UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this "Agreement") is made and entered into
as of March 24, 2005 by and among Tengtu International Corp., a Delaware
corporation (the "Company"), __________________ (the "Investor") and Guzov
Ofsink, LLC (the "Escrow Agent").
WHEREAS, the Company desires to issue to the Investor, and the Investor
desires to purchase from the Company, units (the "Units"), each Unit consisting
of (a) one (1) share of the Company's Series A Convertible Cumulative Preferred
Stock, par value $.01 per share (the "Series A Stock"), (b) a redeemable warrant
to purchase ten (10) shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock") for an initial exercise price of $.40 per share and
(c) a redeemable warrant to purchase five (5) shares of Common Stock for an
initial exercise price of $.60 per share, pursuant to an exemption from
registration under Regulation D under the Securities Act of 1933, as amended as
of the date of this Agreement (the "1933 Act"), on the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Purchase and Sell the Units. The Company will issue and sell
to the Investor and the Investor agrees to purchase ___________________
dollars ($___________) of Units for a purchase price per Unit of the
lesser of (a) U.S. $2.50 or (b) 10 times the volume weighted average price
(the "VWAP") of the Company's Common Stock for the ten (10) trading days
ended on the most recent trading day prior to the Closing (as defined
below) (the number of Units times the purchase price per Unit is referred
to hereinafter as the "Purchase Price") pursuant to an exemption from
registration provided by Regulation D promulgated under the 1933 Act.
2. Issuance of Warrants. The Company will issue to the Investor redeemable
warrants, in the form annexed hereto as Exhibit A to purchase a number of
shares of Common Stock equal to ten times the number of Units purchased
with an exercise price of $0.40 per share (the "$.40 Warrants") and in the
form annexed hereto as Exhibit B to purchase a number of shares of Common
Stock equal to five times the number of Units purchased with an exercise
price of $0.60 per share (the "$.60 Warrants" and together with the $.40
Warrants, the "Warrants"). The Warrants contain a provision allowing the
Company to redeem them upon the occurrence of certain conditions for $.001
unless the Investor exercises the Warrants and purchases the Company's
Common Stock within 30 days after receiving a notice of redemption.
3. Closing, Payment and Escrow.
3.1 The Company will sell and, subject to the terms and conditions hereof,
and in reliance upon the written representations and warranties of the
Company, the Investor will purchase, at a single closing, the Series A
Stock and Warrants. The closing shall be held on or before March 24, 2005
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(the "Closing") at the offices of Guzov Ofsink, LLC, 600 Madison Avenue,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, X.X.X.. Within ten (10) business
days of the Closing, the Company will deliver to the Investor original
stock certificates in the Investor's name and in such denominations (which
in the aggregate shall equal the total number of shares of Series A Stock
purchased by the Investor) as the Investor may specify prior to the
Closing. The Purchase Price shall be paid by wire transfer of immediately
available funds to the account designated by the Company in writing prior
to the Closing.
3.2 Escrow Agent.
3.2.1 The Company and Investor hereby appoint Escrow Agent as
escrow agent for the Purchase Price, Series A Stock and
Warrants in accordance with the terms and conditions set forth
herein, and the Escrow Agent hereby accepts such appointment.
3.2.2 In the event that the Purchase Price is not received
from the Investor by March 24, 2005, Escrow Agent shall have
no obligation to accept any funds from the Investor.
3.2.3 In the event that the Company fails to deliver the Series
A Stock and Warrants to the Investor within ten (10) business
days of the Closing, upon receipt of written notice from the
Investor and confirmation that the securities have not been
delivered by the Company's transfer agent, Escrow Agent shall
return the Purchase Price to Investor.
3.2.4 Escrow Agent shall have no duties or responsibilities other
than those expressly set forth herein. Escrow Agent shall have
no duty to enforce any obligation of any person to make any
payment or delivery, or to direct or cause any payment or
delivery to be made, or to enforce any obligation of any
person to perform any other act. Escrow Agent shall be under
no liability to the other parties hereto, or to anyone else,
by reason of any failure, on the part of any party hereto or
any maker, guarantor, endorser or other signatory of any
document or any other person, to perform such person's
obligations under any such document. Except for amendments to
this Agreement relating to escrowed funds, the Escrow Agent
shall not be obligated to recognize any agreement between any
and all of the persons referred to herein, notwithstanding
that references hereto may be made herein and whether or not
it has knowledge thereof.
3.2.5 Escrow Agent shall not be liable to any party or anyone else
for any action taken, or omitted to be taken by it, or any
action suffered by it to be taken or omitted, in good faith
and acting upon any order, notice, demand, certificate,
opinion or advice of counsel
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(including counsel chosen by the Escrow Agent) statement,
instrument, report, or other paper or document (not only as to
its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any
information therein contained), which is believed by the
Escrow Agent to be genuine and to be signed or presented by
the proper person or persons. The Escrow Agent shall not be
bound by any of the terms thereof, unless evidenced by a
writing delivered to the Escrow Agent signed by the proper
party or parties and, if the duties or rights of the Escrow
Agent are affected, unless it shall give its prior written
consent thereto.
3.2.6 Escrow Agent shall not be responsible for the sufficiency
or accuracy of the form, or of the execution, validity, value
or genuineness of, any document or property received, held or
delivered by it hereunder, or of any signature or endorsement
thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible
or liable to the other parties hereto or to anyone else in any
respect on account of the identity, authority or rights, of
the person executing or delivering or purporting to execute or
deliver any document or property or this agreement. The Escrow
Agent shall have no responsibility with respect to the use or
application of any funds or other property paid or delivered
by the Escrow Agent to the Company pursuant to the provisions
hereof.
3.2.7 Escrow Agent shall have the right to assume, in the absence
of written notice to the contrary from the proper person or
persons, that a fact or an event, by reason of which an action
would or might be taken by the Escrow Agent, does not exist or
has not occurred, without incurring liability to the other
parties hereto or to anyone else for any action taken or
omitted, or any action suffered by it to betaken or omitted,
in good faith and in the exercise of its own best judgment, in
reliance upon such assumption.
3.2.8 Escrow Agent will be indemnified and held harmless by the
Investor and the Company from and against all expenses,
including reasonable counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action,
suit or proceeding involving any claim, or in connection with
any claim or demand, which in any way, directly or indirectly,
arises out of or relates to this Agreement, the services of
the Escrow Agent hereunder, except for claims relating to
willful misconduct or gross negligence by Escrow Agent or
breach of this Agreement by Escrow Agent, or the monies or
other property held by it hereunder.
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4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that the statements in the
following paragraphs of this Section 4 are all true and complete as of the
date hereof:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has
full corporate power and authority to conduct its business as and to
the extent now conducted and to own, use and lease its assets and
properties. The Company has full corporate power and authority to
execute and deliver this Agreement, and to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
4.2 Authority; Due Authorization. The execution and delivery by the
Company of this Agreement, and the performance by the Company of its
obligations hereunder, have been duly and validly authorized by the
Board of Directors of the Company, no other corporate action on the
part of the Company or its respective shareholders being necessary.
This Agreement has been duly and validly executed and delivered by
the Company, and upon the delivery by the Company of the Units will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
4.3 No Conflicts. The execution and delivery by the Company of this
Agreement does not, and the performance by the Company of its
obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
4.3.1 conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of
incorporation or by-laws (or other comparable corporate
charter document) of the Company;
4.3.2 conflict with or result in a violation or breach of any term
or provision of any law or order applicable to the Company or
any of its assets and properties; or
4.3.3 (a) conflict with or result in a violation or breach of, (b)
constitute (with or without notice or lapse of time or both) a
default under, (c) require the Company or any other person or
entity to obtain any consent, approval or action of, make any
filing with or give any notice to any person or entity as a
result or under the terms of, or (d) result in the creation or
imposition of any lien upon the Company or any of its assets
or properties under, any contract or license to which the
Company is a party or by which any of its assets and
properties is bound.
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4.4 Capitalization. The capitalization of the Company immediately prior
to the Closing consists of the following:
4.4.1 Common Stock. A total of one hundred fifty million
(150,000,000) authorized common shares, par value U.S. $0.01
per share, of which no more than 109,178,743 shares are issued
and outstanding.
4.4.2 Preferred Stock. A total of ten million (10,000,000)
authorized preferred shares, par value U.S. $0.01 per share of
which none are issued and outstanding.
4.5 Valid Issuance of Common Stock. The Series A Stock and the Common
Stock issuable upon the conversion of the Series A Stock and
exercise of the Warrants, when issued and paid for as provided in
this Agreement, the Series A Certificate of Designations and the
Warrants, will be duly authorized, validly issued, fully paid and
non-assessable.
4.6 Governmental Consents. To the best of the Company's knowledge, no
consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with any court,
governmental agency, regulatory authority or political subdivision
thereof, or any other entity, is required in connection with the
execution, delivery and performance by the Company of this
Agreement, other than a notice filing with an applicable State
government.
4.7 Litigation. To the best of the Company's knowledge, except as set
forth in the Company's filings with the United States Securities and
Exchange Commission (the "SEC"), there is no action, suit,
proceeding, claim, arbitration or investigation pending (or, to the
best knowledge of the Company, currently threatened) against the
Company or any Company subsidiary, their respective activities,
properties or assets or, to the best of the Company's knowledge,
against any officer, director or key employee of the Company or any
subsidiary in connection with such officer's, director's or key
employee's relationship with, or actions taken on behalf of, the
Company or any subsidiary. The Company has no knowledge or belief
that there is pending or threatened any claim or litigation against
the Company contesting its right to produce, manufacture, sell, use
or offer any product, process, method, substance, part or other
material or service presently produced, manufactured, sold, used or
offered or planned to be produced, manufacture, sold, used or
offered by the Company or any of its Subsidiaries. The Company has
no knowledge or belief that there exists, or there is pending or
planned, any patent, invention, device, application or principle,
which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company or its Subsidiaries.
