NEOMEDIA TECHNOLOGIES, INC. Secured Convertible Debenture Due December 29, 2008
Execution
Copy
Dated:
December 29, 2006
NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY 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-2 |
$2,500,000
|
NEOMEDIA
TECHNOLOGIES, INC.
Due
December 29, 2008
This
Secured Convertible Debenture (the “Debenture”)
is
issued by NEOMEDIA
TECHNOLOGIES, INC., a
Delaware 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 ___, 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%). Interest shall be calculated on the basis
of a
365-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
5)
in
whose name this Debenture is registered on the records of the Obligor regarding
registration and transfers of Debentures (the “Debenture
Register”).
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 Debenture prior to the
Maturity Date provided that the Closing Bid Price of the of the Obligor’s Common
Stock, as reported by Bloomberg, LP, is less than the Fixed Conversion Price
at
the time of the Redemption Notice. The Obligor shall pay an amount equal to
the
principal amount being redeemed plus a redemption premium (“Redemption
Premium”)
equal
to twenty percent (20%) of the principal amount being redeemed, and accrued
interest, (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.
1
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 Debenture
the
Holder shall be permitted to convert all or any portion of this Debenture during
such three business day period.
Security
Agreements.
This
Debenture is secured by a security interest, pursuant to the Security Agreement
executed August 23, 2006 (the “Security
Agreement”),
in
the Pledged Collateral, as defined in the Security Agreement, and perfected
pursuant to the UCC-1 initially filed with the Delaware Department of State
the
UCC Filing Section on August 25, 06 Filing No. 62970861 later amended on
November 14, 2006 Amendment No. 63963113 and the Florida Secured Transaction
Registry on August 25, 2006 Filing No. 200603546313 later amended on November
14, 2006 Filing No. 200604142828.
Consent
of Holder to Sell Capital Stock or Grant Security Interests.
So
long
as any of the principal amount or interest on this Debenture remains unpaid
and
unconverted, the Obligor shall not, and
with
respect to subsection (iii) herein shall cause its subsidiaries now existing
or
later created or acquired not to, without
the prior consent of the Holder, (i) issue or sell any shares of Common
Stock or preferred stock without consideration or for consideration per share
less than the Closing Bid Price of the Common Stock determined immediately
prior
to its issuance, (ii) issue or sell any preferred stock, warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for
consideration per share less than the Closing Bid Price of the Common Stock
determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest
in
any of the assets of the Obligor or any of its subsidiaries now existing or
later created or acquired or
(iv)
file any
registration statements on Form S-8.
Rights
of First Refusal.
So long as any portion of this Debenture is outstanding (including principal
or
accrued interest), if the Obligor intends to raise additional capital by the
issuance or sale of capital stock of the Obligor, including without limitation
shares of any class of Common Stock, any class of preferred stock, options,
warrants or any other securities convertible or exercisable into shares of
Common Stock (whether the offering is conducted by the Obligor, underwriter,
placement agent or any third party) the Obligor shall be obligated to offer
to
the Holder 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
Holder shall have ten (10) Business 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.
This
Debenture is subject to the following additional provisions:
2
Section
1. This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer
or
exchange.
Section
2. 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 Debenture, free of any claim of subordination, as and when
the
same shall become due and payable (whether on a due date, a Conversion Date
or
the Maturity Date or by acceleration or otherwise);
(ii) The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section
2(a)(i)
hereof)
or any Transaction Document (as defined in Section
5)
which
is not cured with in the time prescribed;
(iii) The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of 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
any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of 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 or any subsidiary of 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 or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or
any
subsidiary of 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 or any subsidiary of 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 or any subsidiary of 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
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, 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;
3
(v) The
Common Stock shall cease to be quoted for trading or listing for trading on
either the Nasdaq OTC Bulletin Board (“OTC”),
or if
then listed on Nasdaq Capital Market, New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market (each, a “Subsequent
Market”)
shall
cease to be quoted for trading or listing on such Subsequent Market and shall
not again be quoted or listed for trading thereon within five (5) Trading Days
of such delisting;
(vi) The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section
5);
(vii) The
Obligor shall fail to file the Underlying Shares Registration Statement (as
defined in Section
5)
with
the Commission (as defined in Section
5),
or the
Underlying Shares Registration Statement shall not have been declared effective
by the Commission, in each case within the time periods set forth in the
Investor Registration Rights Agreement (“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 or the Holder shall not be permitted to resell the shares of Common
Stock
underlying this Debenture under the Underlying Shares Registration Statement,
in
either case, for more than five (5) consecutive Trading Days or an aggregate
of
eight Trading Days (which need not be consecutive Trading Days);
(ix) The
Obligor shall fail for any reason to deliver Common Stock certificates to a
Holder prior to 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 Debenture 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 three (3) days after notice is claimed
delivered hereunder;
(b) During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full principal amount of this Debenture, 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 Common Stock of the Obligor. In addition to any other remedies,
the
Holder shall have the right (but not the obligation) to convert this Debenture
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 Debenture 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 Debenture or the sale of the Underlying Shares.
