Exhibit 4
Execution Copy
Dated: December 19, 2005
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
No. CCP-1 $2,500,000
FUTUREMEDIA PLC
Convertible Note
Due December 19, 2008
This Convertible Note (the "Note") is issued by FUTUREMEDIA PLC, an
English corporation (the "Obligor"), to CORNELL CAPITAL PARTNERS, LP (the
"Holder"), pursuant to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith.
FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or
its successors and assigns the principal sum of Two Million Five Hundred
Thousand Dollars ($2,500,000) together with accrued but unpaid interest on or
before December 19, 2008 (the "Maturity Date") in accordance with the following
terms:
Interest. Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to ten percent (10%) for the period of one (1)
year following the date hereof. Commencing on December 19, 2006, interest shall
accrue on the outstanding principal balance hereof at an annual rate equal to
eight percent (8%). Commencing on December 19, 2007, interest shall accrue on
the outstanding principal balance hereof at an annual rate equal to seven
percent (7%). Interest shall be calculated on the basis of a 360-day year and
the actual number of days elapsed, to the extent permitted by applicable law.
Interest hereunder will be paid to the Holder or its assignee (as defined in
Section 4) in whose name this Note is registered on the records of the Obligor
regarding registration and transfers of Notes (the "Note Register"). The Obligor
shall have the right (but not the obligation) to make monthly interest payments
in cash.
Right of Redemption. The Obligor at its option shall have the right, with
three (3) business days advance written notice (the "Redemption Notice"), to
redeem a portion or all amounts outstanding under this Note prior to the
Maturity Date only if the Closing Bid Price of the of the Obligor's ADSs
(representing Ordinary Shares), as reported by Bloomberg, LP, is less than the
Fixed Price at the time of the Redemption Notice and the Obligor shall pay an
amount equal to the principal amount outstanding and accrued interest being
redeemed, plus a redemption premium of twenty percent (20%) ("Redemption
Premium") of the amount redeemed (collectively referred to as the "Redemption
Amount"). The Obligor shall deliver to the Holder the Redemption Amount on the
third (3rd) business day after the Redemption Notice.
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Notwithstanding the foregoing in the event that the Obligor has elected to
redeem a portion of the outstanding principal amount and accrued interest under
this Note the Holder shall still be entitled to effectuate Conversions as
contemplated hereunder.
This Note is subject to the following additional provisions:
Section 1. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
Section 2. Events of Default.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) Any default in the payment of the principal of, interest on or
other charges in respect of this Note, free of any claim of subordination, as
and when the same shall become due and payable (whether on a Conversion Date or
the Maturity Date or by acceleration or otherwise), subject in each case to a
cure period of five (5) Trading Days;
(ii) The Obligor shall fail to observe or perform any other material
covenant, agreement or warranty contained in, or otherwise commit any material
breach or default of any provision of this Note (except as may be covered by
Section 2(a)(i) hereof) or any Transaction Document (as defined in Section 4)
which is not cured with in the time prescribed;
(iii) The Obligor shall commence, or there shall be commenced
against the Obligor under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Obligor commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Obligor or there
is commenced against the Obligor any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 61 days; or the Obligor is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Obligor suffers any
appointment of any custodian, private or court appointed receiver or the like
for it or any substantial part of its property which continues undischarged or
unstayed for a period of sixty one (61) days; or the Obligor makes a general
assignment for the benefit of creditors; or the Obligor shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Obligor shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or the Obligor shall by any act or failure to act expressly indicate
its consent to, approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Obligor for the purpose of effecting
any of the foregoing;
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(iv) The Obligor or any subsidiary of the Obligor shall default in
any of its obligations under any other debenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Obligor or any subsidiary of the Obligor
(but not including trade debt or any other indebtedness arising in the ordinary
course of business) in an amount exceeding $500,000, whether such indebtedness
now exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(v) The Company's ADSs representing Ordinary Shares shall cease to
be quoted for trading or listed for trading on either the Nasdaq OTC Bulletin