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4.8 Reporting Company Status. The Company will cause all the materials
required to be filed by it pursuant to Section 13(a) of the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act") to
be filed with the SEC. The Common Stock is a class of securities
registered under Section 12(g) of the Exchange Act. All documents
filed by the Company with the SEC pursuant to the Exchange Act for
its most recent full fiscal year and subsequent thereto are
available from the Company and should be reviewed by Investor.
5. Representations, Warranties and Certain Agreements of Investor. Investor
hereby represents and warrants to, and agrees with, the Company that:
5.1 Authorization. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
Investor represents that Investor has full power and authority to
enter into this Agreement.
5.2 Purchase for Own Account. The Units to be purchased by the Investor
hereunder will be acquired for investment for Investor's own
account, not as a nominee or agent. Investor has not purchased the
Units with a view to the public resale or distribution thereof, and
Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same.
5.3 Disclosure of Information.Investor has had full access to all the
information Investor considers necessary or appropriate to make an
informed investment decision with respect to the Units to be
purchased by Investor under this Agreement. Investor further has had
an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Units and
to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to
Investor or to which Investor had access. Investor has not relied on
any oral representation made by the Company or any officer,
director, employee or agent of the Company.
5.4 Investment Experience. INVESTOR UNDERSTANDS THAT THE PURCHASE OF THE
UNITS INVOLVES SUBSTANTIAL RISK. INVESTOR (A) HAS EXPERIENCE AS AN
INVESTOR IN SECURITIES OF COMPANIES IN THE DEVELOPMENT STAGE AND
ACKNOWLEDGES THAT INVESTOR CAN BEAR THE ECONOMIC RISK OF INVESTOR'S
INVESTMENT IN THE UNITS AND (B) HAS SUCH KNOWLEDGE AND EXPERIENCE IN
FINANCIAL OR BUSINESS MATTERS THAT INVESTOR IS CAPABLE OF EVALUATING
THE MERITS AND RISKS OF THIS INVESTMENT IN THE UNITS AND PROTECTING
INVESTOR'S INTERESTS IN CONNECTION WITH THIS INVESTMENT.
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5.5 Accredited Investor Status. The Investor is an "accredited investor"
within the meaning of Rule 502 of Regulation D promulgated under the
1933Act. All of Investor's responses set forth in the Prospective
Offeree Questionnaire submitted by Investor to the Company are true
and correct.
5.6 Restricted Securities. Investor understands that the Series A Stock
and the Warrants sold as part of the Units, and the Common Stock
issuable upon conversion of the Series A Stock and exercise of the
Warrants (together, the "Securities"), are characterized as
"restricted securities" under the 1933 Act inasmuch as they are
being or will be acquired from the Company in a transactions not
involving a public offering and that under the 1933 Act, and
applicable regulations thereunder, such Securities may be resold
without registration under the 1933 Act only in certain limited
circumstances. In this connection, Investor represents that Investor
is familiar with Rule 144 of the U.S. Securities and Exchange
Commission, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act.
5.7 Limitations on Dispositions. Investor acknowledges that if any
transfer of the Securities is proposed to be made in reliance upon
an exemption under the 1933 Act, the Company may require an opinion
of counsel satisfactory to the Company that such transfer may be
made pursuant to an applicable exemption under the 1933 Act.
Investor acknowledges that, so long as appropriate, a legend similar
to the following may appear on the certificates representing the
Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE
SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF
FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW.
5.8 Further Limitations on Disposition.Without in any way limiting the
representations set forth above, Investor further agrees not to make
any disposition of all or any portion of the Units or the Securities
except:
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5.8.1 pursuant to a registration statement under the 1933 Act
covering such disposition; or
5.8.2 pursuant to an exemption from registration under the 1933 Act,
including, without limitation, Rule 144, Rule 144A or
Regulation S thereunder.
5.9 No General Solicitation. Investor has not received any general
solicitation or advertising regarding the offering of the Units or
this Agreement.
5.10 No Prospectus. No prospectus or registration statement has been
filed by the Company with a securities commission or other
securities regulatory authorities in the United States or in any
other jurisdiction in connection with the issuance of the Units or
the Common Stock or Warrants.
5.11 Recent Disclosures. Investor has reviewed the Company's Annual
Report on Form 10-K/A filed with the SEC on December 7, 2004,
including, without limitation, the disclosures contained in Item 1
thereof which are set forth on Exhibit C and understands that the
events disclosed therein are materially adverse to the Company.
Investor is also aware that the Company has restated its Quarterly
Reports on Form 10-Q for the quarters ended September 30, 2003,
December 31, 2003 and March 31, 2004 to among other things, correct
the financial statements set forth therein as a result of the
matters referred to the amendments. Investor has considered the
impact of this disclosure in determining whether to enter into this
Agreement.
6. Redemption and Forced Exercise of Warrants. The Investor understands that
the Warrants contain redemption and forced exercise provision which
applies under certain circumstances. The Company may require that the
Warrants be exercised if certain conditions are met and may redeem the
Warrants at $.001 in the event that the Investor declines to exercise.
Investor hereby represents and warrants that Investor has reviewed and
understands these provisions.
7. Conditions to Investor's Obligations at Closing. The obligations of the
Investor under Section 3.1 of this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
7.1 Representations and Warranties True. Each of the representations and
warranties of the Company contained in Section 4 shall be true and
complete on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the
date of the Closing.
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7.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or
before the Closing and shall have obtained all approvals, consents
and qualifications necessary to complete the purchase and sale
described herein.
7.3 Securities Exemptions. The offer and sale of the Common Stock to the
Investor pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act.
7.4 Completion of Due Diligence. Investor shall have completed its legal
and financial due diligence, the results of which shall be
reasonably satisfactory to the Investor, and the Company shall have
reasonably cooperated with Investor in connection therewith.
Investor has reviewed all of the Company's filings with the SEC
under both the 1933 Act and Exchange Act for the five year period
prior to the date of this Agreement.
8. Conditions to the Company's Obligations at Closing. The obligations of the
Company to Investor under Section 3.1 of this Agreement are subject to the
fulfillment or waiver on or before the Closing of each of the following
conditions by Investor:
8.1 Representations and Warranties. The representations and warranties
of Investor contained in Section 5 shall be true and complete on the
date of the Closing with the same effect as though such
representations and warranties had been made on and as of the
Closing.
8.2 Payment of Purchase Price.Investor shall have delivered to the
Escrow Agent the Purchase Price in accordance with the provisions of
Section 3.
8.3 Securities Exemptions. The offer and sale of the Units to the
Investor pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act.
9. Registration Rights. The Company and Investor shall enter into the
Registration Rights Agreement annexed hereto as Exhibit D, granting to
Investor registration rights with respect to the Securities.
10. Post-closing Covenants of Investor.
10.1 Confidentiality.
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10.1.1 Investor acknowledges that the Company could be
irreparably damaged if confidential information
concerning the business and affairs of the Company were
disclosed to or utilized on behalf of any person.
Investor covenants and agrees to and with the Company
that, except as otherwise provided in this Agreement,
Investor will not, at any time, directly or indirectly,
without the prior written consent of the Company,
divulge, or permit any of Investors partners, employees,
agents or affiliates to divulge to any person any
non-public information concerning the business or
financial or other affairs, or any of the methods of
doing business used by the Company or any of its
subsidiaries, nor release any information provided
pursuant to or concerning this Agreement or the
transaction contemplated by this Agreement if such
release is intended for, or may result in, its public
dissemination. The foregoing requirements of
confidentiality shall not apply to information: (i) that
is now or in the future becomes freely available to the
public through no fault of or action by the using or
disclosing party; (ii) that is in the possession of the
using or disclosing party prior to the time such
information was obtained from the Company or that is
independently acquired by the using or disclosing party
without the aid, application or use of such other
information; (iii) that is obtained by the using or
disclosing party in good faith without knowledge of any
breach of a secrecy arrangement from a third party; (iv)
that is required to be disclosed by applicable law or
order of government agency or self-regulatory body; or
(v) that is disclosed in connection with any bona-fide
offer to purchase any shares in the Company; provided
that the proposed transferor obtains an undertaking from
the proposed transferee to keep such information
confidential in accordance with the provision of this
Section 10.1 prior to such disclosure.
10.1.2 Investor and the Company agree to consult with each other
(and to take into consideration any comments reasonably
raised by any such party) prior to the dissemination of
any press release or public communication concerning this
Agreement or the transaction contemplated by this
Agreement. Any such press release or public communication
shall be subject to the approval of both the Company and
Investor.
10.1.3 This Section 10.1 will survive termination of this
Agreement.
11. General Provisions.
11.1 Survival of Warranties; Investigation. The representations,
warranties and covenants of the Company and Investor contained in or
made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing. It shall be no defense
to an action for breach of this Agreement that Investor or its
agents have (or have not) made investigations into the affairs of
the Company or that the Company could not have known of the
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misrepresentation or breach of warranty. Damages for breach of a
representation or warranty or other provision of this Agreement
shall not be diminished by alleged tax savings resulting to the
complaining party as a result of the loss complained of.
