<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): January 30, 1999
TEAM COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in charter)
California 333-26307 95-4053296
(State or Other Jurisdiction of Commission (I.R.S. Employer
Incorporation) File Number Identification No.)
12300 Wilshire Boulevard, Suite 400, Los Angeles, California 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 442-3500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 30, 1999, the Team Communications Group, Inc. (the "Company")
entered into a Securities Purchase Agreement (the "Securities Purchase
Agreement") with Austinvest Anstalt Balzers, Esquire Trade & Finance Inc., Amro
International, S.A. and Nesher Inc. (collectively, the "Purchasers") pursuant to
which the Company agreed to sell up to and issue to the Purchasers, and the
Purchasers agreed to purchase from the Company, an aggregate principal amount of
up to $2,000,000 of 8% Convertible Debentures (the "Debentures") and Warrants
(the "Warrants") to purchase up to 200,000 shares of Common Stock. The sale is
to take place in up to four separate trades, the first of which (the "Initial
Closing") occurred on January 30, 1999. On that date the Company sold, for an
aggregate purchase price of $850,000, $850,000 principal amount of Debentures
and 85,000 Warrants.
The Debentures are convertible into shares of Common Stock at the option
of the Purchasers at any time after the Initial Closing. The conversion price
for each Debenture in effect on any conversion date will be the lesser of (A) an
amount equal to 90% of the average per share market value for five consecutive
trading days immediately prior to the Initial Closing date or (B) an amount
equal to 85% of the per share market value for the trading day having the lowest
per share market value during the five trading days prior to the conversion
date. Purchasers effect conversions by surrendering the Debentures to be
converted to the Company, together with the form of conversion notice attached
thereto. If not otherwise converted, the Debentures mature on January 27, 2002.
The Warrants are exercisable at an exercise price equal to 110% of the
Per Share Market Value as of the last Trading Day prior to the date of the
issuance of the Warrants. This price, which is subject to adjustment in the
event of certain dilutive events, was $1.96 as of the Initial Closing. The
Warrants expire three years after their date of issuance.
Pursuant to the terms of the Securities Purchase Agreement, and a
related registration rights agreement, the Company is obligated to file a
registration statement with respect to the shares issuable upon conversion of
the debentures and the shares issuable upon exercise of the Warrants within 60
days of the Initial Closing. Beginning on the date on which the initial
registration statement (the "Registration Statement") is filed with the
Securities and Exchange Commission (the "Commission"), the Company has the right
to deliver a written notice to the Purchasers requiring the Purchasers to
purchase an additional $350,000 aggregate principal amount of Debentures and
Warrants to purchase an additional 35,000 shares of Common Stock for an
aggregate purchase price of $350,000.
Subject to the terms and conditions set forth in Section 4.2 of the
Securities Purchase Agreement, and elsewhere in the Securities Purchase
Agreement and beginning on the date that the Registration Statement is declared
effective by the Commission, the Company has the right to request that the
Purchasers purchase an additional $400,000 aggregate principal amount of
Debentures and
2
<PAGE> 3
Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000.
Finally, earlier than 75 days after the date on which the Registration
Statement has been declared effective by the Commission, the Company has the
right to deliver a written notice to the Purchasers requiring the Purchasers to
purchase up to an additional $400,000 aggregate principal amount of Debentures
and Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000.
Without shareholder approval, the Company is not permitted to issue
securities representing more than 20% of its outstanding shares of Common Stock
at a price below market value or book value pursuant to applicable NASDAQ rules.
The Company intends to immediately seek shareholder approval ("Shareholder
Approval") at a special meeting of the shareholders of the Company held in
accordance with the Company's articles of incorporation and by-laws, for the
issuance by the Company of shares of all of the shares of Common Stock
potentially called for as a consequence of the conversion of the Debentures into
shares of Common Stock at a price less than the greater of the book or market
value on the Original Issue Date as and to the extent required pursuant to Rule
4460(i) of The Nasdaq Stock Market, Inc.'s Marketplace Rules (or any successor
or replacement provision thereof). If on the Conversion Date applicable to any
conversion, (A) the Common Stock is then listed for trading on the Nasdaq
National Market, the New York Stock Exchange, the American Stock Exchange or The
Nasdaq Small Cap Market, (B) the Conversion Price then in effect is such that
the aggregate number of shares of Common Stock that would then be issuable upon
conversion of all the outstanding Debentures, together with any shares of Common
Stock previously issued upon conversion of Debentures, would equal or exceed 20%
of the number of shares of Common Stock outstanding on the Original Issue Date,
and (C) the Company has not previously obtained Shareholder Approval the Company
may be subject to financial penalties, as well as being required to issue
additional shares of Common Stock. Similar penalties apply in the event that the
Company cannot effectuate the filing of the Registration Statement in a timely
fashion.
The Company has retained the right to redeem the Debentures at a price
equal to 115% of the principal amount thereof, if the price of the Company's
Common Stock trades at a price of $1.50 or less per share for a specified
period of trading. The Purchasers have agreed, subject to certain limitations,
that they will not engage in any "short sales" of the Company's common stock.
If the Conversion Price was $1.75, and the Company received the entire
$2,000,000 of Debentures authorized, the Company would issue approximately
1,430,000 shares of Common Stock, exclusive of accrued interest, in respect of
this transaction. The issuance of these securities will have a material impact
on the Company's earnings per share figure for the fiscal year ended December
31, 1999.
3
<PAGE> 4
(c) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
4.18 Securities Purchase Agreement between the Company and Austinvest Anstalt
Balzers; Esquire Trade & Finance Inc.; Amro International, S.A. and
Nesher Inc.
4.19 Form of Debenture
4.20 Form of Warrant
4.21 Form of Registration Rights Agreement between the Company and Austinvest
Anstalt Balzers; Esquire Trade & Finance Inc.; Amro International, S.A.
and Nesher Inc.
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
TEAM COMMUNICATIONS GROUP, INC.
Date: February 5, 1999 By: /s/ DREW S. LEVIN
--------------------------------------
Drew S. Levin
Its: Chairman of the Board and CEO
4
<PAGE> 1
EXHIBIT 4.18
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
TEAM COMMUNICATIONS GROUP, INC.,
AUSTINVEST ANSTALT BALZERS;
ESQUIRE TRADE & FINANCE INC.;
AMRO INTERNATIONAL, S.A.
and
NESHER INC.
Dated as of January 28, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF THE SECURITIES...............................................4
1.1 Purchase and Sale....................................................................4
1.2 The Closings.........................................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES....................................................6
2.1 Representations, Warranties and Agreements of the Company............................6
2.2 Representations and Warranties of the Purchasers....................................14
ARTICLE III OTHER AGREEMENTS OF THE PARTIES.................................................15
3.1 Transfer Restrictions...............................................................15
3.2 Stop Transfer Orders; Suspension of Qualification...................................16
3.3 Furnishing of Information...........................................................16
3.4 Blue Sky Laws.......................................................................17
3.5 Integration.........................................................................17
3.6 Certain Agreements..................................................................17
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law.................................................................17
3.8 Notice of Breaches..................................................................18
3.9 Conversion Obligations of the Company...............................................19
3.10 Use of Proceeds.....................................................................19
3.11 Indemnification.....................................................................19
3.12 Subsequent Sales and Registrations..................................................21
3.13 Shareholder Approval................................................................21
3.14 Incorporation of the Debentures By Reference........................................22
3.15 Board of Directors..................................................................22
3.16 Additional Warrants.................................................................22
3.17 Short Sales.........................................................................22
ARTICLE IV CONDITIONS......................................................................22
4.1 Conditions Precedent to Sale of the Initial Securities..............................22
4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the
Additional Securities...............................................................25
ARTICLE V MISCELLANEOUS....................................................................28
5.1 Fees and Expenses...................................................................28
5.2 Entire Agreement; Amendments........................................................28
5.3 Notices.............................................................................28
5.4 Amendments; Waivers.................................................................29
5.5 Headings............................................................................29
5.6 Successors and Assigns..............................................................29
5.7 No Third Party Beneficiaries........................................................30
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.8 Governing Law.......................................................................30
5.9 Survival............................................................................30
5.10 Execution...........................................................................30
5.11 Publicity...........................................................................30
5.12 Consent to Jurisdiction; Attorneys' Fees............................................30
5.13 Waiver of Jury Trial................................................................32
5.14 Severability........................................................................32
5.15 Remedies............................................................................32
5.16 Independent Nature of Purchasers' Obligations and Rights............................32
</TABLE>
-ii-
<PAGE> 4
Schedules and Exhibits
<TABLE>
<S> <C>
Schedule 1 - Purchasers of Securities
Schedule 2.1(a) - Organization and Qualification; Subsidiaries
Schedule 2.1(c)(i) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(c)(ii) - Notice with Respect to Listing
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(r) - Registration Rights, Rights of Participation
Schedule 2.1(s) - Title
Schedule 2.1(y) - Year 2000 Compliance
Schedule 3.10 - Use of Proceeds
Exhibit A - Debentures
Exhibit B - Warrants
Exhibit C - Registration Rights Agreement
Exhibit D - Transfer Agent Instructions
</TABLE>
-iii-
<PAGE> 5
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
28, 1999, among Team Communications Group, Inc., a California corporation (the
"Company"), Austinvest Anstalt Balzers ("Austinvest"), Esquire Trade & Finance
Inc. ("Esquire"), Amro International, S.A. ("Amro") and Nesher Inc. ("Nesher").
Austinvest, Esquire, Amro and Nesher are each referred to herein as a
"Purchaser" and are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, $2,000,000 aggregate principal
amount of 8% Convertible Debentures due 2002 of the Company (the "Debentures")
and warrants (the "Warrants") to purchase shares of common stock, no par value
per share, of the Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale.
(a) Subject to the terms and conditions hereof and in reliance
on the representations and warranties contained herein, the Company shall issue
and sell to the Purchasers, and the Purchasers, severally and not jointly, shall
purchase from the Company (i) up to an aggregate principal amount of $2,000,000
of Debentures and (ii) Warrants to purchase up to 200,000 shares of Common
Stock.
(b) The Debentures shall be substantially in the form annexed
hereto as Exhibit A and the Warrants shall be in the form annexed hereto as
Exhibit B.
1.2 The Closings.
(a) The Initial Closing.
(i) The closing of the purchase and sale of the Initial
Securities (as defined below) (the "Initial Closing") shall take place
at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New
York, New York 10038-4982, immediately following the execution hereof or
such later date or different location as the parties shall agree in
writing, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party. The
date of the Initial Closing is hereinafter referred to as the "Initial
Closing Date." At the Initial Closing, the Company shall sell and issue
to the Purchasers, and the Purchasers shall, severally and not jointly,
<PAGE> 6
purchase from the Company, an aggregate principal amount of $850,000 of
Debentures and Warrants to purchase up to 85,000 shares of Common Stock
(the "Initial Securities") for an aggregate purchase price of $850,000
(the "Initial Purchase Price").
(ii) At the Initial Closing (a) the Company shall deliver to
each Purchaser (1) Debentures (in definitive form) in the denominations
specified on Schedule 1 attached hereto, each registered in the name of
such Purchaser, (2) a warrant agreement representing the Warrants
included in the Initial Securities (the "Initial Warrants") purchased by
such Purchaser as set forth next to such Purchaser's name on Schedule 1
attached hereto, registered in the name of such Purchaser, (3) and all
other documents, instruments and writings required to have been
delivered at or prior to the Initial Closing by the Company pursuant to
this Agreement and the Registration Rights Agreement, dated the date
hereof, by and among the Company and the Purchasers, in the form of
Exhibit C annexed hereto (the "Registration Rights Agreement"), and (b)
each Purchaser shall deliver to the Company the portion of the Initial
Purchase Price set forth next to its name on Schedule 1, in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose on or
prior to the Initial Closing Date, and all documents, instruments and
writings required to have been delivered at or prior to the Initial
Closing by such Purchaser pursuant to this Agreement and the
Registration Rights Agreement.
(b) Subsequent Closings.
(i) Second Closing. Beginning on the date on which the initial
Registration Statement (as defined in the Registration Rights Agreement)
is filed with the Securities and Exchange Commission (the "Commission"),
the Company shall have the right to deliver a written notice to the
Purchasers requiring the Purchasers to purchase an additional $350,000
aggregate principal amount of Debentures and Warrants to purchase an
additional 35,000 shares of Common Stock for an aggregate purchase price
of $350,000 (the "Second Tranche"). The closing of the purchase and sale
of the Second Tranche is hereinafter referred to as the "Second
Closing," the date of the Second Closing is hereinafter referred to as
the "Second Closing Date" and the purchase price paid for the Second
Tranche is hereinafter referred to as the "Second Tranche Purchase
Price."
(ii) Third Closing. Subject to the terms and conditions set
forth in Section 4.2 and elsewhere in this Agreement and beginning on
the date that the Registration Statement is declared effective by the
Commission, the Company shall have the right to deliver a written notice
to the Purchasers requiring the Purchasers to purchase an additional
$400,000 aggregate principal amount of Debentures and Warrants to
purchase an additional 40,000 shares of Common Stock for an aggregate
purchase price of $400,000 (the "Third Tranche"). The closing of the
purchase and sale of the Third Tranche is hereinafter referred to as the
"Third Closing," the date of the Third Closing is
-5-
<PAGE> 7
hereinafter referred to as the "Third Closing Date" and the purchase
price paid for the Third Tranche is hereinafter referred to as the
"Third Tranche Purchase Price."
