital it
intends to raise and outline of the material terms of such capital raise, prior
to the offering such issuance or sale of capital stock to any third parties
including, but not limited to, current or former officers or directors, current
or former shareholders and/or investors of the obligor, underwriters, brokers,
agents or other third parties. The Buyers shall have seven (7) trading days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer. If the Buyers elect not
to accept such capital raising offer, or the partiers hereto are unable to agree
upon definitive terms within thirty (30) days following the commencement of such
negotiations, the Company shall be permitted to enter into such equity financing
with a third party at any time during the following ninety (90) days provided,
however, that the terms and conditions of such equity financing with the third
party are not more favorable in any material respect than the terms and
conditions offered to the Buyer(s) pursuant to this Section.
13
5. Reserved.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Convertible
Notes to the Buyer(s) at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction Documents and
delivered them to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Notes in respective amounts as set forth next to
each Buyer as outlined on Schedule I attached hereto and the Escrow Agent shall
have delivered the net proceeds to the Company by wire transfer of immediately
available U.S. funds pursuant to the wire instructions provided by the Company.
(c) The representations and warranties of the Buyer(s) shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to Purchase the
Convertible Notes at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions:
(i) The Company shall have executed the Transaction Documents
and delivered the same to the Buyer(s).
(ii)ADSs representing Ordinary Shares shall be authorized for
quotation on the NASDAQ-CM and trading in the ADSs shall not have been suspended
for any reason.
14
(iii) The representations and warranties of the Company shall
be true and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. If requested by
the Buyer, the Buyer shall have received a certificate, executed by the
President of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
(iv)The Company shall have executed and delivered to the
Buyer(s) the Convertible Notes in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto.
(v) The Buyer(s) shall have received an opinion of counsel
from ▇▇▇▇▇ ▇▇▇▇▇▇▇ in a form satisfactory to the Buyer(s).
(vi)The Company shall have provided to the Buyer(s) a
certificate of good standing from the secretary of state from the state in which
the company is incorporated (except as provided in Schedule 3(a) hereto).
(vii) The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified public accountants as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
(viii) The Company shall have reserved out of its authorized
and unissued Ordinary Shares, solely for the purpose of effecting the conversion
of the Convertible Notes, shares of Ordinary Shares to effect the conversion of
all of the Conversion Shares then outstanding.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Notes and the Conversion Shares
hereunder, and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Buyer(s) and each other holder of the Convertible Notes and the Conversion
Shares, and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys'
15
fees and disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Convertible Notes or the Investor Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in this Agreement, the Investor Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee by an unaffiliated third party and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of
the parties hereto, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Convertible Notes or the status of the Buyer or holder of the Convertible Notes,
the Conversion Shares, or as a Buyer of Convertible Notes in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement,
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby executed by the Buyer, or (c) any
cause of action, suit or claim brought or made against such Company Indemnitee
by an unaffiliated third party and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument, document or
agreement executed pursuant hereto by any of the parties hereto. To the extent
that the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
16
9. NASDAQ RULES. In accordance with the shareholder approval requirements
under the rules of The Nasdaq Stock Market, notwithstanding any other provision
contained in this Agreement, the Convertible Notes or the Warrants or any other
Transaction Document, in no event shall the Company be obligated in connection
with the transactions contemplated hereby to issue a number of Ordinary Shares
representing more than 19.99% of its outstanding capital stock as of the date
hereof (and before giving effect to the transactions contemplated hereby) (or
such other applicable number of Ordinary Shares as may be provided under the
rules of The Nasdaq Stock Market from time to time) without approval of its
shareholders at a general meeting called for that purpose. For the avoidance of
doubt, no Buyer shall be permitted to vote any Ordinary Shares purchased or
otherwise received (by way of conversion of the Convertible Notes or upon
exercise of warrants) pursuant to the transactions contemplated by this
Agreement at any such general meeting.
10. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in ▇▇▇▇▇▇ County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in ▇▇▇▇▇▇ County and the United States District Court for the District
of New Jersey sitting in Newark, New Jersey for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or more
identical 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
17
(f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by certified mail, return receipt
requested, or (iv) one (1) day after deposit with a 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 Company, to: Futuremedia PLC
Nile House, Nile Street
Brighton, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
Telephone: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telephone: + ▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. Unless this Agreement is terminated under Section
10(l), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 10, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of two (2) years following the date on
which the Convertible Notes are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
18
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its commercially reasonable efforts to
consult the Buyer(s) in connection with any such press release or other public
disclosure prior to its release and Buyer(s) shall be provided with a copy
thereof upon release thereof).
(k) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 10(l).
(m) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(n) Confidentiality. The Buyers agree that any material non-public
information with respect to the Company received in connection with the
transactions contemplated by this Agreement shall be kept confidential by the
Buyers, shall be used exclusively for purposes of the transactions contemplated
by this Agreement and shall be treated with at least the same degree of care as
the Buyers use in connection with their own confidential information. The
provisions of this Section shall continue to apply to any such information until
it is made publicly available.
(o) Additional Funding. The Buyers will provide additional funding
("Additional Funding") in the form of convertible notes to the Company in the
amount of up to $7,500,000 (or such other amount as agreed with the Company) on
terms and conditions substantially similar to those contained in the Transaction
Documents subject to the following conditions:
(i) the Company requests the Additional Funding in writing on
or before May 31, 2006;
(ii)there is not an uncured material default by Company under
the terms of this Agreement or any other Transaction Document;
(iii) the proceeds of the Additional Funding shall be used to
finance the Company's acquisition (the "Acquisition") of the business of
Executive Business Channel Limited as contemplated by the share purchase
agreement dated December 7, 2005 between the Company and the shareholder of
Lexon Inc. (as such agreement may be amended after the date hereof);
19
(iv)the convertible notes in connection with the Additional
Funding shall be secured by a senior lien on all assets of the Company (in form
and substance reasonably satisfactory to the Buyers); and
(v) the shareholders of the Company shall have approved the
Additional Funding and the Acquisition to the extent required by the rules of
The Nasdaq Stock Market.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
FUTUREMEDIA PLC
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
21
Execution Copy
EXHIBIT A
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
Execution Copy
EXHIBIT B
FORM OF ESCROW AGREEMENT
Execution Copy
SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
---------------------------------- ------------------------------- --------------------------------- ---------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇ $10,000,000
Its: General Partner ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
By:
-----------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Its: Portfolio Manager
With a copy to: ▇▇▇▇ ▇▇▇▇▇, Esq. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE 3(a)
As discussed with the Buyers, the Company has not filed its UK statutory
accounts with UK Companies House, which were due for filing on November 30,
2005, because of ongoing discussions with the Company's independent accountants
(BDO ▇▇▇▇ ▇▇▇▇▇▇▇) regarding the Company's working capital position. As a
result, the Company is currently not in good standing. The Company expects such
statutory accounts to be filed with UK Companies House as soon as reasonably
practicable following the closing of the transactions contemplated by this
Agreement, at which time the Company will be in good standing.
2