11.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
11.3 Governing Law; Jurisdiction. Any dispute, disagreement, conflict of
interpretation or claim arising out of or relating to this
Agreement, or its enforcement, shall be governed by the laws of the
State of New York. The Company and Investor hereby irrevocably and
unconditionally submit, for themselves and their property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New
York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Each party hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating
to this Agreement in any court referred to above. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court. Each
party to this Agreement irrevocably consents to service of process
in the manner provided for notices below. Nothing in this Agreement
will affect the right of any party to this Agreement to serve
process in any other manner permitted by law. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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11.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement. A
telefaxed copy of this Agreement shall be deemed an original.
11.5 Headings. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to
sections, paragraphs, exhibits and schedules shall, unless otherwise
provided, refer to sections and paragraphs hereof and exhibits and
schedules attached hereto, all of which exhibits and schedules are
incorporated herein by this reference.
11.6 Notices. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by
facsimile, as follows:
If to the Company:
Tengtu International Corp.
000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxxxx X0X 0X0
Attention: Xxxx Xxxx
Facsimile: 000-000-0000
and to:
Guzov Ofsink, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No: 212-688-7273
If to Investor:
-------------------------------
Facsimile No.: _________________
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If to Escrow Agent:
Guzov Ofsink, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No: 212-688-7273
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of
a mailed notice, upon receipt, in each case given or addressed as
aforesaid. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to
the other parties hereto.
11.7 Costs, Expenses. Each party hereto shall bear their own costs in
connection with the preparation, execution and delivery of this
Agreement.
11.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Investor. No delay or omission to exercise any
right, power, or remedy accruing to the Investor, upon any breach,
default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. All remedies, either under this
Agreement, by law, or otherwise afforded to the Investor, shall be
cumulative and not alternative.
11.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall
be interpreted as if such provision(s) were so excluded and shall be
enforceable in accordance with its terms.
11.10 Entire Agreement. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding
of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence,
agreements, understandings duties or obligations between the parties
with respect to the subject matter hereof, including, but not
limited to, any Unit Purchase Agreement entered into with the
Company in February, 2005.
13
11.11 Further Assurances. From and after the date of this Agreement, upon
the request of the Investor or the Company, the Company and the
Investor shall execute and deliver such instruments, documents or
other writings as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY: ESCROW AGENT:
TENGTU INTERNATIONAL CORP. GUZOV OFSINK, LLC
By: By:
---------------------------------- ----------------------------------
Xxxx Xxxx Xxxxxx X. Xxxxxx, Member
Title: President
INVESTOR:
[ ]
By:
------------------------------
Title:
---------------------------
15
Exhibit A
Form of $.40 Warrant
TENGTU INTERNATIONAL CORP.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE OR CANADIAN PROVINCE, OR UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THIS WARRANT IS RESTRICTED AND
MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Void after the Expiry Date Right to Purchase ____________
shares of Common Stock
(subject to adjustment)
PREAMBLE
Tengtu International Corp., a Delaware corporation (the "Company"), hereby
certifies that, for value received, _________________, the holder hereof (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 P.M. New York time, on
the Expiry Date, fully paid and nonassessable shares of the Company's U.S. $.01
par value per share common stock (the "Common Stock"). The purchase price per
share (the "Purchase Price") shall be, in the event of a purchase at any time
during the period commencing on the date hereof and ending on the Expiry Date,
$0.40. The number of shares of Common Stock and the amount of the Purchase Price
are subject to adjustment as provided herein. This Warrant may be redeemed by
the Company for $.001 times the number of Shares which may be purchased upon
exercise of this Warrant upon the occurrence of the certain events set forth in
Section 7(a), unless the Holder exercises this Warrant within 30 days after
receiving a Redemption Notice.
This warrant is the "$.40 Warrant" (this "Warrant"), evidencing the right
to purchase shares of Common Stock of the Company, issued pursuant to that
certain Unit Purchase Agreement dated March ___, 2005 (the "Unit Purchase
Agreement"), between the Company and the Holder. Capitalized terms used and not
16
otherwise defined herein shall have the meanings set forth for such terms in the
Unit Purchase Agreement. This Warrant evidences the right to purchase an
aggregate of ___________ shares of Common Stock of the Company, subject to
adjustment as provided in this Warrant.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall succeed
to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) The term "Expiry Date" refers to the date that is three years
after the date the SEC declares effective a registration statement for the
resale of the Shares (the "Registration Statement"); provided, however, if for
any reason there occurs an Ineffective Period (as defined in Section 8), such
date shall be extended by the length of time of the Ineffective Period and if
the Registration Statement is withdrawn for any reason, such date shall be
extended to the third anniversary of the date a new registration statement
covering the resale of the Shares is declared effective.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the Holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(e) The term "SEC," "Securities and Exchange Commission" or
"Commission" refers to the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
(f) The term "Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
17
(g) The term "Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
(g) The term "Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
1. Restricted Stock.
1.1 If, at the time of any transfer or exchange (other than a
transfer or exchange not involving a change in the beneficial ownership of this
Warrant or the Shares) of this Warrant or the Shares, this Warrant or the Shares
shall not be registered under the Securities Act, the Company will require, as a
condition of allowing such transfer or exchange, that the Holder or transferee
of this Warrant or the Shares, as the case may be, furnish to the Company an
opinion of counsel reasonably acceptable to the Company or a "no action" or
similar letter from the Securities and Exchange Commission to the effect that
such exercise, transfer or exchange may be made without registration under the
Securities Act. In the case of such transfer or exchange and in the case of an
exercise of this Warrant if the Shares to be issued thereupon are not registered
pursuant to the Securities Act, the Company will require a written statement
that this Warrant or the Shares, as the case may be, are being acquired for
investment and not with a view to the distribution thereof. The certificates
evidencing the Shares issued on the exercise of this Warrant shall, if such
Shares are being sold or transferred without registration under the Securities
Act, bear a legend similar to the legend on the face page of this Common Stock
Warrant.
1.2 (a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after 90 days following the effective date
of the first registration of the Company under the Securities Act of an offering
of its securities to the general public.
(b) The Company shall file with the Commission in a timely manner
all required reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to the Holder of this Warrant or the
Shares designated by the Holder, forthwith upon request, (i) a written statement
by the Company as to its compliance with the reporting requirements under the
Securities Act (at any time from and after 90 days following the effective date
of the first registration statement of the Company for an offering of its
securities to the general public) and of the reporting requirements of the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company, (iii) any other reports and documents necessary to satisfy the
information-furnishing condition to offers and sales under Rule 144A under the
Securities Act, and (iv) such other reports and documents as the Holder of this
Warrant or the Shares reasonably requests to avail itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
18
2. Exercise of Warrant.
2.1 Exercise in Full. The Holder of this Warrant may exercise it in
full by surrendering this Warrant, with the form of subscription at the end
hereof duly executed by the Holder, to the Company at its principal office. The
surrendered Warrant shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the face of
this Warrant by the applicable Purchase Price.
2.2 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Subsection
2.1 except that the amount of Common Stock obtained through the exercise shall
be calculated by multiplying (a) the number of shares of Common Stock called for
on the face of this Warrant as shall be designated by the Holder in the
subscription at the end hereof by (b) the Purchase Price. On any such partial
exercise, subject to the provisions of Section 2 hereof, the Company at its
expense will forthwith issue and deliver to, or upon the order of the Holder, a
new Warrant or Warrants of like tenor, in the name of the Holder, calling in the
aggregate on the face or faces thereof, for the number of shares of Common Stock
equal to the number of such shares called for on the face of this Warrant minus
the number of such shares designated by the Holder in the subscription at the
end hereof.
2.3 Company Acknowledgment. The Company will, at the time of the
exercise, exchange or transfer of this Warrant, upon the request of the Holder
acknowledge in writing its continuing obligation to afford to the Holder any
rights (including, without limitation, any right to registration of the Shares)
to which the Holder shall continue to be entitled after such exercise or
exchange in accordance with the provisions of this Warrant. If the Holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford to the Holder any such
rights.
3. Delivery of Stock Certificates, Etc., on Exercise. As soon as
practicable after the exercise of this Warrant, in full or in part, and in any
event within ten business (10) days thereafter, the Company, at its expense,
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, a certificate or certificates
for the number of fully paid and nonassessable Shares to which the Holder shall
be entitled on such exercise. No fractional Share or scrip representing a
fraction of a Share will be issued on exercise, but the number of Shares
issuable shall be rounded to the nearest whole Share.
4. Adjustment for Reorganization, Consolidation, Merger, Etc.
19
4.1 Merger, Etc. If the Company shall (a) consolidate with or merge
into any other person, or (b) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company (any such transaction being
hereinafter sometimes referred to as a "Reorganization") then, in each such
case, the Holder of this Warrant, on the exercise hereof as provided in Section
2 at any time after the consummation or effective date of such Reorganization
(the "Effective Date"), shall receive, in lieu of the Shares issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which the Holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if the Holder had so exercised this Warrant, immediately prior
thereto. The successor corporation in any such Reorganization described in
clause (b) or (c) above where the Company will not be the surviving entity (the
"Acquiring Company") must agree prior to such Reorganization in a writing
satisfactory in form and substance to the Holder that this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on exercise
after the consummation of such Reorganization, and shall be binding upon the
issuer of any such stock or other securities (including, in the case of any
transfer of properties or assets referred to above, the person acquiring all or
substantially all of the properties or assets of the Company). If the Acquiring
Company has not so agreed to continue this Warrant, then the Company shall give
30 days' prior written notice to the Holder of this Warrant of such
Reorganization, during which 30-day period (the "Notice Period") the Holder at
its option and upon written notice to the Company shall be able to (i) exercise
this Warrant or any part thereof at an exercise price (the "Discounted Exercise
Price") equal to the then prevailing purchase price hereunder discounted at the
Discount Rate (as used herein the "Discount Rate" shall mean the then prevailing
interest rate on U.S. Treasury Notes issued on (or immediately prior to) the
date of such 30-day notice and maturing on the Expiry Date (or immediately prior
thereto), such rate to be compounded annually through the Expiry Date, and in no
event to be less than 10% annually); or (ii) on the Effective Date, the Holder
of this Warrant shall be paid an amount (the "Merger Profit Amount") equal to
the difference between the fair market value per share of Common Stock of the
Company being purchased by the Acquiring Company in the Reorganization and the
Discounted Exercise Price described in clause (i) above and the Warrant shall
simultaneously expire. The Merger Profit Amount shall be payable in the same
form as the common stockholders of the Company shall be paid by the Acquiring
Company for their shares of common stock of the Company. The fair market value
of any noncash property received from the Acquiring Company upon the
Reorganization shall be determined in good faith by the Board of Directors of
the Company, as approved by the Company's stockholders.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of this Warrant after the effective date of
such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the Holder of this
Warrant.