(iii) Optional Closing. No earlier than 75 days and no later
than 180 days after the date on which the Registration Statement has
been declared effective by the Commission, the Company shall have the
right to deliver a written notice to the Purchasers (a "Optional Closing
Financing Notice") requiring the Purchasers to purchase up to an
additional $400,000 aggregate principal amount of Debentures and
Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000 (the "Optional Securities"). Such
Optional Closing Financing Notice shall set forth the number of Optional
Securities that the Company intends to sell to the Purchasers. The
closing of the purchase and sale of the Optional Securities is
hereinafter referred to as the "Optional Closing," the date of the
Optional Closing is hereinafter referred to as the "Optional Closing
Date" and the purchase price paid for the Optional Securities is
hereinafter referred to as the "Optional Purchase Price."
(iv) At each of the Subsequent Closings (as defined below) (a)
the Company shall deliver to each Purchaser and each Purchaser shall be
obligated (subject to the terms and conditions herein) to purchase such
portion of such Debentures and Warrants (the Second Tranche, the Third
Tranche and the Optional Securities shall be collectively referred to
herein as the "Additional Securities") sold by the Company as equals
such Purchaser's pro rata portion of the purchase price for the Initial
Securities issued and sold at the Initial Closing. Each of the
Subsequent Closings shall take place in the same manner as the Initial
Closing; provided, however, that in no case shall any Subsequent Closing
take place unless and until the conditions listed in Section 4.2 have
been satisfied or waived by the appropriate party.
The Second Closing, the Third Closing and the Optional Closing
are hereinafter collectively referred to as the "Subsequent Closings"
and the Second Closing Date, the Third Closing Date and the Optional
Closing Date are hereinafter collectively referred to as the "Subsequent
Closing Dates."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification; Subsidiaries. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of California, with the requisite corporate power and
authority to own and use its properties and
-6-
<PAGE> 8
assets and to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in Schedule 2.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Debentures or any of the other Transaction Documents (as defined below),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects (insofar as such prospects may reasonably be foreseen) or
financial condition of the Company and the Subsidiaries, taken as a whole or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document, including, without limitation, the
Company's obligations under Section 3.7 hereof (any of (x), (y) or (z), being a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the other Transaction Documents, and
otherwise to carry out its obligations hereunder and thereunder. This Agreement,
the Registration Rights Agreement, the Debentures and the Warrants are
collectively referred to as the "Transaction Documents." The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company. Each of the Transaction Documents has
been duly executed by the Company and when delivered in accordance with the
terms hereof will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective articles
of incorporation, bylaws or other organizational documents.
(c) Capitalization; Rights to Acquire Capital Stock. On the date
hereof, the authorized capital of the Company consists of (i) 18,000,000 shares
of Common Stock, no par value, of which 3,456,092 are issued and outstanding and
(ii) 2,000,000 shares of preferred stock, no par value, none of which have been
issued. Schedule 2.1(c)(i) hereto sets forth the options, warrants and
convertible securities of the Company (the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Company into which such
Derivative Securities are convertible as of the date hereof,
-7-
<PAGE> 9
(iv) the conversion or exercise price or prices of such Derivative Securities as
of the date hereof and (v) the expiration date of any conversion or exercise
rights held by the owners of such Derivative Securities. All issued and
outstanding shares of capital stock of the Company and each Subsidiary have been
duly authorized and validly issued and are fully paid and non-assessable. No
shares of the capital stock of the Company are entitled to preemptive or similar
rights, nor is any holder of the capital stock of the Company entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of any of the Transaction Documents. To the best knowledge
of the Company, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind. The Common Stock is
quoted and is listed for trading on The Nasdaq Small-Cap Market. Except as
described on Schedule 2.1(c)(ii), the Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing. After giving effect to the transactions
contemplated in this Agreement, the Company believes that it is in compliance
with all such maintenance requirements.
(d) Issuance of Securities. The Debentures have been duly
authorized for issuance, and when duly executed and delivered by the Company in
accordance with this Agreement, shall constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application. The Company
has and, at the Initial Closing Date and each Subsequent Closing Date (each, a
"Closing Date"), as the case may be, will have and at all times while the
Debentures and the Warrants are outstanding will maintain an adequate reserve of
duly authorized shares of Common Stock as may be necessary to effect conversion
of the Debentures and exercise of the Warrants. The shares of Common Stock
issuable upon conversion of , or in lieu of interest payments on, the Debentures
are referred to herein as the "Underlying Shares." When issued in accordance
with the Debentures, the Underlying Shares will be duly authorized, validly
issued, fully paid and nonassessable, free and clear of all liens. The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." When issued and paid for in accordance with the Warrant,
the Warrant Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all liens. The Debentures, the Warrants, the
Underlying Shares and the Warrant Shares are referred to herein as the
"Securities."
-8-
<PAGE> 10
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its articles
of incorporation, bylaws or other organizational documents (each as amended
through the date hereof) or (ii) subject to obtaining the consents referred to
in Section 2.1(e), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument (evidencing a Company debt or otherwise)
to which the Company is a party or by which any property or asset of the Company
is bound or affected, (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations), or by which any material property or
asset of the Company is bound or affected, or (iv) result in the creation of
imposition of a Lien upon any of the Securities or any of the assets of the
Company, or any of its Affiliates (as such term is defined under Rule 405
promulgated under the Securities Act of 1933, as amended (the "Securities
Act")), except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental authority except for any
such violation as would not, individually or in the aggregate, have or result in
a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing of the Registration Statement with the Commission, which shall be
filed in accordance with and in the time periods set forth in the Registration
Rights Agreement, (ii) the application(s) or any letter(s) acceptable to The
Nasdaq Small-Cap Market for the listing of the Underlying Shares and the Warrant
Shares with The Nasdaq Small-Cap Market (and with any other national securities
exchange or market on which the Common Stock is then listed), and (iv) any
filings, notices or registrations under applicable federal and state securities
laws (together with the consents, waivers, authorizations, orders, notices and
filings referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically set forth in
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries or Affiliates or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
(i) adversely affects or challenges the legality, validity or enforceability of
any of
-9-
<PAGE> 11
the Transaction Documents or the Securities or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Except as set forth in Schedule
2.1(h), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound which could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect, (ii) is in violation of any order of any court,
arbitrator or governmental body applicable to it, or (iii) is in violation of
any statute, rule or regulation of any governmental authority to which it is
subject, which violation could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein not misleading.
(j) Private Offering. The Company and to the best of the
Company's knowledge, all Persons acting on its behalf have not made, and will
not make, offers or sales of the Debentures or the Warrants, and any securities
that might be integrated with offers and sales of the Debentures and the
Warrants, except to "accredited investors" (as defined in Regulation D
("Regulation D") under the Securities Act) without any general solicitation or
advertising and otherwise in compliance with the conditions of Regulation D. The
offer and sale by the Company to the Purchasers of the Debentures and the
Warrants and the Underlying Shares and the Warrant Shares into which the
Debentures and the Warrants are convertible or exercisable, as the case may be,
is exempt from the registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, (the foregoing materials
being collectively referred to herein as the "SEC Documents") on a timely basis
or received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required; neither the Company nor any of the Subsidiaries
is in breach of any agreement where such breach could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
-10-
<PAGE> 12
Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q for the period ended September 30, 1998, there has been no
event, occurrence or development that has had a or could reasonably be expected
to have a Material Adverse Effect which has not been specifically disclosed to
the Purchasers by the Company.
(l) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor, finder, investment banker, or bank
with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section 2.1(m) that may be due in connection with the transactions contemplated
by this Agreement. The Company shall indemnify and hold harmless each of the
Purchasers, its employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees.
(n) Solicitation Materials. The Company has not distributed any
offering materials in connection with the offering and sale of the Securities.
The Company confirms that it has not provided the Purchasers or their agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
(o) Exclusivity. The Company shall not issue and sell Debentures
or Warrants to any Person other than the Purchasers pursuant to this Agreement
other than with the prior written consent of each of the Purchasers.
(p) Patents and Trademarks. The Company has sufficient title and
ownership of all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights that
are necessary for use in connection with its business, as currently conducted
and as described in the SEC Documents, and such business does not and would not
conflict with or constitute an infringement on such rights of others.
-11-
<PAGE> 13
(q) Acknowledgment of Dilution. The Company acknowledges that
the issuance of (i) the Underlying Shares upon conversion of the Debentures,
(ii) the Warrant Shares upon exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue (i) the Underlying Shares upon conversion of the Debentures and (ii)
the Warrant Shares upon exercise of the Warrants is unconditional and absolute
regardless of the effect of any such dilution.
(r) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (A) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction Document.
(s) Title. Except as disclosed in Schedule 2.1(s), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company or the Subsidiaries, in each case free and clear of all liens,
except for liens, claims or encumbrances that do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company or the Subsidiaries. Any real property and
facilities held under lease by the Company or the Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or the Subsidiaries.
(t) Permits. The Company and the Subsidiaries possess all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct their respective businesses as described in the
SEC Documents except where the failure to possess such permits would not,
individually or in the aggregate, have a Material Adverse Effect ("Material
Permits"), and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material
Permit.
(u) Employment Matters. The Company and each Subsidiary is in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company or any Subsidiary would have any
liability; neither the Company nor any Subsidiary has incurred and expects to
incur liability under (i) Title IV of ERISA with respect to termination of, or
-12-
<PAGE> 14
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(v) Insurance. The Company and each Subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards. Neither the Company nor any Subsidiary has received notice from, and
has any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Company or any Subsidiary) that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
(w) Taxes. All applicable tax returns required to be filed by
the Company and each of the Subsidiaries have been filed, or if not yet filed
have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Company, the Subsidiaries, or upon any of their respective properties,
income or franchises, shown in such returns and on assessments received by the
Company or the Subsidiaries to be due and payable have been paid, or adequate
reserves therefor have been set up if any of such taxes are being contested in
good faith; or if any of such tax returns have not been filed or if any such
taxes have not been paid or so reserved for, the failure to so file or to pay
would not in the aggregate or individually have a Material Adverse Effect.
(x) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any securities under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of The Nasdaq Stock Market, as applicable. The Company has not
conducted any offering that will be integrated with the issuance of the
Securities solely for purpose of Rule 4460(i) of The Nasdaq Stock Market, Inc.'s
Marketplace Rules.
(y) Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiaries' business and
operations that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, except as set forth on Schedule 2.1(y), the
Company believes that the computer applications that are currently material to
its or any Subsidiaries' business and operations are reasonably expected to be
able to perform properly date-sensitive functions for all
-13-
<PAGE> 15
dates before and after January 1, 2000, except to the extent that a failure to
do so would not reasonably be expected to have a Material Adverse Effect. For
the avoidance of doubt, this Section 2.1(y) applies only to the Company and the
Subsidiaries.
(z) Full Disclosure. The representations and warranties of the
Company set forth in this Agreement do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, at all
times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and in
compliance with applicable State securities laws or under an exemption from such
registration subject to the provisions of this Agreement and the Registration
Rights Agreement,.
(b) Purchaser Status. At the time such Purchaser was offered the
Securities, and at each Closing Date, (i) it was and will be, an "accredited
investor" (as defined in Regulation D), or (ii) such Purchaser either alone or
together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and had and will have so evaluated the merits and risks of such
investment. Such Purchaser has the authority and is duly and legally qualified
to purchase and own the Securities.
(c) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(d) Reliance. Each Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.
-14-
<PAGE> 16
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby or the other Transaction Documents other than those specifically set
forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any Debentures
(and upon conversion thereof any of the Underlying Shares) or Warrants (and upon
exercise thereof any of the Warrant Shares) held by it, each Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act.
In connection with any transfer of any Securities other than pursuant to an
effective registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the foregoing,
the Company hereby consents to and agrees to register (i) any transfer of
Securities by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer by any Purchaser to an Affiliate of such
Purchaser or to an Affiliate of another Purchaser, or any transfer among any
such Affiliates, provided that transferee certifies in writing to the Company
that it is an "accredited investor" (as defined in Regulation D). Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION 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.
-15-
<PAGE> 17
The Underlying Shares issuable upon conversion of the Debentures and the
Warrant Shares issuable upon exercise of the Warrants shall not contain the
legend set forth above if such conversion or exercise occurs at any time while
the Registration Statement is effective under the Securities Act or in the event
there is not an effective Registration Statement at such time, if in the written
opinion of counsel to the Company (such opinion to be furnished at the sole
expenses of the Company at the request of a Purchaser) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares and/or Warrant
Shares, free from such legend at such time as such legend is no longer required
hereunder.
(c) Each Purchaser further agrees that should it decide to dispose of
any Debentures, Underlying Shares, Warrants or Warrant Shares (collectively
referred to herein as the "Securities"), held by it, such Purchaser will dispose
of no more Securities per day in the aggregate than would equal the greater of
(i) 10% of the average per day trading volume for the five previous consecutive
Trading Days (as defined in the Debentures) and (ii) such number of Securities
having a value of $50,000 based on the previous Trading Day's Per Share Market
Value, provided, however, such restriction shall no longer apply if the Per
Share Market Value (as defined in the Debentures) is at least $4.00 per share
for five out of any seven consecutive Trading Days, subject to adjustment for
stock splits, stock dividends, combinations and other similar recapitalizations,
and so long as the average daily trading volume during the preceding seven
Trading Days is at least 50,000 shares per day.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Purchasers, promptly after it receives notice
of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
3.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Purchasers with true and complete
copies of all such filings. As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required
-16-
<PAGE> 18
by Section 13(a) or 15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have been required
to have been made under the Exchange Act. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares and/or Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Underlying Shares under the securities or Blue Sky
laws of such jurisdictions as the Purchasers may request and shall continue such
qualification at all times through the third anniversary of the last Closing
Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of any or all of such securities to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns Debentures, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of all of the Debentures then outstanding, (i) amend its articles
of incorporation, bylaws or other organizational documents so as to adversely
affect any rights of any Purchaser; (ii) declare, authorize, set aside or pay
any dividend or other distribution with respect to the Common Stock as would
adversely affect the rights of any Purchaser hereunder or under the Debentures;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; or (iv) enter into any agreement with
respect to any of the foregoing.
