Convertible Note Financing

Binding Term Sheet

March 1, 2012

 

This binding term sheet (this “Term Sheet”), dated as of the date first written
above, is made with respect to the transactions contemplated by that binding
term sheet, dated as of December 29, 2011 (the “Original Term Sheet”) between
Mandalay Digital Group, Inc. (formerly known as NeuMedia, Inc.), a Delaware
corporation (“Issuer”), and TAJA, LLC (”Investor”). Capitalized terms used and
not defined in this Term Sheet have the meanings ascribed to such terms in the
Original Term Sheet.

 

Existing Note Warrant:   The warrants described under the heading “Existing Note
Warrant” in the Original Term Sheet shall vest and be exercisable one (1) year
from the date of this Term Sheet.       Existing Note Prepayment:   All
outstanding principal and accrued and unpaid interest under the Existing Note
shall become accelerated and immediately due and payable by Issuer upon the
consummation by Issuer of one or more equity sales from and after the date of
this Term Sheet resulting in aggregate net proceeds to Issuer of at least
$10,000,000.       Conversion of Principal:   On the Conversion Date (as defined
below), a portion of the principal amount of the New Note shall be converted
into shares of common stock, par value $0.0001 per share (“Common Stock”), of
Issuer at a conversion price of $0.70 per share (as adjusted for customary
dilution and anti-dilution events, the “Conversion Price”), such that Investor’s
ownership of the issued and outstanding shares of Common Stock (including all
shares of Common Stock held by Investor) shall be as nearly as possible, without
exceeding, 4.9%.       Term:   The section of the Original Term Sheet entitled
“Term” is hereby amended and restated in its entirety as follows: The earlier of
(x) the date on which all outstanding principal and accrued and unpaid interest
under the New Note shall have converted or is then convertible into shares of
Common Stock pursuant to the provisions of this Term Sheet and (y) the date that
is two (2) years following the date of this Term Sheet (the “Maturity Date”).  
    Convertibility:   The section of the Original Term Sheet entitled
“Convertibility” is hereby amended and restated in its entirety as follows: On
the last business day of each calendar month, the Convertible Portion of the
Note (as defined below) shall automatically convert into shares of Common Stock
at the Conversion Price. “Convertible Portion of the Note” means an amount of
outstanding principal and accrued and unpaid interest such that, giving effect
to such conversion, and the simultaneous conversion of any other convertible
debt of the Company subject to ownership limitations, the total number of shares
of Common Stock then beneficially owned by Investor and any other persons whose
beneficial ownership of Common Stock would be aggregated with Investor’s shares
of Common Stock for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended, would not exceed 4.9% of the total number of issued and
outstanding shares of Common Stock, including the shares of Common Stock
issuable on such conversion. If, on the date specified in clause (y) of the
definition of Maturity Date, there remains any outstanding principal or accrued
and unpaid interest under the New Note, all of such outstanding principal and
accrued and unpaid interest shall automatically convert into shares of Common
Stock at the conversion price specified above, notwithstanding the ownership
limitations set forth above.

 

 

 

 

Warrant Coverage:   The following sentence is hereby added to the end of the
section of the Original Term Sheet entitled “Warrant Coverage”: The Warrant may
be exercised only following the first anniversary of the Conversion Date.      
Limits on Exercise:   Notwithstanding anything to the contrary contained herein,
the number of warrant shares that may be acquired by Investor upon any exercise
of the Warrant (or otherwise in respect thereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by Investor and its
affiliates and any other persons whose beneficial ownership of Common Stock
would be aggregated with Investor’s for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, does not exceed 4.9% of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise). This provision
shall not restrict the number of shares of Common Stock which Investor may
receive or beneficially own in order to determine the amount of securities or
other consideration that Investor may receive in the event of customary
fundamental transactions.       Registration Rights:   This section of the
Original Term Sheet is hereby deleted.       Rights of Participation:   Subject
to standard carveouts, Investor shall have a right of participation for future
financings undertaken by Issuer for a period of two (2) years following the
Maturity Date on a pro rata basis in accordance with Investor’s ownership
interests in Issuer, on a fully diluted basis assuming exercise of the Warrant.
      Voting Agreement:   For a period beginning on the date hereof and ending
on the first anniversary of the Conversion Date, notwithstanding any consent
rights Investor may have under the Existing Note, Investor hereby irrevocably
agrees to vote all shares of voting stock (including Common Stock) held by
Investor in favor of any amendment to Issuer’s Certificate of Incorporation
providing for one or more of the following: (x) up to a 10-for-l reverse stock
split affecting all shares of Common Stock, and/or (y) an increase in the number
of authorized shares of any class or series of capital stock of Issuer.      
Conversion Date:   The term “Conversion Date” means the earlier to occur of (x)
the date that the long-form documents are executed and delivered by all parties
hereto with respect to the transactions contemplated by this Term Sheet, and (y)
March 19, 2012.

 

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This Term Sheet shall be binding on the parties hereto and their respective
successors and assigns. Although the parties anticipate entering into long-form
documents with respect to the terms of this Term Sheet and containing such other
provisions as are customary for transactions of the type contemplated, until
they are able to do so, and in any case in the event they are unable to do so,
the terms of this Term Sheet shall be binding and shall govern the parties’
respective rights and obligations. This Term Sheet will be governed by and
construed in accordance with the laws of the State of California. Any disputes
arising out of or relating to this Term Sheet shall be heard exclusively in
state or federal courts located in California, each party waiving any and all
objections to such venue. This Term Sheet, together with the provisions of the
Original Term Sheet not amended or superseded hereby, sets forth the entire
understanding of the parties with respect to the subject matter hereof. This
Term Sheet shall not be amended, or any provision hereof waived, except in a
writing signed by each party hereto. This Term Sheet may be executed in any
number of original, facsimile or other electronic counterparts.

 

[Remainder of Page Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Term Sheet as of the
date first above written.

 

Issuer:   Investor:       MANDALAY DIGITAL GROUP, INC.   TAJA, LLC           By:
/s/ David Mandell   Signature: /s/ Gina Robins Name: David Mandell   Name: Gina
Robins Title: Corporate Secretary   Title: [ILLEGIBLE]

 

Binding Term Sheet

Convertible Note Financing