20
4.3 Continuation of Terms. Except as otherwise expressly provided in
Subsection 4.1, upon any reorganization, consolidation, merger or transfer (and
any dissolution following any transfer) referred to in this Section 4, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4.1.
5. No Impairment. The Company will not, by amendment of its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary 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 action as may be necessary or
appropriate in order to protect the rights of the Holders of this Warrant
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise and (b) will at all times reserve and keep available
out of its authorized capital stock, solely for the purpose of issue upon
exercise of this Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon exercise of this Warrant in full and shall
take all such action as may be necessary or appropriate in order that all shares
of Common Stock that shall be so issuable shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
6. No Dilution.
(a) In the event the Company shall pay a share dividend or other
distribution payable in shares of Common Stock, the Trigger Price and the
Redemption Price(each as defined in Section 7) and the Purchase Price in effect
immediately prior (and each Purchase Price, Trigger Price and Redemption Price
in effect subsequent) to such dividend or distribution shall, concurrently with
the effectiveness of such dividend or distribution, be proportionately adjusted.
In the case of a share dividend or other distribution payable in shares of
Common Stock such adjustment shall occur as follows: the Purchase Price, Trigger
Price and Redemption Price that is then in effect (and in effect at any time
thereafter) shall be decreased as of the time of such issuance, or in the event
a record date is fixed, as of the close of business on such record date, by
multiplying the Purchase Price, Trigger Price and Redemption Pricethen (and
therefore) in effect by a fraction (1) the numerator of which is the total
number of shares of issued Common Stock immediately prior to the time of such
issuance or the close of business on such record date, as the case may be, and
(2) the denominator of which is the total number of shares of issued Common
Stock immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in payment
of such dividend or distribution; provided, however, that, if such record date
21
is fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Purchase Price, Trigger Price and
Redemption Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Purchase Price, Trigger Price and Redemption
Priceshall be adjusted to reflect the actual payment of such dividend or
distribution. In the event of an adjustment of the Purchase Price, the number of
Shares which may be purchased upon exercise of this Warrant shall be
proportionately adjusted, in accordance with the example in Section 6(d).
(b) In the event the issued shares of Common Stock shall be
subdivided, combined or consolidated, by reclassification or otherwise, into a
greater or lesser number of shares of Common Stock, the number of Shares into
which this Warrant is exercisable and the Purchase Price, Trigger Price and
Redemption Price shall be proportionately adjusted, in accordance with the
example in Section 6(d).
(c) In the event the Conversion Price (as defined in the Certificate
of Designations, Preferences and Right of the Series A Convertible Cumulative
Preferred Stock of the Company) is reduced below the initial Conversion Price on
the date of filing (or successively thereafter below the Conversion Price then
in effect), then, if an adjustment in the Purchase Price shall not otherwise be
required pursuant to this Section 6, the Purchase Price then in effect shall
also be proportionately reduced so that the Purchase Price shall be 160% of the
Conversion Price. For example, if the Purchase Price in effect is $.40 and the
Conversion Price is reduced to $.20, then the Purchase Price shall be reduced to
$.32. If thereafter the Conversion Price is again reduced to $.10, the Purchase
Price shall be reduced to $.16.
(d) For clarification, and notwithstanding anything else to the
contrary contained in this Warrant, each time that an adjustment is required to
be made to the Purchase Price, proportionate adjustments will also be made to
the Trigger Price, the Redemption Price and the number of Shares which may be
purchased upon exercise of this Warrant. As an example of how the provisions of
this Section 6 shall be applied, assume that the number of Shares which may be
purchased upon exercise of this Warrant at a point in time is 100,000 Shares,
and that at such point in time, the Purchase Price is $0.40, the Trigger Price
is $1.20, and the Redemption Price is $0.001. Assume further that the Company
effects a two for one stock split. After the effective date of such two for one
stock split, the number of Shares which may be purchased upon exercise of this
Warrant will be adjusted to be 200,000 Shares, the Purchase Price will be
adjusted to be $0.20, the Trigger Price $0.60, and the Redemption Price $0,0005.
Upon the occurrence of each adjustment pursuant to this Section 6, the Company
shall prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based.
(e) The form of this Warrant need not be changed because of any
change pursuant to this Section 6 and any Warrant issued after such change may
state the same Purchase Price, Trigger Price and Redemption Price and the same
number of shares of Common Stock as are stated in this Warrant as initially
issued. However, the Company may at any time in its sole discretion (which shall
be conclusive) make any change in the form of this Warrant that it may deem
22
appropriate and that does not affect the substance thereof. Any Warrant
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant or otherwise, may be in the form as so changed.
(f) In case at any time after the date of this Warrant:
(i) The Company shall declare a dividend (or any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
(ii) The Company shall authorize any reclassification of the
shares of its Common Stock, or any consolidation or merger to which it is a
party and for which approval of any shareholders of the Company is required, or
the sale or transfer of all or substantially all of its assets or all or
substantially all of its issued and outstanding stock; or
(iii) Events shall have occurred resulting in the voluntary
and involuntary dissolution, liquidation or winding up of the Company; then the
Company shall cause notice to be sent to the Holder at least twenty (20) days
prior (or ten (10) day prior in any case specified in clause (i) above, or on
the date of any case specified in clause (iii) above) to the applicable record
date hereinafter specified, a notice stating (1) the date on which a record is
to be taken or the purpose of such dividend, distribution or rights, or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record will be entitled to such dividend, distribution or rights are to
be determined or (2) the date on which such reclassification, consolidation,
merger, sale, transfer, initial public offering, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale transfer, dissolution, liquidation
or winding up. Failure to give any such notice of any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) and
(iii) above.
7. Redemption and Forced Sale Provisions.
The Company may, at its option at any time after both (i) the Registration
Statement has been declared effective (and has not been suspended or withdrawn)
and (ii) the closing price of the Common Stock is $1.20 (such amount, as may
from time to time be adjusted as provided herein, being herein referred to as
the "Trigger Price") or more per share during any period of 20 consecutive
trading days (collectively, the "Trigger Conditions"), redeem this Warrant in
full at a price per share equal to $.001 times the number of Shares which may be
purchased upon exercise of this Warrant (the "Redemption Price"). Each of the
Trigger Price and the Redemption Price is subject to adjustment as provided in
Section 6. The Company shall give notice of such redemption to the Holder, which
notice shall specify the date of the requested redemption (the "Redemption
Notice"). The date of a redemption pursuant to this Section 7 (a "Redemption
Date") shall be a business day not less than thirty (30) days from, and not more
than ninety (90) days from the date of the Redemption Notice sent by the
Company; provided that no such date will be a Redemption Date unless the
23
applicable Redemption Price is paid in full in cash on such date, and if not so
paid in full, the Redemption Date will be the date on which such Redemption
Price is fully paid. For this Warrant, the Company will be obligated on the
Redemption Date to pay to the Holder, upon surrender by the Holder at the
Company's principal office of the certificate representing such Warrant endorsed
or assigned in blank to the Company, an amount equal to the Redemption Price.
The Holder may exercise this Warrant in accordance with its terms at any time
prior to the Redemption Date.
8. Reporting Requirements. The Company shall provide written notice to
Holder of any "Ineffective Period," as defined below, within ten (10) days of
the commencement of any Ineffective Period. "Ineffective Period" shall mean any
period of time after the effective date of a registration statement covering the
Shares during the term hereof that such registration statement or any
supplemental or amended registration statement becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or all of the
Shares for any reason (or in the event the prospectus is not current and
deliverable).
9. Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Expenses. The Company agrees to pay any and all stamp, transfer and
other similar taxes payable or determined to be payable in connection with the
execution and delivery of this Warrant and the issuance of this Warrant.
11. Warrant Agent. The Company may, by written notice to the Holder of
this Warrant, appoint an agent, or U.S. Stock Transfer Corp. for the purpose of
issuing Shares on the exercise of this Warrants pursuant to Section 2,
exchanging this Warrant pursuant to Section 6, and replacing this Warrant
pursuant to Section 9, 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.
12. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant, in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant, are not and will not be adequate, and that 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.
13. Negotiability, Etc. This Warrant is issued upon the following terms,
to all of which the Holder or owner hereof, by the taking hereof, consents and
agrees:
24
(a) title to this Warrant may be transferred by endorsement (by the
Holder executing the form of assignment at the end hereof) and delivery in the
same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant, properly endorsed, is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
14. Notices, Etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified airmail, postage prepaid, at such address as may have been furnished
to the Company in writing by the Holder.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. This Warrant is being executed as an
instrument under seal. All nouns and pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons to whom reference is made herein may require.
16. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., New York time, the Expiry Date.
Dated:
-------------------
TENGTU INTERNATIONAL CORP.
By:
---------------------------
Name: Xxxx Xxxx
Title: President
25
ATTACHMENT A
NOTICE OF EXERCISE
(To be Executed by the Registered Holder in order to Exercise the Warrant)
The undersigned holder hereby irrevocably elects to purchase ____ shares
of Common Stock of Tengtu International Corp. (the "Company") pursuant to the
Common Stock Warrant void after the Expiry Date issued by the Company according
to the conditions set forth in said warrant and as of the date set forth below.*
Date of Exercise:
Number of Shares be Purchased: __________________________________________
Applicable Purchase Price:
Signature:
[Name]
Address:
o This original Warrant must accompany this Notice of Exercise.
26
Exhibit B
Form of $.60 Warrant
TENGTU INTERNATIONAL CORP.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR CANADIAN PROVINCE,
OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THIS WARRANT IS RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
Void after the Expiry Date Right to Purchase ____________
shares of Common Stock
(subject to adjustment)
PREAMBLE
Tengtu International Corp., a Delaware corporation (the "Company"), hereby
certifies that, for value received, _________________, the holder hereof (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 P.M. New York time, on
the Expiry Date, fully paid and nonassessable shares of the Company's U.S. $.01
par value per share common stock (the "Common Stock"). The purchase price per
share (the "Purchase Price") shall be, in the event of a purchase at any time
during the period commencing on the date hereof and ending on the Expiry Date,
$0.60. The number of shares of Common Stock and the amount of the Purchase Price
are subject to adjustment as provided herein. This Warrant may be redeemed by
the Company for $.001 times the number of Shares which may be purchased upon
exercise of this Warrant upon the occurrence of the certain events set forth in
Section 7(a), unless the Holder exercises this Warrant within 30 days after
receiving a Redemption Notice.
This warrant is the "$.60 Warrant" (this "Warrant"), evidencing the right
to purchase shares of Common Stock of the Company, issued pursuant to that
certain Unit Purchase Agreement dated March ___, 2005 (the "Unit Purchase
Agreement"), between the Company and the Holder. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in the
27
Unit Purchase Agreement. This Warrant evidences the right to purchase an
aggregate of ___________ shares of Common Stock of the Company, subject to
adjustment as provided in this Warrant.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall succeed
to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) The term "Expiry Date" refers to the date that is three years
after the date the SEC declares effective a registration statement for the
resale of the Shares (the "Registration Statement"); provided, however, if for
any reason there occurs an Ineffective Period (as defined in Section 8), such
date shall be extended by the length of time of the Ineffective Period and if
the Registration Statement is withdrawn for any reason, such date shall be
extended to the third anniversary of the date a new registration statement
covering the resale of the Shares is declared effective.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the Holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(e) The term "SEC," "Securities and Exchange Commission" or
"Commission" refers to the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
(f) The term "Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
(g) The term "Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
28
(g) The term "Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
1. Restricted Stock.
1.1 If, at the time of any transfer or exchange (other than a
transfer or exchange not involving a change in the beneficial ownership of this
Warrant or the Shares) of this Warrant or the Shares, this Warrant or the Shares
shall not be registered under the Securities Act, the Company will require, as a
condition of allowing such transfer or exchange, that the Holder or transferee
of this Warrant or the Shares, as the case may be, furnish to the Company an
opinion of counsel reasonably acceptable to the Company or a "no action" or
similar letter from the Securities and Exchange Commission to the effect that
such exercise, transfer or exchange may be made without registration under the
Securities Act. In the case of such transfer or exchange and in the case of an
exercise of this Warrant if the Shares to be issued thereupon are not registered
pursuant to the Securities Act, the Company will require a written statement
that this Warrant or the Shares, as the case may be, are being acquired for
investment and not with a view to the distribution thereof. The certificates
evidencing the Shares issued on the exercise of this Warrant shall, if such
Shares are being sold or transferred without registration under the Securities
Act, bear a legend similar to the legend on the face page of this Common Stock
Warrant.
1.2 (a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after 90 days following the effective date
of the first registration of the Company under the Securities Act of an offering
of its securities to the general public.
(b) The Company shall file with the Commission in a timely manner
all required reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to the Holder of this Warrant or the
Shares designated by the Holder, forthwith upon request, (i) a written statement
by the Company as to its compliance with the reporting requirements under the
Securities Act (at any time from and after 90 days following the effective date
of the first registration statement of the Company for an offering of its
securities to the general public) and of the reporting requirements of the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company, (iii) any other reports and documents necessary to satisfy the
information-furnishing condition to offers and sales under Rule 144A under the
Securities Act, and (iv) such other reports and documents as the Holder of this
Warrant or the Shares reasonably requests to avail itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
29
2. Exercise of Warrant.
2.1 Exercise in Full. The Holder of this Warrant may exercise it in
full by surrendering this Warrant, with the form of subscription at the end
hereof duly executed by the Holder, to the Company at its principal office. The
surrendered Warrant shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the face of
this Warrant by the applicable Purchase Price.
2.2 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Subsection
2.1 except that the amount of Common Stock obtained through the exercise shall
be calculated by multiplying (a) the number of shares of Common Stock called for
on the face of this Warrant as shall be designated by the Holder in the
subscription at the end hereof by (b) the Purchase Price. On any such partial
exercise, subject to the provisions of Section 2 hereof, the Company at its
expense will forthwith issue and deliver to, or upon the order of the Holder, a
new Warrant or Warrants of like tenor, in the name of the Holder, calling in the
aggregate on the face or faces thereof, for the number of shares of Common Stock
equal to the number of such shares called for on the face of this Warrant minus
the number of such shares designated by the Holder in the subscription at the
end hereof.
2.3 Company Acknowledgment. The Company will, at the time of the
exercise, exchange or transfer of this Warrant, upon the request of the Holder
acknowledge in writing its continuing obligation to afford to the Holder any
rights (including, without limitation, any right to registration of the Shares)
to which the Holder shall continue to be entitled after such exercise or
exchange in accordance with the provisions of this Warrant. If the Holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford to the Holder any such
rights.
3. Delivery of Stock Certificates, Etc., on Exercise. As soon as
practicable after the exercise of this Warrant, in full or in part, and in any
event within ten business (10) days thereafter, the Company, at its expense,
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, a certificate or certificates
for the number of fully paid and nonassessable Shares to which the Holder shall
be entitled on such exercise. No fractional Share or scrip representing a
fraction of a Share will be issued on exercise, but the number of Shares
issuable shall be rounded to the nearest whole Share.
4. Adjustment for Reorganization, Consolidation, Merger, Etc.
30
4.1 Merger, Etc. If the Company shall (a) consolidate with or merge
into any other person, or (b) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company (any such transaction being
hereinafter sometimes referred to as a "Reorganization") then, in each such
case, the Holder of this Warrant, on the exercise hereof as provided in Section
2 at any time after the consummation or effective date of such Reorganization
(the "Effective Date"), shall receive, in lieu of the Shares issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which the Holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if the Holder had so exercised this Warrant, immediately prior
thereto. The successor corporation in any such Reorganization described in
clause (b) or (c) above where the Company will not be the surviving entity (the
"Acquiring Company") must agree prior to such Reorganization in a writing
satisfactory in form and substance to the Holder that this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on exercise
after the consummation of such Reorganization, and shall be binding upon the
issuer of any such stock or other securities (including, in the case of any
transfer of properties or assets referred to above, the person acquiring all or
substantially all of the properties or assets of the Company). If the Acquiring
Company has not so agreed to continue this Warrant, then the Company shall give
30 days' prior written notice to the Holder of this Warrant of such
Reorganization, during which 30-day period (the "Notice Period") the Holder at
its option and upon written notice to the Company shall be able to (i) exercise
this Warrant or any part thereof at an exercise price (the "Discounted Exercise
Price") equal to the then prevailing purchase price hereunder discounted at the
Discount Rate (as used herein the "Discount Rate" shall mean the then prevailing
interest rate on U.S. Treasury Notes issued on (or immediately prior to) the
date of such 30-day notice and maturing on the Expiry Date (or immediately prior
thereto), such rate to be compounded annually through the Expiry Date, and in no
event to be less than 10% annually); or (ii) on the Effective Date, the Holder
of this Warrant shall be paid an amount (the "Merger Profit Amount") equal to
the difference between the fair market value per share of Common Stock of the
Company being purchased by the Acquiring Company in the Reorganization and the
Discounted Exercise Price described in clause (i) above and the Warrant shall
simultaneously expire. The Merger Profit Amount shall be payable in the same
form as the common stockholders of the Company shall be paid by the Acquiring
Company for their shares of common stock of the Company. The fair market value
of any noncash property received from the Acquiring Company upon the
Reorganization shall be determined in good faith by the Board of Directors of
the Company, as approved by the Company's stockholders.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of this Warrant after the effective date of
such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the Holder of this
Warrant.
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4.3 Continuation of Terms. Except as otherwise expressly provided in
Subsection 4.1, upon any reorganization, consolidation, merger or transfer (and
any dissolution following any transfer) referred to in this Section 4, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4.1.