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law.
(a) The Company shall (i) not later than the fifth Business Day
following the applicable Closing Date prepare and file with The Nasdaq Small-Cap
Market (as well as any other national securities exchange or market on which the
Common Stock is then listed) an additional shares listing application or a
letter acceptable to The Nasdaq Small-Cap Market covering and listing a
sufficient number of shares of Common Stock to cover the maximum number of
Underlying Shares and Warrant Shares then issuable, (ii) take all steps
necessary to cause the Underlying Shares and the Warrant Shares to be approved
for listing in The Nasdaq Small Cap Market (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock on
-17-
<PAGE> 19
such market. As used herein, "Business Day" means any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York generally are authorized or required by
law or other government actions to close.
(b) The Company shall at all times have authorized and reserved
for issuance upon conversion of the Debentures and upon exercise of the Warrants
a sufficient number of shares of Common Stock to provided for the conversion of
the Debentures and exercise of the Warrants.
(c) The Company shall notify the Commission and NASD, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Purchasers and promptly provide copies
thereof to the Purchasers.
(d) Until at least two (2) years after the last of the
Debentures has been converted into Underlying Shares or the last of the Warrants
has been exercised for the Warrant Shares, (i) the Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
such Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement or the Registration Rights Agreement
and will not take any action or file any document (whether or not permitted by
the Securities Act or the Exchange Act or the rules and regulations thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Securities Act and Exchange Act,
except as permitted herein and (ii) the Company will take all action within its
power to continue the listing or trading of its Common Stock on The Nasdaq
Small-Cap Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and The
Nasdaq Stock Market.
3.8 Notice of Breaches.
(a) Each of the Company and each Purchaser shall give prompt
written notice to the other of any breach of any representation, warranty or
other agreement contained in this Agreement, the Debentures, the Warrants or the
Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to any Closing Date, which would reasonably be
likely to cause any representation or warranty or other agreement of such party,
as the case may be, contained herein to be incorrect or breached as of such
Closing Date. However, no disclosure by any party pursuant to this Section 3.8
shall be deemed to cure any breach of any representation, warranty or other
agreement contained herein or in the Registration Rights Agreement.
-18-
<PAGE> 20
(b) Notwithstanding the generality of Section 3.8(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby, by the Debentures, by the
Warrants and by the Registration Rights Agreement violates or would violate any
written agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to each Purchaser a copy of any
written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser with respect to any outstanding Debentures, Warrants, Underlying
Shares or Warrant Shares.
3.9 Conversion Obligations of the Company. The Company covenants to
convert Debentures and to deliver the Underlying Shares in accordance with the
terms and conditions and within the time period set forth in the Debentures.
3.10 Use of Proceeds. The Company shall use all of the proceeds from the
sale of the Securities for working capital and general corporate purposes and
not for the satisfaction of any portion of Company borrowings outside the normal
course of business, including, without limitation, any obligation or liability
of any kind whatsoever owed to a shareholder, officer or director of the
Company, or to redeem Company equity or equity-equivalent securities, except as
specifically set forth on Schedule 3.10 hereto. Pending application of the
proceeds of this placement in the manner permitted hereby, the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.
3.11 Indemnification. The Company also will indemnify and hold the
Purchasers harmless against any and all losses, claims, damages or liabilities
to any such Person (including, without limitation, in connection with any
action, proceeding or investigation brought by or against any such Person,
including by shareholders of the Company) in connection with or as a result of
any matter referred to in this Transaction Documents, including, without
limitation, for any misrepresentation by the Company, for breaches of
representations and warranties contained in any of the Transaction Documents,
and for any breach, non-compliance or nonfulfillment by the Company of any
covenant, agreement or undertaking to be complied with or performed by it
contained in or pursuant to the Transaction Documents. If for any reason the
foregoing indemnification is unavailable to such Purchaser or is insufficient to
hold such Person harmless, then the Company shall contribute to the amount paid
or payable by such Purchaser as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative economic
interests of the Company and its shareholders on the one hand and the Purchasers
on the other hand in the matters contemplated by the Transaction Documents as
well as the relative fault of the Company and the Purchasers with respect to
such loss, claim, damage or liability and
-19-
<PAGE> 21
any other relevant equitable considerations. The reimbursement, indemnity and
contribution obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and the
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers, any such affiliate and any such
Person. The Company also agrees that neither the Purchasers nor any of such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this Agreement except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or bad faith of, or knowing breach of this Agreement by, the Purchasers.
Promptly after receipt by the Purchasers or any affiliate, partners, directors,
agents, employees and controlling persons, as the case may be, of notice of any
claim or other commencement of any action in respect of which indemnity may be
sought, such party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the indemnified parties and the payment of fees and expenses of
such counsel). The indemnified party shall cooperate with the Company and the
Company's counsel in the defense of such claim or action. The Purchasers
understand that the Company shall not in connection with any one such claim or
action or separate but substantially similar related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all of the indemnified parties unless the defense of one
indemnified party is unique or separate from that of another indemnified party
or one or more legal defenses are available to an indemnified party but not to
other indemnified parties subject to the same claim or action. In the event the
Company does not promptly assume the defense of a claim or action, the
indemnified parties shall have the right to employ counsel reasonably
satisfactory to the Company, at the Company's expense, to defend such claim or
action. The indemnified party shall not admit any liability with respect to the
claim or action or settle, compromise, pay or discharge the same without the
prior written consent of the Company so long as the Company is reasonably
contesting or defending the same in good faith. The Company shall not
compromise, settle or discharge any claim or action without the Purchasers'
consent, as applicable, which consent will not be unreasonably withheld, unless
there is no finding or admission of any violation of any law against the
indemnified party and the sole relief is monetary damages paid in full by the
Company. The provisions of this Section 3.11 shall survive any termination or
completion of the Transaction Documents.
3.12 Subsequent Sales and Registrations. (a) Until the later of (i) 180
days after the Optional Closing Date, or if there is no Optional Closing Date,
after the Third Closing Date and (ii) 60 days after all Underlying Shares and
Warrant Shares have been registered under the Securities Act pursuant to an
effective registration statement, the Company shall not, directly or
-20-
<PAGE> 22
indirectly, without the prior written consent of the Purchasers, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant of any option to purchase or other disposition) any of its or its
Affiliates' equity or equity-equivalent securities or any instrument that
permits the holder thereof to acquire Common Stock at a price that is less than
the market price of the Common Stock at the time of issuance of such security or
instrument and, if such security or instrument contains a conversion feature, at
a conversion price that is less than the market price of the Common Stock at the
time of issuance of such security or instrument, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereinafter duly adopted by the Company (including any stock options plans
which are restated after the date hereof), (ii) shares issued upon exercise of
any currently outstanding warrants disclosed in Schedule 2.1(c)(i), and (iii)
shares of Common Stock issued upon conversion of Debentures or upon exercise of
the Warrants.
(b) Other than Underlying Shares, Warrant Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall not, for
a period of not less than 90 Trading Days (as defined in the Debentures) after
the dates that any registration statement relating to the Securities is declared
effective by the Commission, without the prior written consent of the
Purchasers, (i) register for resale any securities of the Company, except as set
forth on Schedule 2.1(r), or (ii) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities except for (A) securities
issued upon the exercise or conversion of the securities set forth on Schedule
2.1(c)(i) or (B) securities sold pursuant to the Company's employee benefit
plans. Any days that any Purchaser is unable to sell Underlying Shares or
Warrant Shares under the Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.13 Shareholder Approval. The Company shall, as promptly as possible,
but in no event later than 60 days after the Initial Closing Date, convene a
shareholders' meeting, held in accordance with the Company's Certificate of
Incorporation and bylaws, and use its best efforts to obtain the approval
("Shareholder Approval") by a majority of the total votes cast on the proposal
at such shareholders' meeting, in person or by proxy, of (i) the issuance of the
Underlying Shares as a consequence of the conversion of the Debentures and (ii)
the issuance of the Warrant Shares as a consequence of the exercise of the
Warrants, in each case in a number exceeding the maximum number of shares of
Common Stock issuable without shareholder approval at a price less than the
greater of the book or market value on the Original Issue Date (as defined in
the Debentures) as and to the extent required pursuant to Rule 4460(i) of The
Nasdaq Stock Market, Inc.'s Marketplace Rules (or any successor or replacement
provision thereof).
3.14 Incorporation of the Debentures By Reference. The Debentures are
hereby incorporated herein by reference and made a part hereof.
-21-
<PAGE> 23
3.15 Board of Directors. While any of the Debentures remain outstanding,
the Purchasers shall have the right to approve the appointment of any new or
replacement member to the Board of Directors, such approval not to be
unreasonably withheld.
3.16 Additional Warrants. If, on the 90th day after the Registration
Statement is declared effective, the Holders have not converted more than 50% of
the principal amount of Debentures issued prior to such date, then the Company
shall issue to each Holder additional warrants, on the same terms as the
Warrants, to purchase such number of shares of Common Stock, equal to principal
amount of Debentures not yet converted by such Holder as of that date divided by
20.
3.17 Short Sales. At any time the Common Stock is trading below $3.00
per share, no Purchaser shall engage in a short selling transaction.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Initial Securities
(a) Conditions Precedent to the Obligation of the Company to
Sell the Initial Securities. The obligation of the Company to sell the Initial
Securities hereunder is subject to the satisfaction or waiver by the Company, at
or before the Initial Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made
and as of the Initial Closing Date, as though made on and as of such
date;
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to
the Initial Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement.
-22-
<PAGE> 24
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Initial Securities. The obligation of each Purchaser
hereunder to acquire and pay for the Initial Securities is subject to
the satisfaction or waiver by such Purchaser, at or before the Initial
Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth
in this Agreement and in the Registration Rights Agreement shall be true
and correct in all material respects as of the date when made and as of
the Initial Closing Date as though made on and as of such date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied with in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Certificate of
Designation, the Warrants or the Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the SEC Document last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect and no
material adverse change in the financial condition of the Company shall
have occurred (for purposes hereof changes in the market price of the
Common Stock may be considered as a factor in determining whether there
has occurred an event which has had a Material Adverse Effect or whether
a material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on The Nasdaq Small Cap Market which suspension shall
remain in effect;
(vi) Listing of Common Stock. The Company shall have
filed a listing application to list the Underlying Shares and the
Warrant Shares for trading on The Nasdaq Small Cap Market;
(vii) Legal Opinion. The Company shall have delivered to
the Purchasers the opinion of Kelly Lytton Mintz & Vann LLP, outside
counsel to the Company, in substantially the form annexed hereto as
Exhibit D;
-23-
<PAGE> 25
(viii) Required Approvals. All Required Approvals shall
have been obtained;
(ix) Shares of Common Stock. On or prior to the Initial
Closing Date, the Company shall have duly reserved the number of
Underlying Shares and Warrant Shares required by the Transaction
Documents to be reserved for issuance upon conversion of the Debentures
and upon exercise of the Warrants;
(x) Delivery of Debentures and Warrant Certificates. The
Company shall have delivered to each Purchaser or such Purchaser's
designee, (i) the Debentures representing the Initial Debentures,
registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and (ii) warrant certificate(s) representing the Initial
Warrants, registered in the name of such Purchaser, in form satisfactory
to the Purchaser;
(xi) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement;
(xii) Change of Control. No Change of Control shall have
occurred between the date hereof and the Initial Closing Date. "Change
of Control" means the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in
Rule 13d5(b)(1) promulgated under the Exchange Act) of in excess of 50%
of the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Board of Directors which is not approved
by those individuals who are members of the Board of Directors on the
date hereof in one or a series of related transactions, (iii) the merger
of the Company with or into another entity, consolidation or sale of all
or substantially all of the assets of the Company in one or a series of
related transactions or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii);
(xiii) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in the form of Exhibit E annexed hereto,
shall have been delivered to and acknowledged in writing by the
Company's transfer agent; and
(xiv) Officer's Certificate. On the Initial Closing Date
the Company shall deliver to the Purchasers an Officer's Certificate
dated the Initial Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the
compliance by the Company with the conditions precedent set forth in
this Section 4.1 as of the Initial Closing Date.
-24-
<PAGE> 26
4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase
the Additional Securities. The obligation of each Purchaser hereunder to acquire
and pay for the Additional Securities is subject to the satisfaction or waiver
by each Purchaser, at or before any Subsequent Closing, of each of the following
conditions:
(a) Initial Closing. The Initial Closing shall have occurred.