Board ("OTC"), Nasdaq-CM, New York Stock Exchange, American Stock Exchange or
the Nasdaq National Market (each, a "Subsequent Market") and shall not again be
quoted or listed for trading thereon within five (5) Trading Days of such
delisting;
(vi) [Reserved];
(vii) The Obligor shall fail to file the Underlying Shares
Registration Statement (as defined in Section 4) with the Commission (as defined
in Section 4), or the Underlying Shares Registration Statement shall not have
been declared effective by the Commission, in each case within the time periods
set forth in the Registration Rights Agreement of even date herewith between the
Obligor and the Holder;
(viii) If the effectiveness of the Underlying Shares Registration
Statement lapses for any reason for more than five (5) consecutive Trading Days
or an aggregate of 15 Trading Days (which need not be consecutive Trading Days)
in any 12-month period;
(ix) The Obligor shall fail for any reason to deliver Ordinary
Shares certificates to a Holder on or before the fifth (5th) Trading Day after a
Conversion Date or the Obligor shall provide notice to the Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversions of this Note in accordance with the terms hereof;
(x) The Obligor shall fail for any reason to deliver the payment in
cash pursuant to a Buy-In (as defined herein) within 10 Trading Days after
notice is delivered hereunder;
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(b) During the time that any portion of this Note is outstanding, if any
Event of Default has occurred and has not been cured by the Obligor within ten
(10) calendar days written after notice from the Holder to the Obligor, the full
principal amount of this Note, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become at the Holder's
election, immediately due and payable in cash, provided however, the Holder may
request (but shall have no obligation to request) payment of such amounts in
Ordinary Shares of the Obligor. If an Event of Default occurs and remains
uncured, the Conversion Price shall be reduced to $0.42 for so long as such
Event of Default remains uncured. In addition to any other remedies, the Holder
shall have the right (but not the obligation) to convert this Note at any time
after (x) an Event of Default or (y) the Maturity Date at the Conversion Price
then in-effect. The Holder need not provide and the Obligor hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by ▇▇▇▇▇▇ at any
time prior to payment hereunder. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon. Upon an
Event of Default, notwithstanding any other provision of this Note or any
Transaction Document, the Holder shall have no obligation to comply with or
adhere to any limitations, if any, on the conversion of this Note or the sale of
the Underlying Shares.
Section 3. Conversion.
(a) (i) Conversion at Option of Holder.
(A) This Note shall be convertible into Ordinary Shares at the
option of the Holder, in whole or in part at any time and from time to time,
after the Original Issue Date (as defined in Section 4) (subject to the
limitations on conversion set forth in Section 3(a)(ii) hereof). The number of
Ordinary Shares issuable upon a conversion hereunder equals the quotient
obtained by dividing (x) the outstanding amount of this Note to be converted by
(y) the Conversion Price (as defined in Section 3(c)(i)). The Obligor shall
deliver Ordinary Shares certificates to the Holder on or before to the Fifth
(5th) Trading Day after a Conversion Date.
(B) Notwithstanding anything to the contrary contained herein,
if on any Conversion Date: (1) the number of shares of Ordinary Shares at the
time authorized, unissued and unreserved for all purposes, or held as treasury
stock, is insufficient to pay principal and interest hereunder in Ordinary
Shares; (2) the Ordinary Shares are not listed or quoted for trading on the
Nasdaq-CM or on a Subsequent Market; (3) the Obligor has failed to timely
satisfy its conversion; or (4) the issuance of such Ordinary Shares would result
in a violation of Section 3(a)(ii), then, at the option of the Holder, the
Obligor, in lieu of delivering Ordinary Shares pursuant to Section 3(a)(i)(A),
shall deliver, within five Trading Days of each applicable Conversion Date, an
amount in cash equal to the product of the outstanding principal amount to be
converted plus any interest due therein divided by the Conversion Price and
multiplied by the closing price of the stock on the date of the conversion
notice.
(C) The Holder shall effect conversions by delivering to the
Obligor a completed notice in the form attached hereto as Exhibit A (a
"Conversion Notice"). The date on which a Conversion Notice is delivered is the
"Conversion Date." Unless the Holder is converting the entire principal amount
outstanding under this Note, the Holder is not required to physically surrender
this Note to the Obligor in order to effect conversions. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Note
plus all accrued and unpaid interest thereon in an amount equal to the
applicable conversion. The Holder and the Obligor shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
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(ii) Certain Conversion Restrictions.