5. No Impairment. The Company will not, by amendment of its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary 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 action as may be necessary or
appropriate in order to protect the rights of the Holders of this Warrant
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise and (b) will at all times reserve and keep available
out of its authorized capital stock, solely for the purpose of issue upon
exercise of this Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon exercise of this Warrant in full and shall
take all such action as may be necessary or appropriate in order that all shares
of Common Stock that shall be so issuable shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
6. No Dilution.
(a) In the event the Company shall pay a share dividend or other
distribution payable in shares of Common Stock, the Trigger Price and the
Redemption Price (each as defined in Section 7) and the Purchase Price in effect
immediately prior (and each Purchase Price, Trigger Price and Redemption Price
in effect subsequent) to such dividend or distribution shall, concurrently with
the effectiveness of such dividend or distribution, be proportionately adjusted.
In the case of a share dividend or other distribution payable in shares of
Common Stock such adjustment shall occur as follows: the Purchase Price, Trigger
Price and Redemption Price that is then in effect (and in effect at any time
thereafter) shall be decreased as of the time of such issuance, or in the event
a record date is fixed, as of the close of business on such record date, by
multiplying the Purchase Price, Trigger Price and Redemption Price then (and
therefore) in effect by a fraction (1) the numerator of which is the total
number of shares of issued Common Stock immediately prior to the time of such
issuance or the close of business on such record date, as the case may be, and
(2) the denominator of which is the total number of shares of issued Common
Stock immediately prior to the time of such issuance or the close of business on
32
such record date plus the number of shares of Common Stock issuable in payment
of such dividend or distribution; provided, however, that, if such record date
is fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Purchase Price, Trigger Price and
Redemption Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Purchase Price, Trigger Price and Redemption
Price shall be adjusted to reflect the actual payment of such dividend or
distribution. In the event of an adjustment of the Purchase Price, the number of
Shares which may be purchased upon exercise of this Warrant shall be
proportionately adjusted in accordance with the example in Section 6(d).
(b) In the event the issued shares of Common Stock shall be
subdivided, combined or consolidated, by reclassification or otherwise, into a
greater or lesser number of shares of Common Stock, the number of Shares into
which this Warrant is exercisable and the Purchase Price, Trigger Price and
Redemption Price shall be proportionately adjusted in accordance with the
example in Section 6(d).
(c) In the event the Conversion Price (as defined in the Certificate
of Designations, Preferences and Right of the Series A Convertible Cumulative
Preferred Stock of the Company) is reduced below the initial Conversion Price on
the date of filing (or successively thereafter below the Conversion Price then
in effect), then, if an adjustment in the Purchase Price shall not otherwise be
required pursuant to this Section 6, the Purchase Price then in effect shall
also be proportionately reduced so that the Purchase Price shall be 240% of the
Conversion Price. For example, if the Purchase Price in effect is $.60 and the
Conversion Price is reduced to $.20, then the Purchase Price shall be reduced to
$.48. If thereafter the Conversion Price is again reduced to $.10, the Purchase
Price shall be reduced to $.24.
(d) For clarification, and notwithstanding anything else to the
contrary contained in this Warrant, each time that an adjustment is required to
be made to the Purchase Price, proportionate adjustments will also be made to
the Trigger Price, the Redemption Price and the number of Shares which may be
purchased upon exercise of this Warrant. As an example of how the provisions of
this Section 6 shall be applied, assume that the number of Shares which may be
purchased upon exercise of this Warrant at a point in time is 100,000 Shares,
and that at such point in time, the Purchase Price is $0.40, the Trigger Price
is $1.20, and the Redemption Price is $0.001. Assume further that the Company
effects a two for one stock split. After the effective date of such two for one
stock split, the number of Shares which may be purchased upon exercise of this
Warrant will be adjusted to be 200,000 Shares, the Purchase Price will be
adjusted to be $0.20, the Trigger Price $0.60, and the Redemption Price $0,0005.
Upon the occurrence of each adjustment pursuant to this Section 6, the Company
shall prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based.
33
(e) The form of this Warrant need not be changed because of any
change pursuant to this Section 6 and any Warrant issued after such change may
state the same Purchase Price,Trigger Price and Redemption Price and the same
number of shares of Common Stock as are stated in this Warrant as initially
issued. However, the Company may at any time in its sole discretion (which shall
be conclusive) make any change in the form of this Warrant that it may deem
appropriate and that does not affect the substance thereof. Any Warrant
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant or otherwise, may be in the form as so changed.
(f) In case at any time after the date of this Warrant:
(i) The Company shall declare a dividend (or any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
(ii) The Company shall authorize any reclassification of the
shares of its Common Stock, or any consolidation or merger to which it is a
party and for which approval of any shareholders of the Company is required, or
the sale or transfer of all or substantially all of its assets or all or
substantially all of its issued and outstanding stock; or
(iii) Events shall have occurred resulting in the voluntary
and involuntary dissolution, liquidation or winding up of the Company; then the
Company shall cause notice to be sent to the Holder at least twenty (20) days
prior (or ten (10) day prior in any case specified in clause (i) above, or on
the date of any case specified in clause (iii) above) to the applicable record
date hereinafter specified, a notice stating (1) the date on which a record is
to be taken or the purpose of such dividend, distribution or rights, or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record will be entitled to such dividend, distribution or rights are to
be determined or (2) the date on which such reclassification, consolidation,
merger, sale, transfer, initial public offering, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale transfer, dissolution, liquidation
or winding up. Failure to give any such notice of any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) and
(iii) above.
7. Redemption and Forced Sale Provisions.
The Company may, at its option at any time after both (i) the Registration
Statement has been declared effective (and has not been suspended or withdrawn)
and (ii) the closing price of the Common Stock is $1.80 (such amount, as may
from time to time be adjusted as provided herein, being herein referred to as
the "Trigger Price") or more per share during any period of 20 consecutive
trading days (collectively, the "Trigger Conditions") redeem this Warrant in
full at a price per share equal to $.001 times the number of Shares which may be
purchased upon exercise of this Warrant (the "Redemption Price"). Each of the
Trigger Price and the Redemption Price is subject to adjustment as provided in
Section 6. The Company shall give notice of such redemption to the Holder, which
34
notice shall specify the date of the requested redemption (the "Redemption
Notice"). The date of a redemption pursuant to this Section 7 (a "Redemption
Date") shall be a business day not less than thirty (30) days from, and not more
than ninety (90) days from, the date of the Redemption Notice sent by the
Company; provided that no such date will be a Redemption Date unless the
applicable Redemption Price is paid in full in cash on such date, and if not so
paid in full, the Redemption Date will be the date on which such Redemption
Price is fully paid. For this Warrant, the Company will be obligated on the
Redemption Date to pay to the Holder, upon surrender by the Holder at the
Company's principal office of the certificate representing such Warrant endorsed
or assigned in blank to the Company, an amount equal to the Redemption Price.
The Holder may exercise this Warrant in accordance with its terms at any time
prior to the Redemption Date.
8. Reporting Requirements. The Company shall provide written notice to
Holder of any "Ineffective Period," as defined below, within ten (10) days of
the commencement of any Ineffective Period. "Ineffective Period" shall mean any
period of time after the effective date of a registration statement covering the
Shares during the term hereof that such registration statement or any
supplemental or amended registration statement becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or all of the
Shares for any reason (or in the event the prospectus is not current and
deliverable).
9. Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Expenses. The Company agrees to pay any and all stamp, transfer and
other similar taxes payable or determined to be payable in connection with the
execution and delivery of this Warrant and the issuance of this Warrant.
11. Warrant Agent. The Company may, by written notice to the Holder of
this Warrant, appoint an agent, or U.S. Stock Transfer Corp. for the purpose of
issuing Shares on the exercise of this Warrants pursuant to Section 2,
exchanging this Warrant pursuant to Section 6, and replacing this Warrant
pursuant to Section 9, 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.
12. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant, in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant, are not and will not be adequate, and that such terms may be
35
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.
13. Negotiability, Etc. This Warrant is issued upon the following terms,
to all of which the Holder or owner hereof, by the taking hereof, consents and
agrees:
(a) title to this Warrant may be transferred by endorsement (by the
Holder executing the form of assignment at the end hereof) and delivery in the
same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant, properly endorsed, is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
14. Notices, Etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified airmail, postage prepaid, at such address as may have been furnished
to the Company in writing by the Holder.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. This Warrant is being executed as an
instrument under seal. All nouns and pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons to whom reference is made herein may require.
16. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., New York time, the Expiry Date.
Dated:
-------------------
TENGTU INTERNATIONAL CORP.
By:
------------------------
Name: Xxxx Xxxx
Title: President
36
ATTACHMENT A
NOTICE OF EXERCISE
(To be Executed by the Registered Holder in order to Exercise the Warrant)
The undersigned holder hereby irrevocably elects to purchase ____ shares
of Common Stock of Tengtu International Corp. (the "Company") pursuant to the
Common Stock Warrant void after the Expiry Date issued by the Company according
to the conditions set forth in said warrant and as of the date set forth below.*
Date of Exercise:
Number of Shares be Purchased:
------------------------------------------
Applicable Purchase Price:
Signature:
[Name]
Address:
o This original Warrant must accompany this Notice of Exercise
37
Exhibit C
Extract from Item 1 of the Company's Annual Report of Form 10-K/A for the
fiscal year ended June 30, 2004
On September 15, 2003, we entered into an agreement with Tengtu China, Beijing
Jiade Tengtu Technology Group Co., Ltd., Xxx Xx Zhang and Beijing Oriental Tai
He Technology Development Co., Ltd. (collectively the "Tengtu China Group"),
pursuant to a July 1, 2003 Terms Memorandum for a restructuring pursuant to
which we acquired 100% of Tengtu United and all of the profits generated by its
business in China while the Tengtu Group continues to operate that business (the
"Restructuring Agreement"). The Restructuring Agreement was approved by our
stockholders at our annual meeting of stockholders on January 20, 2004 and the
agreement was consummated on April 5, 2004.