4
Section
3. Conversion.
(a) Conversion
at Option of Holder.
(i) This
Debenture shall be convertible into shares of Common Stock 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
5)
(subject to the limitations on conversion set forth in Section
3(b)
hereof).
The number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding amount of this Debenture
to be converted by (y) the Conversion Price (as defined in Section
3(c)(i)).
The
Obligor shall deliver Common Stock certificates to the Holder prior to the
Fifth
(5th)
Trading
Day after a Conversion Date.
(ii) Notwithstanding
anything to the contrary contained herein, if on any Conversion Date: (1) the
number of shares of Common Stock at the time authorized, unissued and unreserved
for all purposes, or held as treasury stock, is insufficient to pay principal
and interest hereunder in shares of Common Stock; (2) the Common Stock is not
listed or quoted for trading on the OTC or on a Subsequent Market; (3) the
Obligor has failed to timely satisfy its conversion; or (4) the issuance of
such
shares of Common Stock would result in a violation of Section
3(b),
then,
at the option of the Holder, the Obligor, in lieu of delivering shares of Common
Stock pursuant to Section
3(a)(i),
shall
deliver, within three (3) 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, chosen
by the Holder, and multiplied by the highest closing price of the stock from
date of the conversion notice till the date that such cash payment is
made.
Further,
if the Obligor shall not have delivered any cash due in respect of conversion
of
this Debenture or as payment of interest thereon by the fifth (5th)
Trading
Day after the Conversion Date, the Holder may, by notice to the Obligor, require
the Obligor to issue shares of Common Stock pursuant to Section
3(c),
except
that for such purpose the Conversion Price applicable thereto shall be the
lesser of the Conversion Price on the Conversion Date and the Conversion Price
on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
(iii) 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
Debenture, the Holder is not required to physically surrender this Debenture
to
the Obligor in order to effect conversions. Conversions hereunder shall have
the
effect of lowering the outstanding principal amount of this Debenture plus
all
accrued and unpaid interest thereon in an amount equal to the applicable
conversion. 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.
5
(b) Certain
Conversion Restrictions.
(i) A
Holder
may not convert this Debenture or receive shares of Common Stock 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 4.99% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of interest on, this Debenture held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Obligor the number of shares of Common Stock it may hold at
the
time of a conversion hereunder, unless the conversion at issue would result
in
the issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock 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
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Debenture that, without regard to any other shares that the Holder
or
its affiliates may beneficially own, would result in the issuance in excess
of
the permitted amount hereunder, the 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)
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.
(c) Conversion
Price and Adjustments to Conversion Price.
(i) The
conversion price in effect on any Conversion Date shall be, at the sole option
of the Holder, equal to either (a) Six Cents ($0.06) (the “Fixed
Conversion Price”)
or (b)
ninety percent (90%) of the lowest the closing Bid Price of the Common
Stock during the thirty (30) trading days immediately preceding the Conversion
Date as quoted by Bloomberg, LP (the “Market
Conversion Price”).
The
Fixed Conversion Price and the Market Conversion Price are collectively referred
to as the “Conversion
Price.”
The
Conversion Price may be adjusted pursuant to the other terms of this Debenture.
Notwithstanding the restriction set for the in Section 2(b)(ii) the Holder
shall
have the absolute right to convert any or all of this Debenture at the Fixed
Conversion Price free of such restriction.
6
(ii) If
the
Obligor, at any time while this Debenture is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares
of
its Common Stock or any other equity or equity equivalent securities payable
in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d)
issue
by reclassification of shares of the Common Stock any shares of capital stock
of
the Obligor, then the Fixed Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock 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 Debenture is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Fixed Conversion Price, then the Fixed Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on
the date of issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of which
the
numerator shall be the number of shares of the Common Stock (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 Conversion 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
Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Fixed Conversion 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 Conversion Price made pursuant
to
the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Fixed Conversion 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 Common Stock actually purchased
upon the exercise of such rights, options or warrants actually
exercised.