(A) A Holder may not convert this Note or receive shares of
Ordinary Shares as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with
any affiliate thereof, beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules promulgated thereunder) in
excess of 4.9% of the then issued and outstanding shares of Ordinary Shares,
including shares issuable upon conversion of, and payment of interest on, this
Note held by such Holder after application of this Section. Since the Holder
will not be obligated to report to the Obligor the number of Ordinary Shares it
may hold at the time of a conversion hereunder, unless the conversion at issue
would result in the issuance of Ordinary Shares in excess of 4.9% of the then
outstanding shares of Ordinary Shares without regard to any other shares which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and to
the extent that the Holder determines that the limitation contained in this
Section applies, the determination of which portion of the principal amount of
this Note is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Note that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Obligor shall notify the Holder of this fact and
shall honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 3(a)(i)(A) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 65 days prior notice to the Obligor.
Other Holders shall be unaffected by any such waiver.
(B) Notwithstanding the foregoing, in the event that a Holder
acquires Ordinary Shares or ADSs through open market purchases (or in any other
transaction other than pursuant to this Note or the transaction contemplated by
the Securities Purchase Agreement) and such acquisition of Ordinary Shares or
ADSs (or any portion thereof) precludes or limits the portion of this Note which
may be converted pursuant to a conversion as a result of the foregoing 4.99%
limitation then such Holder shall sell such Ordinary Shares or ADSs within 10
days so as to ensure that there is no delay in the conversion of any portion of
this Note as a result thereof.
(C) In accordance with the shareholder approval requirements
under the rules of The Nasdaq Stock Market, notwithstanding any other provision
contained in this Note, in no event shall the Obligor be obligated in connection
with the transactions contemplated by this Note and/or by the Securities
Purchase Agreement to issue 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 and thereby) (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 prior 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.
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(b) (i) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 2 herein for the
Obligor 's failure to deliver certificates representing Ordinary Shares upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
(ii) In addition to any other rights available to the Holder, if the
Obligor fails to deliver to the Holder such certificate or certificates pursuant
to Section 3(a)(i)(A) on or before the fifth (5th) Trading Day after the
Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases
(in an open market transaction or otherwise) Ordinary Shares to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then the Obligor shall
(A) pay in cash to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the Ordinary Shares
so purchased exceeds (y) the product of (1) the aggregate number of shares of
Ordinary Shares that such Holder anticipated receiving from the conversion at
issue multiplied by (2) the closing price of the Ordinary Shares on the
Conversion Date and (B) at the option of the Holder, either reissue a Note in
the principal amount equal to the principal amount of the attempted conversion
or deliver to the Holder the number of Ordinary Shares that would have been
issued had the Obligor timely complied with its delivery requirements under
Section 3(a)(i)(A). For example, if the Holder purchases Ordinary Shares having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Notes with respect to which the closing price of the Underlying
Shares on the Conversion Date was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Obligor shall be required to pay the Holder
$1,000. The Holder shall provide the Obligor written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
(c) (i) The Holder is entitled, at its option, to convert, and sell on the
same day, at any time, until payment in full of this Note, all or any part of
the principal amount of the Note, plus accrued interest, into the Obligor's
Ordinary Shares at the price per share equal to the lesser of (a) $0.525 (the
"Fixed Price") or (b) an amount equal to ninety five percent (95%) of the lowest
volume weighted average price of the Ordinary Shares, as quoted by Bloomberg,
LP, for any period of three (3) consecutive trading days during the thirty (30)
trading days immediately preceding the Conversion Date (the "Discount Price")
which may be adjusted pursuant to the other terms of this Note. The conversion
prices referred to in sub-clauses (a) and (b) above are individually referred to
as a "Conversion Price." In the event the Holder converts at the Discount Price,
the Obligor shall be permitted to limit the Holder's conversions to 1/12th of
the Subscription Amount (as such term is defined in the Securities Purchase
Agreement of even date herewith) plus accrued interest in any thirty (30) day
period. In addition, notwithstanding any other provision herein, the Holder
shall convert a minimum of twenty five percent (25%) of the Subscription Amount
(as such term is defined in the Securities Purchase Agreement of even date
herewith), along with a pro rata amount of accrued but unpaid interest, (x)
before December 19, 2006 and (y) after December 19, 2006 but before December 19,
2007, respectively (such that a minimum of fifty percent (50%) of the
Subscription Amount and a pro rata amount of accrued interest shall be converted
before December 19, 2007). Any and all amount of outstanding principal and
accrued but unpaid interest of this Note shall be converted on or before the
Maturity Date. For the avoidance of doubt, the mandatory conversion provisions
of this Section 3(c)(i) shall be subject to the 4.9% limitation in Section
3(a)(ii)(A) above.