(b) Subsequent Closings. With respect to the Third Tranche, the
Second Closing shall have occurred and with respect to the Optional Closing, the
Second Closing and the Third Closing shall have occurred;
(c) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct as of the date when made
and as of the Additional Closing Date, as though made on and as of such date,
except where the event causing such representation or warranty to be untrue or
incorrect would not result in a Material Adverse Effect;
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Debentures, the
Warrants and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to any Subsequent Closing Date;
(e) Registration Statements. With respect to the Optional
Closing, the Registration Statement with respect to the Underlying Shares
issuable on conversion of all Debentures and with respect to the Warrant Shares
issuable upon exercise of all Warrants shall have been declared effective under
the Securities Act by the Commission; and on the Optional Closing Date such
Registration Statement shall be effective, not subject to any stop order and not
be subject to any suspension pursuant to Section 3(p) of the Registration Rights
Agreement, and shall have been effective and shall not have been subject to any
stop order for the 30 Trading Days prior to the Optional Closing Date and no
stop order shall be pending or threatened as of the Optional Closing Date;
(f) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement, the Debentures, the Warrants or the Registration
Rights Agreement relating to the issuance, conversion or exercise of any of the
Securities;
-25-
<PAGE> 27
(g) Litigation; Proceedings. No action, suit, notice of
violation, proceeding or investigation shall have been instituted or threatened
against the Company which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect;
(h) Management. In the reasonable judgment of each Purchaser,
there have been no substantial changes in the senior management of the Company,
and for changes which could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect;
(i) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on The
Nasdaq Small-Cap Market (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company);
(j) Listing of Common Stock. The Common Stock shall have been at
all times since the Initial Closing Date listed for trading on The Nasdaq
Small-Cap Market and the Company shall have no knowledge of any action or
proceeding, pending or threatened, that may result in the delisting of the
Common Stock from the Nasdaq Small-Cap Market;
(k) Change of Control. No Change of Control shall have occurred
since the Initial Closing Date;
(l) Legal Opinion. The Company shall have delivered to the
Purchasers the opinion of the Company's legal counsel, in substantially the form
annexed hereto as Exhibit D, dated the Additional Closing Date;
(m) Required Approvals. All Required Approvals shall have been
obtained;
(n) Shareholder Approval. The Company shall have obtained
Shareholder Approval.
(o) Shares of Common Stock. On any Subsequent Closing Date the
Company shall have duly reserved the number of Underlying Shares and Warrant
Shares required by this Agreement to be reserved for issuance upon conversion or
exercise of any Additional Securities, as applicable.
(p) Delivery of Securities. The Company shall have delivered to
each Purchaser or such Purchaser's designee the Additional Securities,
registered in the name of such Purchaser, and in form satisfactory to such
Purchaser;
(q) Performance of Conversion/Exercise Obligations. The Company
shall have delivered Underlying Shares upon conversion of the Debentures and
otherwise performed
-26-
<PAGE> 28
its obligations in accordance with the terms, conditions and timing requirements
of each Debenture;
(r) Common Stock Price; Trading Volume. For each of the twenty
consecutive Trading Days immediately preceding any Subsequent Closing Date (i)
the Per Share Market Value (as defined in the Debentures) shall not have been
less than $1.75 and (ii) the trading volume of the Common Stock shall have been
at least 40,000 shares per day;
(s) Adverse Changes. During the period which is ten consecutive
Trading Days prior to any Subsequent Closing Date, the Per Share Market Value of
the Common Stock shall not have decreased by more than 50% from the highest Per
Share Market Value during such period; provided, however, that if the Per Share
Market Value shall have so decreased by more than 50%, but shall have
subsequently increased so that on such Subsequent Closing Date it has been, for
the three consecutive Trading Days immediately prior to such Subsequent Closing
Date, no more than 25% below the highest Per Share Market Value during such
period, then this condition shall be satisfied;
(t) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E annexed hereto, shall have been delivered
to and acknowledged in writing by the Company's transfer agent; and
(u) Officer's Certificate. On each Subsequent Closing Date the
Company shall deliver to the Purchasers an Officer's Certificate dated as of
such Subsequent Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such Subsequent Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
such Subsequent Closing Date.
-27-
<PAGE> 29
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. (a) The Company shall pay the reasonable legal
fees and expenses of Stroock & Stroock & Lavan LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement and the other Transaction Documents, which legal fees shall not
exceed $15,000 in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Transaction Documents. The Company
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by the Company incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other Transaction Documents. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Securities
pursuant to the Transaction Documents.
(b) The Company shall pay Libra Finance S.A. at the Initial Closing and
at each Subsequent Closing a fee equal to 8% of the aggregate principal amount
of Debentures sold at such closing. Libra Finance S.A. is an intended
third-party beneficiary of this Section 5.1(b).
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the other Transaction Documents, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Purchaser at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
-28-
<PAGE> 30
Team Communications Group, Inc.
12300 Wilshire Boulevard
Los Angeles, California 90025
Attention: Drew Levin
Telephone No.: (310) 442-3500
Facsimile No.: (310) 442-3501
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Purchaser shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Facsimile No.: (212) 806-6006. Copies of notices to
the Company shall be sent to Kelly Lytton Mintz & Vann LLP, 1900 Avenue of the
Stars, Suite 1450, Los Angeles, California 90067, Attention: Bruce Vann Esq.,
Facsimile No.: (310) 277-5953.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter. Notwithstanding the foregoing, no
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Securities outstanding. The Company shall not offer or pay
any consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any assignee must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities or transfer
or assign rights under the Registration Rights Agreement.
-29-
<PAGE> 31
5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without regard to
the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations, warranties and
provisions contained in this Agreement shall survive the delivery of the
Securities pursuant to this Agreement and each Closing hereunder and any
conversion of the Debentures or exercise of the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other Party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent unless otherwise required by
law, in which case the Company shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.
5.12 Consent to Jurisdiction; Attorneys' Fees (a) The Company
(including, but not limited to, its affiliates, subsidiaries, officers,
directors and controlling persons) and each Purchaser hereby (i) irrevocably
submits to the exclusive jurisdiction of any New York State court or Federal
court sitting in the Borough of Manhattan, The City of New York in any action
related to, connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Company subsequent to the purchase by such Purchaser or
Persons claimed to be affiliated with such Purchaser, (ii) agrees that all
claims in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum and
(iv) consents to the service of process by certified mail, return
-30-
<PAGE> 32
receipt requested. Nothing herein shall affect the right of any party to serve
legal process in any manner permitted by law or affect its right to bring any
action in any other court.
(b) In connection with any dispute between the Company and any
Purchaser, related to, connected with or arising out of, in whole or in part,
the Transaction Documents including, but not limited to, transactions in the
securities of the Company subsequent to the purchase, by a Purchaser or Persons
claimed to be affiliated to a Purchaser, the prevailing party shall be awarded
all reasonable attorneys' fees and expenses incurred by it. In that connection
fees and expenses actually paid by a party in connection with the litigation of
any dispute shall be deemed presumably reasonable.
(c) In the event that any Purchaser or any Person claimed to be
affiliated or associated with such Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including shareholders of the Company, in connection with or as a result of any
matter referred to in the Transaction Documents, the Company will reimburse such
Purchaser and/or those claimed to be affiliated or associated with such
Purchaser for its legal fees and expenses and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as those
fees and expenses are incurred; provided, however, that if at the conclusion of
such action, proceeding or investigation it shall be finally judicially
determined by a court of competent jurisdiction that indemnity for such fees and
expenses is contrary to law, or that such Purchaser is not the prevailing party
then in that event, such Purchaser and/or any other Person having received such
advances of fees and expenses shall reimburse the Company in full for the sums
advanced.
(d) The provisions of this Section 5.12 shall survive any termination or
completion of the Transaction Documents.
5.13 Waiver of Jury Trial (a) The parties hereto each waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to the Transaction Documents, or the transactions
contemplated by the Transaction Documents, in any action, proceeding or other
litigation of any type brought by any of the parties against any other party or
parties, whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be tried
by a court trial without a jury. Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this Section 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof or
thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any termination or
completion of the Transaction Documents.
-31-
<PAGE> 33
5.14 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents and injunctive relief. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation or injunctive relief
the defense that a remedy at law would be adequate.
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
-32-
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
TEAM COMMUNICATIONS GROUP, INC.
By:
--------------------------------------
Name:
Title:
AUSTINVEST ANSTALT BALZERS
By:
--------------------------------------
Name:
Title:
ESQUIRE TRADE & FINANCE INC.
By:
--------------------------------------
Name:
Title:
AMRO INTERNATIONAL, S.A.
By:
--------------------------------------
Name:
Title:
NESHER INC.
By:
--------------------------------------
Name:
Title:
-33-
<PAGE> 35
Schedule 1
<TABLE>
<CAPTION>
Principal Amount of
Debentures Purchased Number of Warrants
Name of Investor in Initial Closing Purchased in Initial Closing
- ---------------- -------------------- ----------------------------
<S> <C> <C>
Austinvest Anstalt Balzers $292,190.00 29,219
Esquire Trade & Finance Inc. $292,190.00 29,219
Amro International, S.A. $212,500.00 21,250
Nesher Inc. $ 53,120.00 5,312
</TABLE>
-34-
<PAGE> 1
EXHIBIT 4.19
EXHIBIT A TO THE SECURITIES PURCHASE AGREEMENT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION 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.
TEAM COMMUNICATIONS GROUP, INC.
(Incorporated in the State of California)
8% CONVERTIBLE DEBENTURE DUE 2002
No. _______________ Principal Amount U.S. $[ ]
Original Issue Date: January 28, 1999
FOR VALUE RECEIVED, Team Communications Group, Inc., a corporation duly
incorporated and existing under the laws of the State of California (the
"Company"), hereby promises to pay to the order of
________________________________, or registered assigns (hereinafter, the
"Holder"), the principal sum of [ ] ($[ ]) United States Dollars on January 27,
2002 (the "Maturity Date"), subject to earlier conversion or redemption as
provided herein. The Debentures will be convertible into common stock, no par
value per share, of the Company on the terms and subject to the conditions
hereinafter set forth at any time after the date hereof. Interest shall be paid
on the unpaid principal balance of this Debenture at the rate of 8% per annum
from the date hereof, payable, in the manner set forth below, upon conversion,
redemption or maturity of this Debenture to the person that is the Holder on the
date of such event. Interest hereon shall be calculated on the basis of a 360
day year consisting of twelve 30-day months.
1. General. (a) This Debenture is one of a duly authorized issue of
Debentures of the Company in original aggregate principal amount of $2,000,000
designated as its 8% Convertible Debenture due 2002 (herein called the
"Debentures"), issued pursuant to the authorization of the Board of Directors of
the Company and issued pursuant to a Securities Purchase Agreement, dated
January 28, 1999, by and among the Company and the Purchasers identified therein
(the "Securities Purchase Agreement"). The Securities Purchase Agreement
contains certain additional terms that are binding upon the Company and each
Holder of the Debentures.
(b) The Debentures are issuable, without coupons, in principal
denominations of U.S. $10.00 and integral multiples thereof. The Debentures, and
transfers thereof, shall be in registered form as provided in Section 4 hereof.
The registered holder of a Debenture shall (to
<PAGE> 2
the fullest extent permitted by applicable law) be treated at all times, by all
persons and for all purposes as the absolute owner of such Debenture, regardless
of any notice of ownership, theft or loss or of any writing thereon.
2. Principal Payment. Payment of the principal of this Debenture shall
be made upon presentation of this Debenture at the Company's principal office
for surrender upon payment in full. The Company may not prepay all or any
portion of this Debenture.
3. Interest. Each Debenture shall be entitled to receive cumulative
interest at the rate of 8% per annum, compounded semi-annually, in cash, on the
principal amount thereof. Such interest shall be due and payable upon
conversion, redemption or maturity of this Debenture. Interest shall accrue from
the Original Issue Date (as defined herein), whether or not earned or declared,
until maturity or such time as the Debenture has been converted or redeemed as
herein provided. The interest so payable will be paid to the person in whose
name the Debentures (or one or more predecessor shares) are registered on the
records of the Company regarding registration and transfers of the Debentures;
provided, however, that the Company's obligation to a transferee of a Debenture
arises only if such transfer, sale or other disposition is made in accordance
with the terms and conditions hereof and the Securities Purchase Agreement.
4. Transfers. The Debentures have been issued subject to investment
representations of the original purchaser and may be transferred or exchanged
only in compliance with the Securities Act of 1933, as amended, and applicable
state securities laws. Prior to due presentment for transfer of each Debenture,
the Company may treat the Holder as the owner thereof for the purpose of
receiving payments as herein provided and all other purposes, and the Company
shall not be affected by any notice to the contrary.
5. Conversion at the Option of the Holder. (a) (i) The Debentures shall
be convertible into shares of Common Stock (subject to Section 5(a)(ii) and
Section 5(a)(iii)) at the Conversion Ratio (as defined in Section 9) at the
option of the Holder in whole or in part at any time after the Issue Date. The
Holders shall effect conversions by surrendering the Debentures to be converted
to the Company, together with the form of conversion notice attached hereto as
Exhibit 1 (the "Conversion Notice"). The Conversion Notice may be delivered by
facsimile, with the Debenture to follow within three Trading Days. Each
Conversion Notice shall specify the principal amount of Debentures to be
converted. The date on which such conversion is to be effected shall be the date
the Holder delivers such Conversion Notice by facsimile (the "Conversion Date").
Subject to Sections 5(a)(ii), 5(b) and 5(k) hereof, each Conversion Notice, once
given, shall be irrevocable. If the Holder is converting less than all of the
principal amount represented by the Debenture tendered by the Holder with the
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall promptly deliver to such Holder, at the expense of
the Company, (in the manner and within the time set forth in Section 5(b)) a new
Debenture representing the unconverted principal amount, to the same extent as
if the Debenture theretofore representing such unconverted principal amount had
not been surrendered on conversion.
