PROMISSORY
NOTE
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Date of
Issuance
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October 23,
2008
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FOR VALUE
RECEIVED, Mandalay Media, Inc. , a Delaware
corporation (the “Company”), hereby promises to pay to
the order of Nathaniel MacLeitch, as trustee for the Sellers (as
defined below), with an address of c/o AMV Holding Limited, 65 High
Street, Marlow, Buckinghamshire, United Kingdom (the
“Holder”), the aggregate principal sum of Five Million
Three Hundred Seventy Five Thousand Dollars ($5,375,000.00),
together with interest thereon from the date of this Note. Interest
shall accrue on the unpaid principal balance at an initial rate of
five percent (5%) per annum, subject to adjustment as provided in
Section 1(e), and shall accrue on a daily basis from the date of
this Note until paid. Interest shall be calculated on the basis of
a three hundred and sixty (360) day year. This Note shall be
non-assignable by the Company.
This Note has been issued pursuant to that
certain Stock Purchase Agreement, dated as of October 8, 2008 (the
“Purchase Agreement”), between the Company, the Holder,
Jack Cresswell (“Cresswell”) and the shareholders of
AMV Holding Limited (“AMV”) signatories thereto
(together with the Holder and Cresswell, the
“Sellers”), in connection with the acquisition of 100%
of the share capital of AMV and 80% of the share capital of Fierce
Media Limited. The Holder is holding this Note as trustee on behalf
of Sellers, pursuant to the Purchase Agreement.
Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such
terms in the Purchase Agreement.
The principal amount of this Note is subject to
adjustment in accordance with the terms of Sections 2.1, 2.7, 2.9
and Article X of the Purchase Agreement. In the event of such an
adjustment, the Holder and the Company agree to take all reasonably
necessary actions to replace this Note with a new Note that
reflects the adjusted principal amount. Other than as set forth in
the Purchase Agreement, this Note is not subject to any set-off,
counterclaim or deduction.
This Note is secured by the security interests
granted pursuant to a certain Debenture, by and between AMV and the
Holder, dated as of even date herewith, and the Holder of this
Note, on behalf of the Sellers, is entitled to the benefits
thereof.
(a) Unless earlier paid, the entire outstanding
principal balance and interest of this Note shall be payable on or
before January 30, 2010. The Company shall have the right of
prepayment on this Note.
(b)
Payment of principal and interest
on this Note shall be made by wire transfer of immediately
available funds to an account designated by the Holder or by check
sent to the Holder as the Holder may designate for such purpose
from time to time by written notice to the Company, in such coin or
currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private
debts.
(c)
In the event that the Company
completes an equity financing (the “Financing”) that
results in gross proceeds to the Company of over $6,000,000
(including the amount of any financing raised in connection with
the acquisition of AMV), then, within ten days of completion of
such Financing, the Company shall prepay to Holder an amount equal
to one-third of the excess of the gross proceeds of the Financing
over $6,000,000, provided that in no event shall such prepayment
exceed the aggregate principal sum then outstanding under the Note,
plus accrued interest thereon.
(d)
If, prior to July 23, 2009, the
Company completes a Financing that results in gross proceeds to the
Company of over $15,000,000 (which is in addition to the Financing
described in subsection (c) above), then the Company shall prepay
to Holder the entire aggregate principal sum then outstanding under
the Note, plus accrued interest thereon, within ten days of
completion of such Financing.
(e)
If, prior to July 23, 2009 the
entire aggregate principal sum then outstanding under the Note,
plus accrued interest thereon, has not been prepaid in accordance
with Sections 1(c) or 1(d), then on and after July 23, 2009,
interest shall accrue on the unpaid principal balance of the Note
at a rate of seven percent (7%) per annum until paid.
(a)
The occurrence of any one or more
of the following events shall constitute an “Event of
Default”:
(i)
Nonpayment
. The Company shall fail to make, on
or before the due date, in the manner required, any payment of
principal, interest or any other sums due under this Note and the
Company shall not have remedied such default within ten (10) days
after notice of such default;
(ii)
Other Defaults; Cure
Period . The Company
shall fail to observe or perform any of its covenants contained in
this Note, and the Company shall have not remedied such default
within ten (10) days after notice of such default;
(iii)
Insolvency
. The Company shall generally not
pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or the Company shall
commence any voluntary bankruptcy proceeding, or there shall be
commenced against the Company by another party any such case,
proceeding or other action in bankruptcy which remains unstayed,
undismissed or undischarged for a period of thirty (30) days;
or
(iv)
The Company shall be dissolved,
liquidated or reorganized.
(b)
Acceleration
. Upon an Event of Default, the
interest rate payable hereunder shall increase by four (4)
percentage points and there shall immediately be due an