Since April 5, 2004, we, through our Audit Committee, have conducted a
thorough examination of the financial condition of Tengtu United, its operations
and the present and former operations of our former joint venture partner,
Beijing Tengtu China Culture and Education Electronics Development Co., Ltd.
("Tengtu China"), and the Tengtu China Group. Prior to the acquisition, Tengtu
China conducted all of Tengtu United's business with all Chinese government
entities as its agent and still conducts some of Tengtu United's business.
As a result of the examination, we have discovered that there were
inadequate internal and financial controls and systems at Tengtu China and the
Tengtu China Group which, to date, we have discovered resulted in inaccurate
recordkeeping, accounting errors, double counting of sales, and recognition of
revenue that is considered premature under United States generally accepted
accounting principles. We have, to date, implemented a number of measures to
correct weaknesses in internal controls and financial reporting systems as
follows:
i. We have reorganized the finance and accounting departments;
ii. We have replaced financial management responsible for financial
reporting, and appointed Xxxxx Xxx as Chief Financial Officer of Tengtu United
to oversee the Company's financial review and reorganization;
iii. We require our Chief Financial Officer to pre-approve all large
contracts for products or services, perform credit worthiness reviews of all
customers, perform thorough analysis of the profitability and capital
requirements of individual contracts and hold sales employees accountable for
the profitability and collectibility of sales made.
38
Our systems of internal control, however, are still in the process of
evaluation and improvement as personnel are replaced and new procedures are
implemented.
For the fiscal year ended June 30, 2004, we made a one time adjustment of
$18,700,000 to due from related party. As previously reported in a Current
Report on Form 8-K filed with the SEC on May 26, 2004, we believed that our
approximately $19.5 million receivable due from Tengtu China was materially
impaired and that we were continuing an assessment of the impairment. Upon
further assessment, we believe that approximately $800,000 of this amount will
be collected from schools resulting in a write-down $18,700,000 due from Tengtu
China in the quarter ended June 30, 2004. However, we are continuing aggressive
efforts to collect all receivables.
39
Exhibit D
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of March 24, 2005 is made and
entered into by and between Tengtu International Corp., a Delaware corporation
(the "Company"), and ______________________(the "Investor").
WHEREAS, the Investor, has agreed to purchase from the Company, and the
Company has agreed to issue to the Investor, shares of the Company's Series A
Convertible Cumulative Preferred Stock, par value $.01 per share (the "Series A
Stock") and warrants, pursuant to a Unit Purchase Agreement (the "Purchase
Agreement" and with respect to other investors who have purchased Series A Stock
and warrants, the "Purchase Agreements"); and
WHEREAS, in order to induce investors to enter into Purchase Agreements,
the Purchase Agreements require that the Company enter into this Registration
Rights Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. REQUESTED REGISTRATIONS.
1.1 REGISTRATION REQUESTS.
1.1.1 INITIAL REGISTRATION REQUEST. On a date immediately following
the last closing under the Purchase Agreements, the Company
shall be deemed to have received a written request for a
Requested Registration (as defined below) from the Investors
and Investor with respect to all Registrable Securities.
1.1.2 The Company may include in such registration other securities
of the same class as the Registrable Securities for sale for
its own account or for the account of any other person.
Neither the Company nor any of its shareholders shall have the
right to include any of the Company's securities (other than
Registrable Securities) in a registration statement to be
filed as part of a Requested Registration unless (i) such
securities are of the same class as the Registrable
Securities, (ii) the holders of a majority of the Registrable
Securities covered by such registration statement consent to
such inclusion in writing, unless the Company is required to
include such securities pursuant to a pre-existing agreement
and (iii) if such Requested Registration is an underwritten
offering, the Company or such shareholders, as applicable,
agree in writing to sell their securities on the same terms
and conditions as apply to the Registrable Securities being
sold. If any shareholders of the Company (other than the
40
holders of Registrable Securities in such capacity) register
securities of the Company in the Requested Registration in
accordance with this Section, such holders shall pay the fees
and expenses of their counsel and their Pro Rata share, on the
basis of the respective amounts of the securities included in
such registration on behalf of each such Owner, of the
Registration Expenses if the Registration Expenses for such
registration are not paid by the Company for any reason.
1.2 REGISTRATION STATEMENT FORM. The Company may, if permitted by law,
effect any Requested Registration by the filing of a registration
statement on the applicable form.
1.3 REGISTRATION EXPENSES. The Company will pay all Registration
Expenses incurred in connection with the Requested Registration.
2. REGISTRATION PROCEDURES. If and whenever the Company is required to use
its best efforts to effect the registration of any Registrable Securities
pursuant Section 1 or Section 2, the Company will use its best efforts to
effect the registration to permit the record owners of the Registrable
Securities to sell in accordance with the provisions of the Act. Without
limiting the foregoing, the Company in each such case will, as
expeditiously as possible:
2.1 prepare and file with the Commission the requisite registration
statement to effect such registration and use its best efforts to
cause such registration statement to become effective as soon as
possible, provided that as far in advance as practical before filing
such registration statement or any amendment thereto;
2.2 prepare and file with the Commission such amendments and supplements
to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such
Registration Statement and to comply with the provisions of the Act
with respect to the disposition of all Registrable Securities
covered by such Registration Statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i)
such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement and (ii)
six months after the expiry date of the warrants granted to
Investors in connection with the Purchase Agreements ;
2.3 promptly notify each owner of Registrable Securities (an "Owner"):
2.3.1 when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto,
has become effective; and
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2.3.2 of the notification to the Company by the Commission of the
initiation of any proceeding with respect to the issuance by
the Commission of, or of the issuance by the Commission of,
any stop order suspending the effectiveness of such
Registration Statement.
2.4 furnish to each seller of Registrable Securities covered by such
Registration Statement such number of conformed copies of such
registration statement and of each amendment and supplement thereto
(in each case including all exhibits and documents incorporated by
reference), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under
Rule 424 promulgated under the Act relating to such Owner's
Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable
Securities;
2.5 use its best efforts to register or qualify all Registrable
Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Owner
shall reasonably request, assuming no exemption from registration is
available, to keep such registration or qualification in effect for
so long as such registration statement remains in effect, and take
any other action which may be reasonably necessary or advisable to
enable such Owner to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Owner,
except that the Company shall not for any such purpose be required
(i) to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of
this Paragraph 2.5 be obligated to be so qualified, (ii) to subject
itself to taxation in any such jurisdiction solely by reason of such
registration or qualification or (iii) to consent to general service
of process in any jurisdiction;
2.6 notify each Owner covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered
under the Act, (a) of the happening of any event as a result of
which any Prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or
omits 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, (b) of any
change in such prospectus and (c) if the use of such prospectus has
been suspended, the time when such prospectus or any modified or
supplemented prospectus may thereafter be used, and at the request
of any such Owner promptly prepare and furnish to such Owner a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
42
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;
2.7 otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission;
2.8 provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
2.9 use its best efforts to cause all Registrable Securities covered by
such registration statement to be listed, upon official notice of
issuance, on any securities exchange on which any of the securities
of the same class as the Registrable Securities are then listed. The
Company may require each Owner of Registrable Securities as to which
any registration is being effected to, and each such Owner, as a
condition to including Registrable Securities in such registration,
shall furnish the Company with such information and affidavits
regarding such Owner and the distribution of such securities as the
Company may from time to time reasonably request in writing in
connection with such registration. Each Owner of Registrable
Securities agrees by acquisition of such Registrable Securities that
upon receipt of any notice from the Company of the happening of any
event of the kind described in Paragraph 2.6, such Owner will
forthwith discontinue such Owner's disposition of Registrable
Securities pursuant to the registration statement relating to such
Registrable Securities until such Owner's receipt of the copies of
the supplemented or amended prospectus contemplated by Paragraph 2.6
and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies,
then in such Owner's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the
period referred to in Paragraph 2.2 shall be extended by a number of
days equal to the number of days during the period from and
including the giving of notice pursuant to Paragraph 2.6 and to and
including the date when each Owner of any Registrable Securities
covered by such registration statement shall receive the copies of
the supplemented or amended prospectus contemplated by Paragraph
2.6.
3. REGISTRATION DEFAULTS
3.1 Each of the following events shall constitute a "Registration
Default" for purposes of this Agreement:
3.1.1 (a) if a Registration Statement covering the Registrable
Securities shall not have been declared effective on or prior
to 90 days after the date of this Agreement, except where the
failure to meet such deadline is the result solely of actions
by the holders of Registrable Securities; or
43
(b) the inability of the Investor to sell all of its
Registrable Securities pursuant to an effective Registration
Statement because of a failure by the Company to keep the
Registration Statement effective, to disclose such information
as is necessary for sales to be made pursuant to the
Registration Statement, to register sufficient shares of
Common Stock or the suspension or withdrawal of the
Registration Statement.
3.2 Upon the occurrence of a Registration Default, and for the period
commencing on the date the Registration Default occurs and ending on
the earlier of the date the Registration Default is cured or the day
when the Owner may sell all of the Owner's Registrable Securities
under Rule 144, the Company shall pay each Owner for each day of
such Registration Default an amount equal to .033% of the purchase
price paid by the Investor for the Units of the Company's Series A
Stock and warrants purchased by the Investor pursuant to the
Purchase Agreement between the Investor and the Company (rounded to
the nearest xxxxx). Payments hereunder shall be made by the Company
on the first business day of each month for any period of default in
a prior month.