<PAGE> 3
(ii) If on the Conversion Date applicable to any conversion, (A)
the Common Stock is then listed for trading on the Nasdaq National
Market, the New York Stock Exchange, the American Stock Exchange or The
Nasdaq Small Cap Market, (B) the Conversion Price then in effect is such
that the aggregate number of shares of Common Stock that would then be
issuable upon conversion of all the outstanding Debentures, together
with any shares of Common Stock previously issued upon conversion of
Debentures, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Original Issue Date (the "Issuable Maximum"),
and (C) the Company has not previously obtained (or attempted pursuant
to clause (i) of this subsection to obtain) Shareholder Approval (as
defined below), then the Company shall issue to any Holder so requesting
conversion of Debentures its pro rata portion of the Issuable Maximum in
the same ratio that the principal amount of Debentures held by any such
Holder bears to the aggregate principal amount of Debentures then
outstanding and, with respect to the aggregate principal amount of the
Debentures that remains outstanding after such issuance (the "Remaining
Principal Amount"), the Company shall at the Holder's request, (x) as
promptly as possible but in no event later than 60 days after such
Conversion Date, convene a meeting of the holders of the Common Stock
and use its best efforts to obtain the Shareholder Approval or a waiver
of such approval from The Nasdaq Stock Market or the appropriate
exchange and (y) (1) as promptly as possible from time to time, after a
written request by the Holder, issue shares of Common Stock at a
Conversion Price equal to the Per Share Market Value on the Trading Day
immediately preceding the date of such request for all or a portion of
Remaining Principal Amount (plus any accrued interest thereon) held by
such Holder (whether or not subject to the Conversion Notice specified
above) or (2) as promptly as possible but in any event within seven days
after a request by the Holder redeem all or a portion of the Remaining
Principal Amount (plus any accrued interest thereon) to which such
Conversion Notice applies, for an amount, paid in cash, equal to the
greater of (A) the aggregate principal amount of such Debentures, plus
accrued and unpaid interest, multiplied by 130%, or (B) the applicable
Conversion Ratio as of the Conversion Date multiplied by the average Per
Share Market Value for the five Trading Days immediately preceding the
Conversion Date or the date of payment, whichever is greater. If the
Holder has requested that the Company redeem Debentures pursuant to this
Section and the Company fails for any reason to pay the redemption
price, as calculated pursuant to the immediately preceding sentence,
within seven days after such notice is deemed delivered pursuant to the
preceding sentence, the Company will pay interest on the redemption
price at a rate of 15% per annum, in cash to such Holder, accruing from
such seventh day until the redemption price and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). "Shareholder Approval" means the approval
by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Company held in
accordance with the Company's articles of incorporation and by-laws, of
the issuance by the Company of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of the Debentures
into Common Stock at a price less than the greater of the book or market
value on the Original Issue Date as and to the extent required pursuant
to Rule 4460(i) of
<PAGE> 4
The Nasdaq Stock Market, Inc.'s Marketplace Rules (or any successor or
replacement provision thereof).
(iii) In no event shall a Holder be permitted to convert in
excess of such principal amount of Debentures upon the conversion of
which, (x) the number of shares of Common Stock owned by such Holder
(other than shares of Common Stock issuable upon conversion of
Debentures or upon exercise of the Warrants (as defined in the
Securities Purchase Agreement) plus (y) the number of shares of Common
Stock issuable upon such conversion of such Debentures, would be equal
to or exceed (z) 9.999% of the number of shares of Common Stock then
issued and outstanding, including shares issuable on conversion of the
Debentures held by such Holder after application of this Section
5(a)(iii). To the extent that the limitation contained in this Section
5(a)(iii) applies, the determination of whether Debentures are
convertible (in relation to other securities owned by a Holder) and of
which Debentures are convertible shall be in the sole discretion of such
Holder, and the submission of Debentures for conversion shall be deemed
to be such Holder's determination of whether such Debentures are
convertible (in relation to other securities owned by a Holder) and of
which Debentures are convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. Nothing contained
herein shall be deemed to restrict the right of a Holder to convert such
Debentures at such time as such conversion will not violate the
provisions of this paragraph. The provisions of this Section 5(a)(iii)
may be waived by a Holder of Debentures as to itself (and solely as to
itself) upon not less than 60 days prior notice to the Company, and the
provisions of this Section 5(a)(iii) shall continue to apply until such
60th day (or later, if stated in the notice of waiver). No conversion in
violation of this paragraph but otherwise in accordance with this
Debenture shall affect the status of the securities issued upon such
conversion as validly issued, fully-paid and nonassessable.
(b) (i) Not later than three (3) Trading Days after any Conversion Date,
the Company will deliver to the applicable Holder by express courier (A) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Securities Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of Debentures (subject to reduction pursuant
to Section 5(a)(ii) and Section 5(a)(iii)) and (B) a new Debenture representing
the unconverted principal amount. If in the case of any Conversion Notice such
Debenture or Debentures are not delivered to or as directed by the applicable
Holder by the seventh Trading Day after the Conversion Date (the "Delivery
Date"), the holder shall be entitled by written notice to the Company at any
time on or before its receipt of such Debenture or Debentures thereafter, to
rescind such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion, whereupon the Company and the Holder shall
each be restored to their respective positions immediately prior to the delivery
of such notice of revocation, except that any amounts described in Sections
5(b)(ii) and (iii) shall be payable through the date notice of rescission is
given to the Company.
<PAGE> 5
(ii) The Company understands that a delay in the delivery of the
shares of Common Stock upon conversion of Debentures and failure to
deliver a new Debenture representing the unconverted principal amount
beyond the Delivery Date could result in economic loss to the Holder. If
the Company fails to deliver to the Holder such certificate or
certificates pursuant to this Section hereunder by the Delivery Date for
any reason other than the failure to obtain Shareholder Approval as
provided in Section 5(a)(ii), the Company shall pay to such Holder, in
cash, an amount per Trading Day for each Trading Day until such
certificates are delivered, together with interest on such amount at a
rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to (i) 1% of the aggregate
principal amount of the Debentures, plus the accrued and unpaid interest
thereon, requested to be converted for the first four Trading Days after
the Delivery Date and (ii) 2% of the aggregate principal amount of the
Debentures, plus the accrued and unpaid interest thereon, requested to
be converted for each Trading Day thereafter (which amounts shall be
paid as liquidated damages and not as a penalty). If the Company fails
to deliver to the Holder such certificate or certificates pursuant to
this Section prior to the 15th Trading Day after the Conversion Date,
the Company shall, at the Holder's option, redeem in cash, from funds
legally available therefor at the time of such redemption, such
principal amount of Debentures then held by such Holder, plus the
accrued and unpaid interest thereon, as requested by such Holder, in
cash. The redemption price shall be equal to the aggregate principal
amount of Debentures then held by such Holder, plus accrued and unpaid
interest thereon, multiplied by the average Per Share Market Value for
the five Trading Days immediately preceding (A) the Conversion Date or
(B) the date of payment in full by the Company of such prepayment price,
whichever is greater, multiplied by the Conversion Ratio calculated on
the Conversion Date. If the Holder has requested that the Company redeem
Debentures pursuant to this Section and the Company fails for any reason
to pay the redemption price, as calculated pursuant to the immediately
preceding sentence, within seven days after such notice is deemed
delivered pursuant to Section 5(a)(i), the Company will pay interest on
the redemption price at a rate of 15% per annum, in cash to such Holder,
accruing from such seventh day until the redemption price and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). Nothing herein shall limit a
Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon conversion
within the period specified herein (including, without limitation,
damages relating to any purchase of shares of Common Stock by such
Holder to make delivery on a sale effected in anticipation of receiving
certificates representing shares of Common Stock upon conversion, such
damages to be in an amount equal to (A) the aggregate amount paid by
such holder for the shares of Common Stock so purchased minus (B) the
aggregate amount of net proceeds, if any, received by such Holder from
the sale of the shares of Common Stock issued by the Company pursuant to
such conversion), 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).
<PAGE> 6
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i) by the Delivery Date and if
after the Delivery Date the Holder purchases (in an open market
transaction or otherwise) shares of 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
Company shall pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (A) the
Holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (B) the aggregate
principal amount of the Debentures for which such conversion was not
timely honored, together with interest thereon at a rate of 15% per
annum, accruing until such amount and any accrued interest thereon is
paid in full (which amount shall be paid as liquidated damages and not
as a penalty). For example, if the Holder purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 aggregate principal amount
of the Debentures, the Company shall be required to pay the Holder
$1,000, plus interest. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the
Buy-In.
(c) (i) The conversion price for the Debentures (the "Conversion Price")
in effect on any Conversion Date shall be the lesser of (A) an amount equal to
90% of the average Per Share Market Value for five consecutive Trading Days
immediately prior to the Original Issue Date and (B) an amount equal to 85% of
the Per Share Market Value for the Trading Day having the lowest Per Share
Market Value during the five Trading Days prior to the Conversion Date (the
"Look Back Period"), except that if during any period (a "Black-out Period"), a
Holder is unable to trade any Common Stock issued or issuable upon conversion of
Debentures immediately due to the postponement of filing or delay or suspension
of effectiveness of a registration statement or because the Company has
otherwise informed such Holder that an existing prospectus cannot be used at
that time in the sale or transfer of such Common Stock, such Holder shall have
the option but not the obligation on any Conversion Date within ten Trading Days
following the expiration of the Black-out Period of using the Conversion Price
applicable on such Conversion Date or any Conversion Price selected by such
Holder that would have been applicable had such Conversion Date been at any
earlier time during the Black-out Period or within the ten Trading Days
thereafter. Beginning on the 150th day following the Original Issue Date, the
number of Trading Days used in clause (B) above in calculating the Look Back
Period shall be increased by two Trading Days per month up to a maximum of 12
Trading Days.
Notwithstanding the foregoing, if the Company has failed to file a
registration statement as required by the Registration Rights Agreement within
30 days after the date (the "Filing Date") it was required to file such
registration statement pursuant to the Registration Rights Agreement or if any
registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement has not been declared effective by the Commission
within 30 days after the date it was required to be declared effective by the
Commission pursuant to the Registration Rights Agreement, or if the Company has
allowed any registration statement required to be filed pursuant to the
Registration Rights Agreement to lapse for a period of 30
<PAGE> 7
consecutive days, then the Conversion Price shall, immediately after such 30th
day, as applicable, be decreased by 3% and shall be further decreased by an
additional 0.1% for each subsequent day thereafter until such time as such
registration statement is filed, declared effective or had its effectiveness
reinstated, as applicable; provided, that if any such registration statement is
not effective within 180 days after the Filing Date, then the Conversion Price
shall be decreased by an additional 1.25% for each seven calendar days following
such 180th day and continuing until any such registration statement is
effective; provided further, that the Conversion Price shall not be decreased by
more than 50%. The provisions of this Section are not exclusive and shall in no
way limit the Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other
equity security payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c)
combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, the applicable 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 5(c)(ii) shall become effective
immediately after the record date for the determination of shareholders
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 Company, at any time while Debentures are
outstanding, shall sell or issue additional shares of Common Stock or
rights or warrants to acquire shares of Common Stock at a price per
share less than the Per Share Market Value at the record date mentioned
below, excluding any rights of the holder of the Debentures or the
holders of the Warrants issued pursuant to the Securities Purchase
Agreement to acquire Common Stock, the applicable Conversion Price shall
be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, 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 Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, rights or warrants
plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such shares, rights
or warrants are issued, and shall become effective immediately after the
issuance of such shares, rights or warrants or, if such rights or
warrants are issued to shareholders of the Company, the record date for
the determination of shareholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in
the applicable Conversion Price pursuant to this Section 5(c)(iii), if
any such right or warrant shall expire and shall not have been
<PAGE> 8
exercised, the applicable Conversion Price shall immediately upon such
expiration be re-computed and effective immediately upon such expiration
be increased to the price which it would have been (but reflecting any
other adjustments in the applicable Conversion Price made pursuant to
the provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the applicable Conversion Price made
upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to
holders of Debentures) evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii) and (iii) above), then in each such
case the applicable Conversion Price at which the Debentures shall
thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed
for determination of shareholders entitled to receive such distribution
by a fraction of which the denominator shall be the Per Share Market
Value determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value 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 Common Stock as determined by the Board of
Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent of the net assets of the Company,
such fair market value shall be determined by an Independent Appraiser
(as defined below) selected in good faith by the holders of a majority
in interest of the principal amount of the Debentures then outstanding;
and provided, further, that the Company, after receipt of the
determination by such Independent Appraiser shall have the right to
select an additional Independent Appraiser, in good faith, in which case
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures 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.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the applicable Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii) or (iv) (for purposes of this Section
5(c)(vi), each an "adjustment"), the Company shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Board made any
determination hereunder), and the applicable Conversion Price after
giving effect to such adjustment, and shall cause
<PAGE> 9
copies of such certificate to be delivered to each Holder promptly after
each adjustment. Any dispute between the Company and the Holders with
respect to the matters set forth in such certificate may at the option
of the Holders be submitted to one of the national accounting firms
currently known as the "big five" selected by the holders of a majority
in interest of the principal amount of the Debentures then outstanding,
provided that the Company shall have ten days after receipt of notice
from such Holders of their selection of such firm to object thereto, in
which case the holders of a majority in interest of the principal amount
of the Debentures then outstanding shall select another such firm and
the Company shall have no such right of objection. The firm selected by
the holders of a majority in interest of the principal amount of the
Debentures then outstanding as provided in the preceding sentence shall
be instructed to deliver a written opinion as to such matters to the
Company and the Holders within thirty days after submission to it of
such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by
the Company.