(iv) If
the
Obligor or any subsidiary thereof, as applicable, at any time while this
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock (“Common
Stock Equivalents”)
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Fixed Conversion Price (if the holder of the Common Stock or
Common Stock Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise
or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the Fixed Conversion
Price, such issuance shall be deemed to have occurred for less than the Fixed
Conversion Price), then, at the sole option of the Holder, the Fixed Conversion
Price shall be adjusted to mirror the conversion, exchange or purchase price
for
such Common Stock or Common Stock Equivalents (including any reset provisions
thereof) at issue. Such adjustment shall be made whenever such Common Stock
or
Common Stock Equivalents are issued. The Obligor shall notify the Holder in
writing, no later than one (1) business day following the issuance of any Common
Stock or Common Stock Equivalent subject to this Section, indicating therein
the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section
shall
be made as a result of issuances and exercises of options to purchase shares
of
Common Stock issued for compensatory purposes pursuant to any of the Obligor's
stock option or stock purchase plans.
7
(v) If
the
Obligor, at any time while this Debenture is outstanding, shall distribute
to
all holders of Common Stock (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 Conversion Price at which this
Debenture shall thereafter be convertible shall be determined by multiplying
the
Fixed Conversion Price in effect immediately prior to the record date fixed
for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the 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 Common Stock 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 Common Stock. 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 Common Stock or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash
or
property, the Holder shall have the right thereafter to, at its option, (A)
convert the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holder of this Debenture shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock 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 Debenture could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts due
and
payable thereon. The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vii) The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Debenture; and within three (3) 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 Common Stock to comply with such
requirement.
8
(viii) All
calculations under this Section
3
shall be
rounded to the nearest $0.0001 or whole share.
(ix) Whenever
the Conversion Price is adjusted pursuant to Section
3
hereof,
the Obligor shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment.
(x) If
(A)
the Obligor shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Obligor shall authorize the granting
to all holders of the Common Stock 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 Common Stock, 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 Common
Stock
is 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
Debenture, 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 twenty (20) 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 Common Stock 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
Common Stock of record shall be entitled to exchange their shares of the Common
Stock 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. The Holder is entitled to convert this Debenture
during the 20-day calendar period commencing the date of such notice to the
effective date of the event triggering 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)
exercise any rights under Section
2(b),
(B)
convert the aggregate amount of this Debenture then outstanding into the shares
of stock and other securities, cash and property receivable upon or deemed
to be
held by holders of Common Stock 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 Common
Stock into which such aggregate principal amount of this Debenture could have
been converted immediately prior to such merger, consolidation or sales would
have been entitled, or (C) in the case of a merger or consolidation, require
the
surviving entity to issue to the Holder a convertible Debenture with a principal
amount equal to the aggregate principal amount of this Debenture then held
by
such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and privileges of the Holder of
this
Debenture set forth herein and the agreements pursuant to which this Debentures
were issued. In the case of clause (C), the conversion price applicable for
the
newly issued shares of convertible preferred stock or convertible Debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price
in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion
or
redemption following such event. This provision shall similarly apply to
successive such events.
9
(d) Other
Provisions.
(i) The
Obligor covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Debenture and payment of interest on this
Debenture, 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 shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares set
forth in this Debenture) 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 Debenture and payment
of interest hereunder. The Obligor covenants that all shares of Common Stock
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.
(ii) Upon
a
conversion hereunder the Obligor shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, 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 share of Common
Stock.
(iii) The
issuance of certificates for shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the 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 Debenture 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.
10
(iv) 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 shares of Common
Stock 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.
(v) 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) by
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) Common
Stock 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 (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion
at
issue multiplied by (2) the market price of the Common Stock at the time of
the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue a Debenture in the principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Obligor timely
complied with its delivery requirements under Section
3(a)(i).
For
example, if the Holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Underlying Shares on the date
of
conversion was a total of $10,000 under clause (A) of the immediately preceding
sentence, the 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.
Section
4. Notices.
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 a nationally 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:
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Neomedia
Technologies, Inc.
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▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇
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Fort
▇▇▇▇▇, FL 33901
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Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
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Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
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With
a copy to:
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▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
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Miami,
FL 33131-2399
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Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
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Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
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Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
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11
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If
to the Holder:
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Cornell
Capital Partners, LP
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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Jersey
City, NJ 07303
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Attention: ▇▇▇▇
▇▇▇▇▇▇
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Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
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Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
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With
a copy to:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
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Jersey
City, NJ 07302
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Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
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Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
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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 a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
a
nationally recognized overnight delivery service in accordance with clause
(i),
(ii) or (iii) above, respectively.