4 INDEMNIFICATION.
4.1 INDEMNIFICATION BY THE COMPANY. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of
Registrable Securities included in any registration statement filed
in connection with a Requested Registration its general or limited
partners, directors, officers, employees, agents and each other
Person, if any, who controls any such seller within the meaning of
the Act, against any losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such
seller or any such partner, director, officer, employee, agent or
controlling Person may become subject under the Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the
case of a prospectus, in the light of the circumstances under which
they were made) not misleading, and the Company will reimburse such
seller and each such partner, director, officer, employee, agent and
controlling Person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any
such Loss (or action or proceeding in respect thereof); provided
that the Company shall not be liable in any such case to the extent
that any such Loss (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
seller. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller
or any such partner, director, officer, employee, agent or
controlling Person, and shall survive the transfer of such
securities by such seller.
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4.2 INDEMNIFICATION BY THE SELLERS. Each Owner of Registrable Securities
which are included or are to be included in any registration
statement filed in connection with the Requested Registration, as a
condition to including Registrable Securities in such registration
statement, shall, to the full extent permitted by law, indemnify and
hold harmless the Company, its directors, officers, employees,
agents and each other Person, if any, who controls the Company
within the meaning of the Act, against any Losses to which the
Company or any such director, officer, employee, agent or
controlling Person may become subject under the Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the
case of a prospectus, in the light of the circumstances under which
they were made) not misleading, if such untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon written information furnished to the Company by such
seller or seller's agent, and used in any preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement;
provided, however, that the obligation to provide indemnification
pursuant to this Section 4.2 shall be several, and not joint and
several, among such indemnifying parties on the basis of the number
of Registrable Securities included in such registration statement
and the aggregate amount which may be recovered from any Owner of
Registrable Securities pursuant to the indemnification provided for
in this Section 4.2 in connection with any registration and sale of
Registrable Securities shall be limited to the total proceeds
received by such Owner from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such
director, officer, employee, agent or controlling Person and shall
survive the transfer of such securities by such seller.
4.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding Paragraph 4.1 or 4.2,
such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party pursuant to such paragraphs, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs 4.1 or 4.2, except to the
extent that the indemnifying party is materially prejudiced by such
failure to give notice. In case any such action is brought against
an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it
45
may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter
in connection with the defense thereof other than reasonable costs
of investigation; provided that the indemnified party may
participate in such defense at the indemnified party's expense; and
provided further, that the indemnified party or indemnified parties
shall have the right to employ one counsel to represent it or them
if, in the reasonable judgment of the indemnified party or
indemnified parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses
which are different from or in addition to those available to the
indemnifying party, and in that event the reasonable fees and
expenses of such one counsel shall be paid by the indemnifying
party. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the indemnified
parties with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other indemnified parties
with respect to such claim, in which event the indemnifying party
shall be obligated to pay the fees and expenses of such additional
counsel for the indemnified parties or counsels. No indemnifying
party shall consent to entry of any judgment or enter into any
settlement without the consent of the indemnified party which does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. No
indemnifying party shall be subject to any liability for any
settlement made without its consent, which consent shall not be
unreasonably withheld.
4.4 CONTRIBUTION. If the indemnity and reimbursement obligation provided
for in any paragraph of this Section is unavailable or insufficient
to hold harmless an indemnified party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then
the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such Losses (or
actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party
on the one hand and the indemnified party on the other hand in
connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this paragraph
were to be determined by Pro Rata allocation or by any other method
of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph.
The amount paid by an indemnified party as a result of the Losses
referred to in the first sentence of this paragraph shall be deemed
46
to include any legal and other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
Loss which is the subject of this paragraph. No indemnified party
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from the
indemnifying party if the indemnifying party was not guilty of such
fraudulent misrepresentation.
4.5 OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding paragraphs of this Section (with appropriate
modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or
other qualification of securities under any Federal or state law or
regulation of any Governmental or Regulatory Authority other than
the Act. The provisions of this Section shall be in addition to any
other rights to indemnification or contribution which an indemnified
party may have pursuant to law, equity, contract or otherwise.
5. COVENANTS RELATING TO REPORTING. The Company will file reports in
compliance with the Exchange Act.
6. DEFINITIONS.
6.1 Except as otherwise specifically indicated, the following terms will
have the following meanings for all purposes of this Agreement:
6.1.1 "Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
6.1.2 "Board of Directors" means the Board of Directors of the
Company.
6.1.3 "Commission" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority.
6.1.4 "Common Stock" means the Common Stock, par value $.01 per
share, of the Company, as constituted on the date hereof, and
any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such
Common Stock.
6.1.5 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
6.1.6 "NASD" means the National Association of Securities Dealers.
6.1.7 "Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other
business organization, trust, union or association.
47
6.1.8 "Public Offering" means any offering of Common Stock to the
public, either on behalf of the Company or any of its
shareholders, pursuant to an effective registration statement
under the Act.
6.1.9 "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with its obligations
under this Agreement to effect the registration of Registrable
Securities in a Requested Registration, including without
limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification
and other fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or
incident to such performance and compliance, premiums and
other costs of policies of insurance against liabilities
arising out of the Public Offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and
commissions, the fees and disbursements of counsel retained by
the Owners of the Registrable Securities being registered and
transfer taxes, if any, in respect of Registrable Securities,
which shall be payable by each Owner thereof, provided that,
in any case where Registration Expenses are not to be borne by
the Company, such expenses shall not include salaries of the
Company personnel or general overhead expenses of the Company,
auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Company or
other expenses for the preparation of financial statements or
other data normally prepared by the Company in the ordinary
course of its business or which the Company would have
incurred in any event.
6.1.10"Registrable Securities" means (i) shares of Common Stock to
be issued to the Investors upon conversion of the Series A
Stock, (ii) shares of Common Stock issuable upon exercise of
warrants granted to Investors in connection with the Purchase
Agreements, and (ii) any additional shares of Common Stock
issued or distributed by way of a dividend, stock split or
other distribution in respect of shares of Common Stock
referred to in clause (i), or acquired by way of any rights
offering or similar offering made in respect of shares of
Common Stock referred to in Clause (i). As to any particular
Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall
have become effective under the Act and such securities shall
have been disposed of in accordance with such registration
statement, (ii) they shall have been distributed to the public
pursuant to Regulation S or (iii) they shall have ceased to be
outstanding.
6.1.11"Transferee" means all Persons acquiring shares of Common
Stock from an Investor.
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7. MISCELLANEOUS.
7.1 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by
facsimile, as follows: If to the Company: Tengtu International
Corp., 000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0, Attention: Xxxx
Xxxx, Facsimile No: 000-000-0000. If to Investor:
____________________________________________________________
Facsimile No.: ________________________________. Except as otherwise
provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopier or e-mail to
the designated recipient. Any party hereto may change its designee
and address or facsimile number for that designee for notices and
other communications hereunder by notice to the other parties
hereto.
7.2 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.
7.3 AMENDMENT. Sections 1.3, 2, 4, 6, 7.3 and 7.5 of this Agreement may
be amended, supplemented or modified only by a written instrument
(which may be executed in any number of counterparts) duly executed
by or on behalf of each of the Company and the Owners of all of the
Registrable Securities then outstanding or subject to issuance. Each
of the other sections of this Agreement may be amended, supplemented
or modified only by a written instrument (which may be executed in
any number of counterparts) duly executed by or on behalf of each of
the Company and the Owners of two-thirds (2/3) or more of the
Registrable Securities then outstanding or subject to issuance.
7.4 WAIVER. Subject to Paragraph 7.5, any term or condition of this
Agreement may be waived at any time by the party that is entitled to
the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of
the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the
same term or condition of this Agreement on any future occasion.
7.5 CONSENTS AND WAIVERS BY OWNERS. Any consent of the Owners of
Registrable Securities pursuant to this Agreement, and any waiver by
the Owners of Registrable Securities of any provision of this
Agreement, shall be in writing (which may be executed in any number
of counterparts) and may be given or taken by the Owners of the
requisite amount of Registrable Securities then outstanding or
subject to issuance provided for in Paragraph 7.3 , and any such
consent or waiver so given or taken will be binding on all the
Owners.
49
7.6 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto
and their respective successors or permitted assigns, and it is not
the intention of the parties to confer third-party beneficiary
rights upon any other Person other than any Person entitled to
indemnification under Section 3.
7.7 SUCCESSORS AND ASSIGNS. The registration rights contained in this
Agreement shall be transferable by any Owner of Registrable
Securities to any Person that acquires Registrable Securities from
such Owner (excluding any Person that acquires such Registrable
Securities in a transaction pursuant to which such securities cease
to be Registrable Securities).
7.8 HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the
provisions hereof.
7.9 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible.
7.10 REMEDIES. Except as otherwise expressly provided for herein, no
remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more
remedies by any party hereto shall not constitute a waiver by any
such party of the right to pursue any other available remedies.
Damages in the event of breach of this Agreement by any party hereto
or any of their respective successors or permitted assigns would be
difficult, if not impossible, to ascertain, and it is therefore
agreed that each such Person, in addition to and without limiting
any other remedy or right it may have, will have the right to an
injunction or other equitable relief in any court of competent
jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof and each party hereto, on its own
behalf and behalf of its respective successors and permitted
assigns, hereby waives any and all defenses it may have on the
ground of lack of jurisdiction or competence of the court to grant
such an injunction or other equitable relief. The existence of this
right will not preclude any such Person from pursuing any other
rights and remedies at law or in equity which such Person may have.
50
7.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
TENGTU INTERNATIONAL CORP.
By:
-------------------------------
Name: Xxxx Xxxx
Title: President
[ ]
By:
-----------------------------
Title:
---------------------------
51