(vii) In case the Company after the Original Issue Date shall do
any of the following (each, a "Triggering Event") (a) consolidate with
or merge into any other person and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) permit any other person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving person but,
in connection with such consolidation or merger, any capital stock of
the Company shall be changed into or exchanged for securities of any
other person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other person, or
(d) effect a capital reorganization or reclassification of its capital
stock, the holders of the Debentures then outstanding shall have the
right thereafter to convert such shares only 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 Triggering Event, and the
holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common
Stock of the Company into which such Debentures could have been
converted immediately prior to such Triggering Event would have been
entitled; provided, however, that each Holder shall have the option to
require the Company to redeem, from funds legally available therefor at
the time of such redemption, such principal amount of its Debentures at
a price equal to the aggregate principal amount of Debentures to be
redeemed, plus accrued and unpaid interest thereon, multiplied by the
product of (i) the average Per Share Market Value for the five Trading
Days immediately preceding (1) the effective date, the date of the
closing or the date of the announcement, as the case may be, of the
Triggering Event triggering such redemption right or (2) the date of
payment in full by the Company of the redemption price hereunder,
whichever is greater, and (ii) the Conversion Ratio calculated on the
date of the closing or the effective date, as the case may be, of the
Triggering Event triggering such redemption right, as the case may be.
The entire redemption price shall be paid in cash. If the Holder has
requested that the Company redeem Debentures pursuant to this Section
and the Company fails for any reason to pay the redemption price, as
calculated pursuant to the immediately preceding sentence, within seven
days after such notice is deemed delivered pursuant to the
<PAGE> 10
preceding sentence, the Company will pay interest on the redemption
price at a rate of 15% per annum, in cash to such Holder, accruing from
such seventh day until the redemption price and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). The terms of any such Triggering Event
shall include such terms so as to continue to give to the holder of
Debentures the right to receive the securities, cash or property set
forth in this Section 5(c)(vii) upon any conversion or redemption
following such Triggering Event. This provision shall similarly apply to
successive Triggering Events.
(viii) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company 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; or
D. the approval of any shareholders of the Company
shall be required in connection with any
Triggering Event; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding
up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
Holders of Debentures at their last addresses as they shall appear upon the
stock books of the Company, at least 30 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 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 Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, 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. Holders are entitled
to convert Debentures during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
<PAGE> 11
(d) If at any time conditions shall arise by reason of action taken by
the Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the holders of Debentures (different than or distinguished
from the effect generally on rights of holders of any class of the Company's
capital stock) or if at any time any such conditions are expected to arise by
reason of any action contemplated by the Company, the Company shall mail a
written notice briefly describing the action contemplated and the material
adverse effects of such action on the rights of the holders of Debentures at
least 10 calendar days prior to the effective date of such action, and an
Independent Appraiser selected by the holders of majority in interest of the
principal amount of the Debentures then outstanding shall give its opinion as to
the adjustment, if any (not inconsistent with the standards established in this
Section 5), of the Conversion Price (including, if necessary, any adjustment as
to the securities into which Debentures may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Debentures; provided, however, that the Company, after
receipt of the determination by such Independent Appraiser, shall have the right
to select an additional Independent Appraiser, in good faith, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Independent Appraiser. The Board of Directors shall make the adjustment
recommended forthwith upon the receipt of such opinion or opinions or the taking
of any such action contemplated, as the case may be; provided, however, that no
such adjustment of the Conversion Price shall be made which in the opinion of
the Independent Appraiser(s) giving the aforesaid opinion or opinions would
result in an increase of the Conversion Price to more than the Conversion Price
then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures free from preemptive rights or any
other actual contingent purchase rights of persons other than the holders of
Debentures, not less than such number of shares of Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Securities Purchase Agreement) be issuable (taking into
account the adjustments and restrictions of Section 5(c)) upon the conversion of
all outstanding Debentures. The Company 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 freely tradable.
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the holder of a Debenture
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the holders thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate.
<PAGE> 12
(h) Debentures converted into Common Stock shall be canceled and retired
by the Company.
(i) Any and all notices or other communications or deliveries to be
provided by the holders of Debentures hereunder, including, without limitation,
any Conversion Notice, shall be in writing and delivered personally, by
facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the President and to the Secretary of the Company
at the facsimile telephone number or address of the principal place of business
of the Company as set forth in the Securities Purchase Agreement. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or sent by
a nationally recognized overnight courier service, addressed to each Holder of
Debentures at the facsimile telephone number or address of such holder appearing
on the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earlier of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:00 p.m., New York City time, (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:00 p.m., New
York City time, on any date and earlier than 11:59 p.m., New York City time, on
such date, (iii) receipt, if sent by a nationally recognized overnight courier
service, or (iv) actual receipt by the party to whom such notice is required to
be given.
(j) In the event a Holder shall elect to convert any Debentures as
provided herein, the Company cannot refuse conversion based on any claim that
such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of said Debentures shall have
issued and the Company posts a surety bond for the benefit of such Holder in the
amount of the principal amount of Debentures sought to be converted, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Holder in the event
it obtains judgment.
(k) If on the Conversion Date, the average Per Share Market Value for
the five Trading Days immediately preceding the Conversion Date is equal to or
less than $1.50 per share, then the Company may elect, in lieu of delivering the
shares of Common Stock, to redeem, from funds legally available therefor at the
time of such redemption, such principal amount of Debentures tendered by such
Holder for Conversion, in cash. The redemption price shall be equal to the
aggregate principal amount of Debentures then held by such Holder, plus accrued
and unpaid interest thereon, multiplied by 115%. The Company shall deliver
written notice of its election to redeem Debentures pursuant to this Section
5(k) providing for a redemption date of not less than five Trading Days after
the Conversion Date and not more than ten Trading Days after the Conversion
Date. If the Company fails for any reason to pay the redemption price, as
calculated pursuant to the immediately preceding sentence, on the redemption
date the Company will pay interest on the redemption price at a rate of 15% per
annum, in cash to such Holder, accruing from such seventh day until the
redemption price and any accrued interest thereon is
<PAGE> 13
paid in full (which amount shall be paid as liquidated damages and not as a
penalty). The Holder shall be entitled by written notice to the Company at any
time after receipt of the redemption notice and prior to the redemption date, to
rescind its Conversion Notice, in which event the Company shall immediately
return the Debentures tendered for conversion, whereupon the Company and the
Holder shall each be restored to their respective positions immediately prior to
the delivery of such notice of revocation, except that any amounts described in
Sections 5(b)(ii) and (iii) shall be payable through the date notice of
rescission is given to the Company
6. Mandatory Conversion. (a) From and after the date of effectiveness of
the Registration Statement (as defined in the Registration Rights Agreement) and
for so long as such Registration Statement remains effective, and in the event
that the Per Share Market Value is at least $4.00 per share and less than $5.00
per share for five out of any seven consecutive Trading Days, subject to
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations, and so long as the average daily trading volume during the
preceding seven Trading Days is at least 50,000 shares per day, then the Company
shall have the right to cause the Holders to convert up to $1,000,000 principal
amount of Debentures, in the aggregate, into shares of Common Stock at the
applicable Conversion Price, in accordance with this Section 6 (such date being
referred to herein as the "Initial Mandatory Conversion Date"). Each Holder
shall be required to convert Debentures pursuant to this Section 6(a) in the
same ratio the aggregate principal amount of Debentures held by such Holder
bears to the aggregate amount of Debentures outstanding prior to such
conversion.
(b) From and after the date of effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement) and for so long as
such Registration Statement remains effective, and in the event that the Per
Share Market Value is at least $5.00 per share for five out of any seven
consecutive Trading Days, subject to adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations and so long as the
average daily trading volume during the preceding seven Trading Days is at least
50,000 shares per day, then the Company shall have the right to cause the
Holders to convert the remaining outstanding aggregate principal amount of
Debentures into shares of Common Stock at the applicable Conversion Price, in
accordance with this Section 6 (such date being referred to herein as the "Final
Mandatory Conversion Date", each of the Initial Mandatory Conversion Date and
the Final Mandatory Conversion Date collectively referred to herein as a
"Mandatory Conversion Date"). Each Holder shall be required to convert
Debentures pursuant to this Section 6(b) in the same ratio the aggregate
principal amount of Debentures held by such Holder bears to the aggregate amount
of Debentures outstanding prior to such conversion. For the avoidance of doubt,
the Company and each Holder understands (i) that the Per Share Market Value
referenced in sub-clause (a) above (at least $4.00 per share and less than $5.00
per share for five out of any seven consecutive Trading Days) may not occur and
(ii) the Company may choose not to exercise any of its rights under sub-clause
(a) above. In either case, once the conditions of this sub-clause (b) are met,
the Company may exercise its right to cause the Holders to convert all of the
outstanding aggregate principal amount of Debentures pursuant to the provisions
of this sub-clause (b).
(c) The Company will send each Holder written notice of any Mandatory
Conversion Date and the place designated for mandatory conversion of the
Debentures pursuant to this
<PAGE> 14
Section 6 (the "Mandatory Conversion Notice"). The Mandatory Conversion Notice
need not be given in advance of the occurrence of the Mandatory Conversion Date.
The Mandatory Conversion Notice shall be sent by facsimile to the facsimile
number in the Securities Purchase Agreement or by first class or registered
mail, postage prepaid, to each Holder at the address indicated in the Securities
Purchase Agreement. Upon receipt of such notice, each Holder shall surrender the
Debentures subject to such conversion pursuant to Section 6(a) or 6(b), as the
case may be, to the Company at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common Stock to
which such holder is entitled as a result of such Mandatory Conversion. On the
Mandatory Conversion Date, all rights with respect to the Debentures so
converted, including the rights, if any, to receive notices and vote, will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which the Debentures have been converted.
The Company shall deliver to such Holder a certificate or certificates for the
number of full shares of Common Stock into which the Debentures have been
converted and cash as provided herein with respect to any fraction of a share of
Common Stock, in accordance with Section 5(b)(i) hereof as if such Mandatory
Conversion Date were a Conversion Date.
(d) All Debentures that are required to be surrendered for conversion in
accordance with the provisions hereof shall, from and after the Mandatory
Conversion Date, be deemed to have been retired and canceled and the principal
amount of Debentures represented thereby converted into Common Stock for all
purposes, notwithstanding the failure of the Holder to surrender such Debentures
on or prior to such date.
7. Events of Default.
Each of the following shall constitute an event of default ("Event of
Default"), whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
administrative, governmental or non-governmental body or otherwise howsoever:
(a) the Company shall default in any payment of principal of, or
interest on, the Debentures or any other amounts due under the Transaction
Documents when and as due (whether at maturity, upon acceleration or otherwise);
or
(b) the Company shall fail duly to perform or observe any term, covenant
or agreement contained in any of the Debentures or in the Securities Purchase
Agreement or in the Registration Rights Agreement for a period of seven days
after the date on which written notice of such failure shall first have been
given to the Company; or
(c) a final judgment shall be entered by any court against the Company
for the payment of money which together with all other outstanding final
judgments against the Company exceeds $10,000 in the aggregate, or (ii) a
warrant of attachment or execution or similar process shall be issued or levied
against any of the Company's property which exceeds in
<PAGE> 15
value $10,000 in the aggregate, and if, within 30 days after the entry, issue or
levy thereof, such judgment, warrant or process shall not have been paid or
discharged; or
(d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for any
substantial part of the property of it or ordering the winding-up or liquidation
of the affairs of it and such decree or order shall remain unstayed and in
effect for a period of 30 days; or
(e) the Company shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or shall make any general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as they become due or
shall take any corporate action in furtherance of any of the foregoing; or
(f) an event of default, as defined in any indenture or instrument
evidencing or under which the Company shall have outstanding indebtedness for
borrowed money in excess of $10,000, inclusive of accrued interest, accrued
premium, if any, or any additional amounts payable, shall happen and be
continuing and such default shall involve the failure to pay the principal of
such indebtedness (or any part thereof), when due and payable after the
expiration of any applicable grace period with respect thereto, or such
indebtedness shall have been accelerated so that the same shall be or become due
and payable prior to the date on which the same would otherwise have become due
and payable, and failure to pay shall not have been cured by the Company within
30 days after such failure or such acceleration shall not be rescinded or
annulled within 30 days after notice thereof shall have first been given to the
Company; provided that if such event of default under such indenture or
instrument shall be remedied or cured by the Company or waived by the holders of
such indebtedness, then the Event of Default hereunder by reason thereof shall
be deemed likewise to have been thereupon remedied, cured or waived without
further action upon the part of any of the holders of Debentures; or
(g) the Common Stock is delisted from, or trading in the Common Stock
shall have been suspended for more than ten Trading Days on, The Nasdaq
Small-Cap Market or such other principal market or exchange on which the Common
Stock is listed for trading; or
(h) the Company fails to timely deliver the shares of Common Stock to
the Holder or a replacement Debenture representing any unconverted portion of
this Debenture pursuant to this Debenture; or
<PAGE> 16
(i) the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities (as defined in the Registration Rights
Agreement) or the initiation of any proceedings for that purpose.