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(ii) If the Obligor, at any time while this Note is outstanding,
shall (a) pay a stock dividend or otherwise make a distribution or distributions
on its Ordinary Shares or any other equity or equity equivalent securities
payable in shares of Ordinary Shares, (b) subdivide outstanding Ordinary Shares
into a larger number of shares, (c) combine (including by way of reverse stock
split) outstanding Ordinary Shares into a smaller number of shares, or (d) issue
by reclassification of the Ordinary Shares any shares of capital stock of the
Obligor, then the Fixed Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Ordinary Shares (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of Ordinary Shares outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Obligor, at any time while this Note is outstanding,
shall issue rights, options or warrants to all holders of Ordinary Shares (and
not to the Holder) entitling them to subscribe for or purchase Ordinary Shares
at a price per share less than the Fixed Price, then the Fixed Price shall be
multiplied by a fraction, of which the denominator shall be the number of
Ordinary Shares (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants (plus the number of additional Ordinary
Shares offered for subscription or purchase), and of which the numerator shall
be the number of Ordinary Shares (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants, plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at the Fixed Price. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants. However, upon the expiration of any such right,
option or warrant to purchase shares of the Ordinary Shares the issuance of
which resulted in an adjustment in the Fixed Price pursuant to this Section, if
any such right, option or warrant shall expire and shall not have been
exercised, the Fixed Price shall immediately upon such expiration be recomputed
and effective immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the Fixed Price made
pursuant to the provisions of this Section after the issuance of such rights or
warrants) had the adjustment of the Fixed Price made upon the issuance of such
rights, options or warrants been made on the basis of offering for subscription
or purchase only that number of shares of the Ordinary Shares actually purchased
upon the exercise of such rights, options or warrants actually exercised.
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(iv) Reserved.
(v) If the Obligor, at any time while this Note is outstanding,
shall distribute to all holders of Ordinary Shares (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the Fixed Price at which this
Note shall thereafter be convertible shall be determined by multiplying the
Fixed Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Bid Price determined as
of the record date mentioned above, and of which the numerator shall be such
Closing Bid Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Ordinary Shares as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Ordinary Shares. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Ordinary Shares or any
compulsory share exchange pursuant to which the Ordinary Shares are converted
into other securities, cash or property, the Holder shall have the right
thereafter to, at its option, convert the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts then owing
hereunder in respect of this Note into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the
Ordinary Shares following such reclassification or share exchange, and the
Holder of this Note shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Ordinary Shares of the Obligor
into which the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Note could have been converted immediately prior to such reclassification or
share exchange would have been entitled. This provision shall similarly apply to
successive reclassifications or share exchanges.
(vii) The Obligor shall maintain a share reserve of not less than
500% of the Ordinary Shares issuable upon conversion of this Note; and within
five Business Days following the receipt by the Obligor of a Holder's notice
that such minimum number of Underlying Shares is not so reserved, the Obligor
shall promptly reserve a sufficient number of shares of Ordinary Shares to
comply with such requirement.
(viii) All calculations under this Section 3 shall be rounded up to
the nearest $0.001 of a share.
