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EXHIBIT 4.29
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)
12% CONVERTIBLE DEBENTURE DUE NOVEMBER 30, 1999
No. _______________ Principal Amount U.S. $1,200,000.00
Original Issue Date: July 26, 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 VMR
Luxembourg S.A., Chateau Xxxxx, 00 Xxx Xxxxx, Xxxxxx, X0000, Luxembourg, or
registered assigns (hereinafter, the "Holder"), the principal sum of One Million
Two Hundred Thousand Dollars and no cents ($1,200,000.00) United States Dollars
on November 30, 1999 (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
12% 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 $1,200,000
designated as its 12% Convertible Debenture due November 30, 1999 (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 July 26, 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. $10,000.00 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 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 10% per annum, compounded monthly, in cash,
on the principal amount thereof. Such interest shall be due and payable monthly
on maturity. 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
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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 such date as the closing sales
price of the Company's common stock as reported on the Nasdaq Small Cap
Market (or Nasdaq Market if so listed) equals or exceeds $12.00. 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.
(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
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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).
(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, 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.
(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
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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).
(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 the average Per Share Market Value for five
consecutive Trading Days immediately prior to the Original Issue Date
and (B) an amount equal to 93% 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 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
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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 reclassification.
(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
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
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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 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 30 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 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.
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(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.
(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
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covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid, non-assessable 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.
(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) The Company may elect at any time or from time to time
(but in no event later than one day after receipt of a conversion notice, 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 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. 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
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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 or in the
Security 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 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
(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.
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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).
7. 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.
"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
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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 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.
8. 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.
9. 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.
10. Governing Law. The Debentures shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles of conflicts of law.
11. 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.
12. 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.
-11-
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13. Descriptive Headings. The descriptive headings appearing
herein are for convenience of reference only and shall not alter, limit or
define the provisions hereof.
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: July 26, 1999
TEAM COMMUNICATIONS GROUP, INC.
By /s/ XXXX X. XXXXX
------------------------------------------
Name Xxxx X. Xxxxx
-------------------------------------
Title CEO
------------------------------------
ATTEST:
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
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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 10%
Convertible Debentures due 1999(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:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Facsimile Number:
-----------------------------
Authorization: By
--------------------------
Title
--------------------
Dated:
--------------------
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