With the exception of an Event of Default specified in clauses (d) or (e) above,
upon the occurrence and continuance of an Event of Default, the Holder may
declare the principal of and interest on the Debentures and all other amounts
owing under the Transaction Documents to be forthwith due and payable by giving
written notice thereof to the Company without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
the Transaction Documents to the contrary notwithstanding. Upon the occurrence
and continuance of an Event of Default specified in clauses (d) or (e) above,
such principal, interest and other amounts shall thereupon and concurrently
therewith become automatically due and payable all without any action by the
Holder and without presentment, demand, protest or other notice of any kind, all
of which are expressly waived, anything in the Transaction Documents to the
contrary notwithstanding.
Interest on overdue principal and interest (and other amounts, if any)
shall accrue from the date on which such principal and interest (and other
amounts, if any) were due and payable to the date such principal and interest
(and other amounts, if any) are paid or duly provided for, at a rate of 15% per
annum (to the extent payment of such interest shall be legally enforceable).
8. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
"Common Stock" means the common stock, no par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Conversion Ratio" means the number of shares of Common Stock issuable
upon conversion of each Debentures determined by the application of the
following formula where "D" equals the accrued and unpaid interest on the
aggregate principal amount of Debentures so converted as of the Conversion Date:
Principal Amount to be Converted + D
------------------------------------
Conversion Price
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) that is regularly engaged in the business of
appraising the capital stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Company or any
Holder.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
<PAGE> 17
"Original Issue Date" shall mean the date of the first issuance of any
Debentures regardless of the number of transfers of any particular Debentures
and regardless of the number of certificates which may be issued to evidence
such Debentures.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq Small-Cap
Market, the Nasdaq National Market or other registered national stock exchange
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered
national stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market, as reported by NASDAQ or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the over-the-counter quotes on the
Electronic Bulletin Board of the National Association of Securities Dealers,
Inc. for the relevant conversion period, as determined in good faith by the
holder, or (d) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by an Independent Appraiser
selected in good faith by the holders of a majority in interest of the shares of
the Debentures; provided, however, that the Company, after receipt of the
determination by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value of the
Company determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Original Issue Date, by and among the Company and the original
Holders.
"Trading Day" means (a) a day on which the Common Stock is traded on The
Nasdaq Small-Cap Market, the Nasdaq National Market or other registered national
stock exchange on which the Common Stock has been listed, or (b) if the Common
Stock is not listed on The Nasdaq Small-Cap Market, the Nasdaq National Market
or any registered national stock exchange, a day or which the Common Stock is
traded in the over-the-counter market, as
<PAGE> 18
reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Underlying Shares" means the number of shares of Common Stock into
which the Debentures are convertible in accordance with the terms hereof and the
Securities Purchase Agreement.
9. Taxes. The Company shall pay any and all taxes attributable to the
issuance and delivery of Common Stock or other securities upon conversion of the
Debentures.
10. No Impairment. The Company shall not by any action including,
without limitation, amending the articles of incorporation or the by-laws of the
Company, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Debenture, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Company will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Conversion Price, (ii) not
amend or modify any provision of the articles of incorporation or by-laws of the
Company in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Debentures, (iii) take all such action as may be reasonably necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this
Debentures, and (iv) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be reasonably necessary to enable the Company to perform its
obligations under this Debenture.
11. Governing Law. The Debentures shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law.
12. Countersignature and Registration. This Debenture shall not become
valid or obligatory for any purpose until the Debentures shall have been duly
executed by the Company and such signature attested to by an authorized Officer
thereof.
<PAGE> 19
13. Warranty of the Company. The Company hereby certifies and warrants
that all acts, conditions and things required to be done and performed and to
have happened precedent to the creation and issuance of this Debenture, and to
constitute the same as legal, valid and binding obligations of the Company
enforceable in accordance with their terms, have been done and performed and
have happened in due and strict compliance with all applicable laws.
14. Descriptive Headings. The descriptive headings appearing herein are
for convenience of reference only and shall not alter, limit or define the
provisions hereof.
<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed in its corporate name by the manual or facsimile signature of a duly
authorized signatory, as attested to by another duly authorized signatory of the
Company.
Dated: January , 1999
TEAM COMMUNICATIONS GROUP, INC.
By:
--------------------------------------
Name:
Title:
ATTEST:
By:
--------------------------------------
Name:
Title:
<PAGE> 21
EXHIBIT 1
CONVERSION NOTICE
Reference is made to the debenture certificate (the "Debenture Certificate") of
Team Communications Group, Inc., a California corporation (the "Company"). In
accordance with and pursuant to the Debenture Certificate, the undersigned
hereby elects to have the Company convert the principal amount of 8% Convertible
Debentures due 2002 (the "Debentures"), of the Company, indicated below into
shares of Common Stock, no par value per share (the "Common Stock"), of the
Company, by tendering the certificate(s) representing the Debentures specified
below as of the date specified below.
Date of Conversion: _______________________________
Principal amount of Debentures to be converted: _______________________________
Certificate no(s). of Debentures to be converted:_______________________________
Please confirm the following information: _______________________________
Conversion Price: _______________________________
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Debentures are being converted in the following
name and to the following address:
Issue to: _______________________________
_______________________________
_______________________________
_______________________________
Facsimile Number: _______________________________
Authorization: _______________________________
By:
--------------------------------------
Title:
--------------------------------
Dated:
--------------------------------
<PAGE> 1
EXHIBIT 4.20
EXHIBIT B TO THE SECURITIES PURCHASE AGREEMENT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION 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.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
TEAM COMMUNICATIONS GROUP, INC.
Expires January 27, 2002
No. W- New York, New York
January 28, 1999
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, TEAM COMMUNICATIONS GROUP, INC., a California corporation (together
with its successors and assigns, the "Issuer"), hereby certifies that
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to [ ] shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., New York City time, on January 27, 2002 (such period
being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
<PAGE> 2
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank
check.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been cancelled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to the provisions of subsection
(e) of this Section 2, this Warrant may be transferred on the books of the
Issuer by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement,
or an exemption from registration, under the Securities Act and any
applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION 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
<PAGE> 3
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall have
been effectively registered under the Securities Act, (B) upon the
Issuer's receipt of an opinion of counsel, in form and substance
reasonably satisfactory to the Issuer, addressed to the Issuer to the
effect that such restrictions are no longer required to ensure
compliance with the Securities Act or (C) upon the Issuer's receipt of
other evidence reasonably satisfactory to the Issuer that such
registration is not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be
entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legends
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge
in writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
<PAGE> 4
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) Rights and Obligations under the Registration Rights Agreement. This
Warrant and the Warrant Stock are entitled to the benefits and subject to the
terms of the Registration Rights Agreement dated as of even date herewith
between the Issuer and the Holders listed on the signature pages thereof (as
amended from time to time, the "Registration Rights Agreement"). The Issuer
shall keep or cause to be kept a copy of the Registration Rights Agreement, and
any amendments thereto, at its chief executive office and shall furnish, without
charge, copies thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale. (i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event") (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately
<PAGE> 5
prior to the consummation of such Triggering Event in lieu of the Common Stock
issuable upon such exercise of this Warrant prior to such Triggering Event, the
Securities, cash and property to which such Holder would have been entitled upon
the consummation of such Triggering Event if such Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments and increases (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in Section 4 hereof or
(y) to sell this Warrant (or, at such Holder's election, a portion hereof) to
the Person continuing after or surviving such Triggering Event, or to the Issuer
(if Issuer is the continuing or surviving Person) at a sales price equal to the
amount of cash, property and/or Securities to which a holder of the number of
shares of Common Stock which would otherwise have been delivered upon the
exercise of this Warrant would have been entitled upon the effective date or
closing of any such Triggering Event (the "Event Consideration"), less the
amount or portion of such Event Consideration having a fair value equal to the
aggregate Warrant Price applicable to this Warrant or the portion hereof so
sold.
(ii) Notwithstanding anything contained in this Warrant to the contrary,
the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's
cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the
<PAGE> 6
applicable record date, whichever is earlier) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying
the Warrant Price in effect immediately prior to such record date (or if
no such record is taken, then immediately prior to such payment or other
distribution), by a fraction (1) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution, and (2) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately after
such dividend or distribution (plus in the event that the Issuer paid
cash for fractional shares, the number of additional shares which would
have been outstanding had the Issuer issued fractional shares in
connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common Stock
(other than as described in clause (i) of this subsection (c)), or in
the event that the Company shall offer options or rights to subscribe
for shares of Common Stock, or issue any Common Stock Equivalents, to
all of its holders of Common Stock, then on the record date for such
payment, distribution or offer or, in the absence of a record date, on
the date of such payment, distribution or offer, the Holder shall
receive what the Holder would have received had it exercised this
Warrant in full immediately prior to the record date of such payment,
distribution or offer or, in the absence of a record date, immediately
prior to the date of such payment, distribution or offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at any
time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Per Share
Market Value then in effect or without consideration, then the Warrant Price
upon each such issuance shall be adjusted to that price (rounded to the nearest
cent) determined by multiplying the Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus (B) the number
of shares of Common Stock (rounded to the nearest whole share) which the
aggregate consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at a price per share equal to
the Per Share Market Value then in effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
<PAGE> 7
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (Y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Warrant Price then in effect or less than the Per Share Market Value then in
effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
Warrant Price or less than the Per Share Market Value in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received or receivable by the Issuer
for the issuance of such Additional Shares of Common Stock pursuant to such
Common Stock Equivalent. No adjustment of the Warrant Price shall be made under
this subsection (e) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
<PAGE> 8
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received by
the Issuer shall be deemed to be the following: to the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents shall
be issued for a cash consideration, the consideration received by the
Issuer therefor, or if such Additional Shares of Common Stock or Common
Stock Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Common Stock Equivalents are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price, in
any such case excluding any amounts paid or receivable for accrued
interest or accrued dividends and without deduction of any compensation,
discounts, commissions, or expenses paid or incurred by the Issuer for
or in connection with the underwriting thereof or otherwise in
connection with the issue thereof; to the extent that such issuance
shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the fair market value of such
consideration at the, time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so paid
or satisfied. In any case in which the consideration to be received or
paid shall be other than cash, the Board shall notify the Holder of this
Warrant of its determination of the fair market value of such
consideration prior to payment or accepting receipt thereof. If, within
thirty days after receipt of said notice, the Majority Holders shall
notify the Board in writing of their objection to such determination, a
determination of the fair market value of such consideration shall be
made by an Independent Appraiser selected by the Majority Holders with
the approval of the Board (which approval shall not be unreasonably
withheld), whose fees and expenses shall be paid by the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon
<PAGE> 9
conversion, exchange or exercise of any such Common Stock Equivalent
shall no longer be computed as set forth above, and the Warrant Price
shall forthwith be readjusted and thereafter be the price which it would
have been (but reflecting any other adjustments in the Warrant Price
made pursuant to the provisions of this Section 4 after the issuance of
such Common Stock Equivalent) had the adjustment of the Warrant Price
been made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon conversion,
exchange or issuance of such Common Stock Equivalent and thereupon only
the number of Additional Shares of Common Stock actually so issued shall
be deemed to have been issued and only the consideration actually
received by the Issuer (computed as in clause (i) of this subsection
(g)) shall be deemed to have been received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (B) be deemed to include all
shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of Indebtedness (including, without limitation, the
Debentures), shares of Capital Stock or other Securities which are or
may be at any time convertible into or exchangeable for shares of Common
Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (g) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such
<PAGE> 10
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to one of the national accounting firms
currently known as the "big five" selected by the Holder, provided that the
Issuer shall have ten days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection. The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto. The fees
and expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all shares
of Other Common, if any, issued by the Issuer after the Original Issue
Date, except (i) Warrant Stock, (ii) any shares of Common Stock issuable
upon conversion of the Debentures and (iii) any shares of Common Stock
issuable upon exercise of the Stock Options.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership, (iii)
all membership interests or limited liability company interests in any
limited liability company, and (iv) all equity or ownership interests in
any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date and
as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
"Debenture" means any of the certificates representing
$2,000,000 aggregate principal amount of 8% Convertible Debentures of
the Issuer.
"Original Issue Date" means January 28, 1999.
"Common Stock" means the Common Stock, no par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
<PAGE> 11
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares
of Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for Additional Shares of Common Stock.
The term "Convertible Security" means one of the Convertible Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly
engaged in the business of appraising the Capital Stock or assets of
corporations or other entities as going concerns, and which is not
affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means Team Communications Group, Inc., a California
corporation, and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The
Nasdaq Small-Cap Market, the Nasdaq National Market or other registered
national stock exchange on which the Common Stock is then listed or if
there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or
(b) if the Common Stock is not listed then on The Nasdaq Small-Cap
Market, the Nasdaq National Market or any registered national stock
exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by NASDAQ or in the National
Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at
<PAGE> 12
the close of business on such date, or (c) if the Common Stock is not
then reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the holder, or (d) if the Common
Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good
faith by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which case,
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account all
relevant factors determinative of value, and shall be final and binding
on all parties. In determining the fair market value of any shares of
Common Stock, no consideration shall be given to any restrictions on
transfer of the Common Stock imposed by agreement or by federal or state
securities laws, or to the existence or absence of, or any limitations
on, voting rights.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or
other right to purchase or acquire any Security. "Security" means one of
the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of January 28, 1999 among the Issuer and Austinvest
Anstalt Balzers, Esquire Trade & Finance Inc., Amro International, S.A.
and Nesher Inc.