Section
5. Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.
“Change
of Control Transaction”
means
the occurrence of (a) an acquisition after the date hereof by an individual
or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Obligor, by contract or otherwise) of in
excess of fifty percent (50%) of the voting securities of the Obligor (except
that the acquisition of voting securities by the Holder shall not constitute
a
Change of Control Transaction for purposes hereof), (b) a replacement at one
time or over time of more than one-half of the members of the board of directors
of the Obligor which is not approved by a majority of those individuals who
are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (c) the merger,
consolidation or sale of fifty percent (50%) or more of the assets of the
Obligor or any subsidiary of the Obligor in one or a series of related
transactions with or into another entity, or (d) the execution by the Obligor
of
an agreement to which the Obligor is a party or by which it is bound, providing
for any of the events set forth above in (a), (b) or (c).
12
“Closing
Bid Price”
means
the price per share in the last reported trade of the Common Stock on the OTC
or
on the exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock, par value $0.01, 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 Debenture into shares of the Company’s Common
Stock 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 Debenture regardless of the number
of transfers and regardless of the number of instruments, which may be issued
to
evidence such Debenture.
“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 Common Stock are quoted on the OTC or quoted or
traded on such Subsequent Market on which the shares of Common Stock are then
quoted or listed; provided, that in the event that the shares of Common Stock
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
Security Agreement, the Irrevocable Transfer Agent Instructions, the
Registration Rights Agreement, and the Warrants.
“Underlying
Shares”
means
the shares of Common Stock issuable upon conversion of this Debenture 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.
13
Section
6. Except
as
expressly provided herein, no provision of this Debenture 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 Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Obligor. This Debenture ranks pari
passu
with all other Debentures now or hereafter issued under the terms set forth
herein. As long as this Debenture 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 Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.
Section
7. This
Debenture shall not entitle the Holder to any of the rights of a stockholder
of
the 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 shares of Common Stock in accordance with the terms
hereof.
Section
8. If
this
Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute
and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof,
and
indemnity, if requested, all reasonably satisfactory to the
Obligor.
Section
9. No
indebtedness of the Obligor is senior to this Debenture 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 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 Debenture.
Section
10. This
Debenture 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 Debenture 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
11. If
the
Obligor fails to strictly comply with the terms of this Debenture, 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 Debenture, 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.
14
Section
12. Any
waiver by the Holder of a breach of any provision of this Debenture shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Debenture. The failure of the
Holder to insist upon strict adherence to any term of this Debenture on one
or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other
term
of this Debenture. Any waiver must be in writing.
Section
13. If
any
provision of this Debenture is invalid, illegal or unenforceable, the balance
of
this Debenture shall remain in effect, and if any provision is inapplicable
to
any person or circumstance, it shall nevertheless remain applicable to all
other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The 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 Debenture as contemplated herein, wherever enacted, now or
at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the 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
14. 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
16. So
long
as no Event of Default exists, solely with regard cash payments made by the
Company to pay any and all amounts due and outstanding to the Holder, unless
otherwise specified by the Holder, any cash payments made by the Company to
the
Holder shall first apply all amounts of principal and interest outstanding
pursuant the Series C Preferred shares on February 17, 2006 (“Series
C Preferred”).
Section
15. 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.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
15
IN
WITNESS WHEREOF,
the
Obligor has caused this Secured Convertible Debenture to be duly executed by
a
duly authorized officer as of the date set forth above.
|
NEOMEDIA
TECHNOLOGIES, INC.
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| |
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| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇ | |
|
Name:
▇▇▇▇▇ ▇▇▇▇▇
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|
Title:
CFO
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||
16
EXHIBIT
“A”
NOTICE
OF CONVERSION
(To
be executed by the Holder in order to convert the
Debenture)
TO:
The
undersigned hereby irrevocably elects to convert $___________________________
of
the
principal amount of the above Debenture into Shares of Common Stock of Neomedia
Technologies, Inc., according to the conditions stated therein, as of the
Conversion Date written below.
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Conversion
Date:
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Applicable
Conversion Price:
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Signature:
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Name:
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Address:
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Amount
to be converted:
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$
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Amount
of Debenture unconverted:
|
$
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Conversion
Price per share:
|
$
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Number
of shares of Common Stock to be issued:
|
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Please
issue the shares of Common Stock in the
following name and to the following address: |
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Issue
to:
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Authorized
Signature:
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Name:
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Title:
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Phone
Number:
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Broker
DTC Participant Code:
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Account
Number:
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