(ix) Whenever the Fixed Price is adjusted pursuant to Section 3
hereof, the Obligor shall promptly mail to the Holder a notice setting forth the
Fixed Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
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(x) If (A) the Obligor shall declare a dividend (or any other
distribution) on the Ordinary Shares; (B) the Obligor shall declare a special
nonrecurring cash dividend on or a redemption of the Ordinary Shares; (C) the
Obligor shall authorize the granting to all holders of the Ordinary Shares
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Obligor
shall be required in connection with any reclassification of the Ordinary
Shares, any consolidation or merger to which the Obligor is a party, any sale or
transfer of all or substantially all of the assets of the Obligor, of any
compulsory share exchange whereby the Ordinary Shares are converted into other
securities, cash or property; or (E) the Obligor shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Obligor; then, in each case, the Obligor shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause
to be mailed to the Holder at its last address as it shall appear upon the stock
books of the Obligor, at least ten calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Ordinary Shares of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Ordinary Shares of record
shall be entitled to exchange their shares of the Ordinary Shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
(xi) In case of any (1) merger or consolidation of the Obligor or
any subsidiary of the Obligor with or into another Person, or (2) sale by the
Obligor or any subsidiary of the Obligor of more than one-half of the assets of
the Obligor in one or a series of related transactions, a Holder shall have the
right to (A) convert the aggregate amount of this Note then outstanding into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Ordinary Shares following such merger,
consolidation or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the shares of Ordinary Shares into which such aggregate principal amount of
this Note could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (B) in the case of a merger
or consolidation, require the surviving entity to issue to the Holder a
convertible Note with a principal amount equal to the aggregate principal amount
of this Note then held by such Holder, plus all accrued and unpaid interest and
other amounts owing thereon, which such newly issued convertible Note shall have
terms identical (including with respect to conversion) to the terms of this
Note, and shall be entitled to all of the rights and privileges of the Holder of
this Note set forth herein and the agreements pursuant to which this Notes were
issued. In the case of clause (B), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible Notes shall be based
upon the amount of securities, cash and property that each share of Ordinary
Shares would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
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(d) The Obligor covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Ordinary Shares solely
for the purpose of issuance upon conversion of this Note and payment of interest
on this Note, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder, not less
than such number of Ordinary Shares as shall (subject to any additional
requirements of the Obligor as to reservation of such shares set forth in this
Note) be issuable (taking into account the adjustments and restrictions of
Sections 2(b) and 3(c)) upon the conversion of the outstanding principal amount
of this Note and payment of interest hereunder. The Obligor covenants that all
Ordinary Shares that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the Underlying Shares
Registration Statement has been declared effective under the Securities Act,
registered for public sale in accordance with such Underlying Shares
Registration Statement.
(e) Upon a conversion hereunder the Obligor shall not be required to issue
stock certificates representing fractions of shares of the Ordinary Shares, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Closing Bid Price at such time. If the Obligor elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole Ordinary Shares.
(f) The issuance of certificates for Ordinary Shares on conversion of this
Note shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such Note so converted and the Obligor shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that such
tax has been paid.
(g) Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) trading day after deposit with an internationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
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If to the Obligor, to: Futuremedia PLC
Nile House, Nile Street
Brighton, East Sussex BN1 1HW, United Kingdom
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CEO
Telephone: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
If to the Holder: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by an internationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from an internationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
Section 4. Definitions. For the purposes hereof, the following terms shall
have the meanings indicated in this Section. All other defined terms used herein
but not otherwise defined shall have the meanings provided in the Securities
Purchase Agreement.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a legal holiday in the
United Kingdom or a day on which banking institutions are authorized or required
by law or other government action to close in the U.S. or UK.
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"Commission" means the Securities and Exchange Commission.
"Ordinary Shares" means the Ordinary Shares (as evidenced by American
Depositary Shares, as evidenced by American Depositary Receipts) of the Obligor
and stock of any other class into which such shares may hereafter be changed or
reclassified.
"Conversion Date" shall mean the date upon which the Holder gives the
Obligor notice of their intention to effectuate a conversion of this Note into
shares of the Obligor's Ordinary Shares as outlined herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Original Issue Date" shall mean the date of the first issuance of this
Note regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Note.
"Closing Bid Price" means the price per share in the last reported trade
of the Ordinary Shares on the Nasdaq-CM or on the exchange which the Ordinary
Shares is then listed as quoted by Bloomberg, LP.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means a day on which the shares of Ordinary Shares are
quoted on the Nasdaq-CM or quoted or traded on such Subsequent Market on which
the shares of Ordinary Shares are then quoted or listed; provided, that in the
event that the shares of Ordinary Shares are not listed or quoted, then Trading
Day shall mean a Business Day.
"Transaction Documents" means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Investor Registration Rights Agreement and
the Warrant of even date herewith.
"Underlying Shares" means the Ordinary Shares issuable upon conversion of
this Note or as payment of interest in accordance with the terms hereof.