"Stock Options" means options to purchase up to 375,000 shares
of Common Stock issued by the Issuer on the Original Issue Date to
certain members of the Issuer's senior management, as the same may from
time to time be amended, modified or supplemented in accordance with
their terms, provided however, such number may be increased or
decreased, as the case may be, upon the restatement of the Company's
Stock Option Plan, as approved by the shareholders of the Company.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on The Nasdaq Small-Cap Market, the Nasdaq National Market or
other registered national stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not listed on The Nasdaq
Small-Cap Market, the Nasdaq National Market or any registered national
stock exchange, a day or which the Common Stock is traded in the
over-the-counter market, as
<PAGE> 13
reported by the OTC Bulletin Board, or (c) if the Common Stock is not
quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set forth
in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Securities Purchase Agreement, including, without limitation, this
Warrant, and any other warrants of like tenor issued in substitution or
exchange for any thereof pursuant to the provisions of Section 2(c),
2(d) or 2(e) hereof or of any of such other Warrants.
"Warrant Price" means initially an amount equal to 110% of the
Per Share Market Value as of the last Trading Day prior to the date of
the issuance of the Warrants, as such price may be adjusted from time to
time as shall result from the adjustments specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the terms
hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to
subscribe for or purchase any shares of Capital
Stock of any class or of any Common Stock
Equivalents or Convertible Securities or other
rights; or
(C) there shall be any reclassification of the
Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
<PAGE> 14
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or
other disposition of all or substantially all of
the Issuer's property, assets or business
(except a merger or other reorganization in
which the Issuer shall be the surviving
corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged
and except a consolidation, merger, sale,
transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Issuer or any partial liquidation of the Issuer
or distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share umber, increase the Warrant Price, shorten
the period during which this Warrant may be exercised or modify any provision of
this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day
<PAGE> 15
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
Team Communications Group, Inc.
12300 Wilshire Boulevard
Los Angeles, California 90025
Attention: Drew Levin
Telephone No.: (310) 442-3500
Facsimile No.: (310) 442-3501
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York New, York 10038-4982, Attention:
James R. Tanenbaum, Esq., facsimile no.: (212) 806-6006. Copies of notices to
the Issuer shall be sent to Kelly Lytton Mintz & Vann LLP, 1900 Avenue of the
Stars, Suite 1450, Los Angeles, California 90067, Attention: Bruce Vann, Esq.,
facsimile no.: (310) 277-5953.
12. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE> 16
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
TEAM COMMUNICATIONS GROUP, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 17
EXERCISE FORM
TEAM COMMUNICATIONS GROUP, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of TEAM
COMMUNICATIONS GROUP, INC. covered by the within Warrant.
Dated: Signature
--------------------------- --------------------------------
Address
----------------------------------
----------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: Signature
--------------------------- --------------------------------
Address
----------------------------------
----------------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
--------------------------- --------------------------------
Address
----------------------------------
----------------------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
<PAGE> 1
EXHIBIT 4.21
EXHIBIT C TO THE SECURITIES PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of [ ], 1999, among Team Communications Group,
Inc., a California corporation (the "Company"), [PURCHASERS]. [PURCHASERS] are
each referred to herein as a "Purchaser" and are collectively referred to herein
as the "Purchasers."
This Agreement is being entered into pursuant to the Securities
Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, no par value
per share.
"Debentures" means the 8% Convertible Debentures due 2002 of the
Company issued to the Purchasers pursuant to the Purchase Agreement.
<PAGE> 2
"Effectiveness Date" means with respect to the Registration
Statement the 125th day following the Initial Closing Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Event" shall have the meaning set forth in Section 7(e)(i).
"Event Date" shall have the meaning set forth in Section
7(e)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 75th day following the Initial Closing
Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock
issuable upon conversion of the Debentures and the shares of Common Stock
issuable upon exercise of the Warrants; provided, however, that Registrable
Securities shall include (but not be limited to) a number of shares of Common
Stock equal to no less than 200% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Debentures and upon exercise of
the Warrants, assuming such conversion and exercise occurred either (i) on the
Initial
-2-
<PAGE> 3
Closing Date or (ii) the Filing Date, whichever date would produce a greater
number of Registrable Securities. Such registered shares of Common Stock shall
be allocated among the Holders pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the Commission. Notwithstanding anything herein contained to the
contrary, if the actual number of shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants exceeds 200% of
the number of shares of Common Stock issuable upon conversion of the Debentures
and upon exercise of the Warrants based upon a computation as at the Initial
Closing Date or the Filing Date, the term "Registrable Securities" shall be
deemed to include such additional shares of Common Stock.
"Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
2. Shelf Registration.
On or prior to the Filing Date the Company shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form SB-2 (or on Form S-3 if
the Company is then eligible to register for resale the Registrable Securities
on Form S-3). The Company shall (i) not permit any securities other than the
Registrable Securities to be included in the Registration Statement and (ii) use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date which
is
-3-
<PAGE> 4
five years after the date that such Registration Statement is declared effective
by the Commission or such earlier date when all Registrable Securities covered
by such Registration Statement have been sold or may be sold without any
restriction pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "Effectiveness Period"). If an additional Registration
Statement is required to be filed because the actual number of shares of Common
Stock into which the Debentures are convertible and the Warrants are exercisable
exceeds the number of shares of Common Stock initially registered in respect of
the Underlying Shares and the Warrant Shares based upon the computation on the
Initial Closing Date, the Company shall have fifteen (15) Business Days to file
such additional Registration Statement, and the Company shall use its best
efforts to cause such additional Registration Statement to be declared effective
by the Commission as soon as possible, but in no event later than 60 days after
filing.
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-2 (or on Form S-3 if the
Company is then eligible to register for resale the Registrable Securities on
Form S-3) in accordance with the method or methods of distribution thereof as
specified by the Holders (except if otherwise directed by the Holders), and
cause the Registration Statement to become effective and remain effective as
provided herein; provided, however, that not less than ten (10) Business Days
prior to the filing of the Registration Statement or any related Prospectus or
any amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of such Holders and such Special Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders, to conduct a reasonable investigation within the
meaning of the Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities or any Special
Counsel, shall reasonably object in writing within seven (7) Business Days of
their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration
-4-
<PAGE> 5
Statement or any amendment thereto and as promptly as possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
any Special Counsel as promptly as possible (and, in the case of (i)(A) below,
not less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
-5-
<PAGE> 6
(f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
and any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any Holders may request at
least two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on The Nasdaq Small-Cap
Market and any other securities
-6-
<PAGE> 7
exchange, quotation system, market or over-the-counter bulletin board, if any,
on which similar securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the
-7-
<PAGE> 8
Company's best interest to disclose and which the Company is not otherwise
required to disclose, or (ii) there is a significant business opportunity
(including, but not limited to, the acquisition or disposition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction) available to the Company which the Board
reasonably determines not to be in the Company's best interest to disclose, then
the Company may postpone or suspend filing or effectiveness of a registration
statement for a period not to exceed 20 consecutive days, provided that the
Company may not postpone or suspend its obligation under this Section 3(n) for
more than 45 days in the aggregate during any 12 month period; provided,
however, that no such postponement or suspension shall be permitted for
consecutive 20 day periods, arising out of the same set of facts, circumstances
or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with The Nasdaq Small Cap Market and each other securities exchange or
market on which Registrable Securities are required hereunder to be listed, (B)
with respect to filings required to be made with the National Association of
Securities Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
to a maximum amount of $5,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
-8-
<PAGE> 9
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and
-9-
<PAGE> 10
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party) in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
-10-
<PAGE> 11
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
-11-
<PAGE> 12
6. Rule 144.
As long as any Holder owns Debentures, Underlying Shares,
Warrants or Warrant Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders
with true and complete copies of all such filings. As long as any Holder owns
Debentures, Underlying Shares, Warrants or Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Underlying Shares and Warrant
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions referred to in the Purchase Agreement.
Upon the request of any Holder, the Company shall deliver to such Holder a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(r) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities
-12-
<PAGE> 13
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except for up to an aggregate
of up to [625,000] shares of Common Stock, as described in Schedule 3.12(b) of
the Purchase Agreement, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto or as disclosed in
Schedule 2.1(r) of the Purchase Agreement) may include securities of the Company
in the Registration Statement, and the Company shall not after the date hereof
enter into any agreement providing such right to any of its securityholders,
unless the right so granted is subject in all respects to the prior rights in
full of the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering (i) Underlying Shares or (ii)
Warrant Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within thirty (30) days after
receipt of such notice, any such holder shall so request in writing, (which
request shall specify the Registrable Securities intended to be disposed of by
the Purchasers), the Company will cause the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by the holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then if
the Company after consultation with the managing underwriter(s) should
reasonably determine that the inclusion of such Registrable Securities, would
materially adversely affect the offering contemplated in such registration
statement, and based on such determination recommends inclusion in such
registration statement of fewer or none of the
-13-
<PAGE> 14
Registrable Securities of the Holders, then (x) the number of Registrable
Securities of the Holders included in such registration statement shall be
reduced pro-rata among such Holders (based upon the number of Registrable
Securities requested to be included in the registration), if the Company after
consultation with the managing underwriter(s) recommends the inclusion of fewer
Registrable Securities, or (y) none of the Registrable Securities of the Holders
shall be included in such registration statement, if the Company after
consultation with the managing underwriter(s) recommends the inclusion of none
of such Registrable Securities; provided, however, that if securities are being
offered for the account of other persons or entities as well as the Company,
such reduction shall not represent a greater fraction of the number of
Registrable Securities intended to be offered by the Holders than the fraction
of similar reductions imposed on such other persons or entities (other than the
Company).
(e) Failure to File Registration Statement; Rights of
Rescission. The Company and the Purchasers agree that the Holders will suffer
damages if the Registration Statement is not filed on or prior to the Filing
Date and not declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Time or if certain other events occur. The Company and the Holders
further agree that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration Statement is not
filed on or prior to the Filing Date, or is not declared effective by the
Commission on or prior to the Effectiveness Date (or in the event an additional
Registration Statement is filed because the actual number of shares of Common
Stock into which the Debentures are convertible and the Warrants are exercisable
exceeds the number of shares of Common Stock initially registered is not filed
and declared effective with the time periods set forth in Section 2), or (B) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (C) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (D) trading in the Common Stock shall be suspended or if the
Common Stock is delisted for any reason for more than three Business Days in the
aggregate, or (E) the conversion rights of the Holders are suspended for any
reason except as a result of Section 5(a)(ii) of the Debentures, or (F) the
Company breaches in a material respect any covenant or other material term or
condition to this Agreement, the Debentures, the Purchase Agreement (other than
a representation or warranty contained therein) or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby, and such breach continues for a
period of thirty days after written notice thereof to the Company, or (G) the
Company fails to convene a meeting of shareholders within the time period
specified in Section 3.13 of the Purchase Agreement or does so convene a meeting
of shareholders within such time period but fails to obtain Shareholder Approval
at such meeting, or (H) the Company has breached Section 3(n) (any such failure
or breach being referred to as an "Event," and for purposes of clauses (A) and
(E) the date on which such Event occurs, or for purposes of clause (B) the date
on which such five day period is exceeded, or for purposes of clause (C) after
more than fifteen Business
-14-
<PAGE> 15
Days, or for purposes of clause (D) the date on which such three Business Day
period is exceeded, or for clause (F) the date on which such thirty day period
is exceeded, being referred to as "Event Date"), the Company shall pay in cash
as liquidated damages to each Holder an amount equal to (I) 1.5% of the
aggregate principal amount of Debentures purchased by such Holder and the
aggregate amount of the exercise price of the Warrants purchased by such Holder,
whether or not exercised, for the 30-day period, or portion thereof, commencing
on the Event Date; (II) 2.0% of the aggregate principal amount of Debentures
purchased by such Holder and the aggregate amount of the exercise price of the
Warrants purchased by such Holder, whether or not exercised, for the 30-day
period, or portion thereof, commencing on the 31st day after the Event Date,
(III) 2.5% of the aggregate principal amount of Debentures purchased by such
Holder and the aggregate amount of the exercise price of the Warrants purchased
by such Holder, whether or not exercised, for the 30-day period, or portion
thereof, commencing on the 61st day after the Event Date and (IV) 3.0% of the
aggregate principal amount of Debentures purchased by such Holder and the
aggregate amount of the exercise price of the Warrants purchased by such Holder,
whether or not exercised, commencing on the 91st day after the Event Date until
the applicable Event is cured. Payments to be made pursuant to this Section 7(e)
shall be due and payable immediately upon demand in immediately available funds.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., New York
City time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., New York
City time, on any date and earlier than 11:59 p.m., New York City time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule 1 attached hereto, or with respect to the Company,
addressed to:
-15-
<PAGE> 16
Team Communications Group, Inc.
12300 Wilshire Boulevard
Los Angeles, California 90025
Attention: Drew Levin
Telephone No.: (310) 442-3500
Facsimile No.: (310) 442-3501
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Facsimile No.: (212) 806-6006. Copies of notices to
the Company shall be sent to Kelly Lytton Mintz & Vann LLP, 1900 Avenue of the
Stars, Suite 1450, Los Angeles, California 90067, Attention: Bruce Vann, Esq.,
Facsimile No.: (310) 277-5953.
(h) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder and up to four other assignees of
all or a portion of the Debentures or the Registrable Securities if: (i) the
Holder agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment, (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
(j) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
-16-
<PAGE> 17
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(o) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[Remainder of Page Intentionally Left Blank]
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
TEAM COMMUNICATIONS GROUP, INC.
By:
--------------------------------------
Name:
Title:
[PURCHASERS]
-18-