"Underlying Shares Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
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Section 5. Except as expressly provided herein, no provision of this Note
shall alter or impair the obligations of the Obligor, which are absolute and
unconditional, to pay the principal of, interest and other charges (if any) on,
this Note at the time, place, and rate, and in the coin or currency, herein
prescribed. This Note is a direct obligation of the Obligor. This Note ranks
pari passu with all other Notes now or hereafter issued under the terms set
forth herein. As long as this Note is outstanding, the Obligor shall not and
shall cause their subsidiaries not to, without the consent of the Holder, (i)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holder; (ii) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Ordinary Shares or other
equity securities other than to the extent permitted or required under the
Transaction Documents; or (iii) enter into any agreement with respect to any of
the foregoing.
Section 6. This Note shall not entitle the Holder to any of the rights of
a stockholder of the Obligor, including without limitation, the right to vote,
to receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Obligor, unless
and to the extent converted into Ordinary Shares in accordance with the terms
hereof.
Section 7. If this Note is mutilated, lost, stolen or destroyed, the
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Note, or in lieu of or in substitution for a lost,
stolen or destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Obligor.
Section 8. Section 8. Except for the Obligor's existing arrangements with
HSBC (as disclosed to the Holder), no indebtedness of the Obligor is senior to
this Note in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. Without the Holder's consent, the
Obligor will not and will not permit any of their subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any additional
indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
there from that is senior in any respect to the obligations of the Obligor under
this Note.
Section 9. This Note shall be governed by and construed in accordance with
the laws of the State of New Jersey, without giving effect to conflicts of laws
thereof. Each of the parties consents to the jurisdiction of the Superior Courts
of the State of New Jersey sitting in ▇▇▇▇▇▇ County, New Jersey and the U.S.
District Court for the District of New Jersey sitting in Newark, New Jersey in
connection with any dispute arising under this Note and hereby waives, to the
maximum extent permitted by law, any objection, including any objection based on
forum non conveniens to the bringing of any such proceeding in such
jurisdictions.
Section 10. Section 10. If the Obligor fails to strictly comply with the
terms of this Note, then the Obligor shall reimburse the Holder promptly for all
fees, costs and expenses, including, without limitation, attorneys' fees and
expenses incurred by the Holder in any action in connection with this Note,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.
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Section 11. Any waiver by the Holder of a breach of any provision of this
Note shall not operate as or be construed to be a waiver of any other breach of
such provision or of any breach of any other provision of this Note. The failure
of the Holder to insist upon strict adherence to any term of this Note on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note. Any waiver must be in writing.
Section 12. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Obligor from paying all or any portion of the
principal of or interest on this Note as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Obligor (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.
Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 14. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
Section 15. Neither the Holder nor any of its affiliates have had
(directly or indirectly) an open short position in the ADSs or Ordinary Shares
of the Obligor during the period from November 8, 2005 up to and including the
date hereof, and the Holder agrees that it shall not, and that it will cause its
affiliates not to, directly or indirectly, engage in any short sales of or
hedging transactions with respect to any securities of the Obligor as long as
any portion of this Note shall remain outstanding.
[REMAINDER OF PAGE INTENTIONLLY LEFT BLANK]
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IN WITNESS WHEREOF, the Obligor has caused this Convertible Note to be
duly executed by a duly authorized officer as of the date set forth above.
FUTUREMEDIA PLC
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
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EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal
amount of the above Note into Shares of Ordinary Shares of Futuremedia PLC,
according to the conditions stated therein, as of the Conversion Date written
below.
Conversion Date:
------------------------------------------------
Applicable Conversion Price:
------------------------------------------------
Signature:
------------------------------------------------
Name:
------------------------------------------------
Address:
------------------------------------------------
Amount to be converted: $
------------------------------------------------
Amount of Note unconverted: $
------------------------------------------------
Conversion Price per share: $
------------------------------------------------
Number of shares of Ordinary
Shares to be issued:
------------------------------------------------
Please issue the shares of
Ordinary Shares in the
following name and to the
following address:
------------------------------------------------
Issue to:
------------------------------------------------
Authorized Signature:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Phone Number:
------------------------------------------------
Broker DTC Participant Code:
------------------------------------------------
Account Number:
------------------------------------------------