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EXHIBIT 4.18
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SECURITIES PURCHASE AGREEMENT
Among
TEAM COMMUNICATIONS GROUP, INC.,
AUSTINVEST ANSTALT BALZERS;
ESQUIRE TRADE & FINANCE INC.;
AMRO INTERNATIONAL, S.A.
and
NESHER INC.
Dated as of January 28, 1999
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF THE SECURITIES...............................................4
1.1 Purchase and Sale....................................................................4
1.2 The Closings.........................................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES....................................................6
2.1 Representations, Warranties and Agreements of the Company............................6
2.2 Representations and Warranties of the Purchasers....................................14
ARTICLE III OTHER AGREEMENTS OF THE PARTIES.................................................15
3.1 Transfer Restrictions...............................................................15
3.2 Stop Transfer Orders; Suspension of Qualification...................................16
3.3 Furnishing of Information...........................................................16
3.4 Blue Sky Laws.......................................................................17
3.5 Integration.........................................................................17
3.6 Certain Agreements..................................................................17
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law.................................................................17
3.8 Notice of Breaches..................................................................18
3.9 Conversion Obligations of the Company...............................................19
3.10 Use of Proceeds.....................................................................19
3.11 Indemnification.....................................................................19
3.12 Subsequent Sales and Registrations..................................................21
3.13 Shareholder Approval................................................................21
3.14 Incorporation of the Debentures By Reference........................................22
3.15 Board of Directors..................................................................22
3.16 Additional Warrants.................................................................22
3.17 Short Sales.........................................................................22
ARTICLE IV CONDITIONS......................................................................22
4.1 Conditions Precedent to Sale of the Initial Securities..............................22
4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the
Additional Securities...............................................................25
ARTICLE V MISCELLANEOUS....................................................................28
5.1 Fees and Expenses...................................................................28
5.2 Entire Agreement; Amendments........................................................28
5.3 Notices.............................................................................28
5.4 Amendments; Waivers.................................................................29
5.5 Headings............................................................................29
5.6 Successors and Assigns..............................................................29
5.7 No Third Party Beneficiaries........................................................30
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TABLE OF CONTENTS
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5.8 Governing Law.......................................................................30
5.9 Survival............................................................................30
5.10 Execution...........................................................................30
5.11 Publicity...........................................................................30
5.12 Consent to Jurisdiction; Attorneys' Fees............................................30
5.13 Waiver of Jury Trial................................................................32
5.14 Severability........................................................................32
5.15 Remedies............................................................................32
5.16 Independent Nature of Purchasers' Obligations and Rights............................32
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Schedules and Exhibits
Schedule 1 - Purchasers of Securities
Schedule 2.1(a) - Organization and Qualification; Subsidiaries
Schedule 2.1(c)(i) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(c)(ii) - Notice with Respect to Listing
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(r) - Registration Rights, Rights of Participation
Schedule 2.1(s) - Title
Schedule 2.1(y) - Year 2000 Compliance
Schedule 3.10 - Use of Proceeds
Exhibit A - Debentures
Exhibit B - Warrants
Exhibit C - Registration Rights Agreement
Exhibit D - Transfer Agent Instructions
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
28, 1999, among Team Communications Group, Inc., a California corporation (the
"Company"), Austinvest Anstalt Balzers ("Austinvest"), Esquire Trade & Finance
Inc. ("Esquire"), Amro International, S.A. ("Amro") and Nesher Inc. ("Nesher").
Austinvest, Esquire, Amro and Nesher are each referred to herein as a
"Purchaser" and are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, $2,000,000 aggregate principal
amount of 8% Convertible Debentures due 2002 of the Company (the "Debentures")
and warrants (the "Warrants") to purchase shares of common stock, no par value
per share, of the Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale.
(a) Subject to the terms and conditions hereof and in reliance
on the representations and warranties contained herein, the Company shall issue
and sell to the Purchasers, and the Purchasers, severally and not jointly, shall
purchase from the Company (i) up to an aggregate principal amount of $2,000,000
of Debentures and (ii) Warrants to purchase up to 200,000 shares of Common
Stock.
(b) The Debentures shall be substantially in the form annexed
hereto as Exhibit A and the Warrants shall be in the form annexed hereto as
Exhibit B.
1.2 The Closings.
(a) The Initial Closing.
(i) The closing of the purchase and sale of the Initial
Securities (as defined below) (the "Initial Closing") shall take place
at the offices of Stroock & Stroock & Xxxxx LLP, 000 Xxxxxx Xxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000, immediately following the execution hereof or
such later date or different location as the parties shall agree in
writing, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party. The
date of the Initial Closing is hereinafter referred to as the "Initial
Closing Date." At the Initial Closing, the Company shall sell and issue
to the Purchasers, and the Purchasers shall, severally and not jointly,
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purchase from the Company, an aggregate principal amount of $850,000 of
Debentures and Warrants to purchase up to 85,000 shares of Common Stock
(the "Initial Securities") for an aggregate purchase price of $850,000
(the "Initial Purchase Price").
(ii) At the Initial Closing (a) the Company shall deliver to
each Purchaser (1) Debentures (in definitive form) in the denominations
specified on Schedule 1 attached hereto, each registered in the name of
such Purchaser, (2) a warrant agreement representing the Warrants
included in the Initial Securities (the "Initial Warrants") purchased by
such Purchaser as set forth next to such Purchaser's name on Schedule 1
attached hereto, registered in the name of such Purchaser, (3) and all
other documents, instruments and writings required to have been
delivered at or prior to the Initial Closing by the Company pursuant to
this Agreement and the Registration Rights Agreement, dated the date
hereof, by and among the Company and the Purchasers, in the form of
Exhibit C annexed hereto (the "Registration Rights Agreement"), and (b)
each Purchaser shall deliver to the Company the portion of the Initial
Purchase Price set forth next to its name on Schedule 1, in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose on or
prior to the Initial Closing Date, and all documents, instruments and
writings required to have been delivered at or prior to the Initial
Closing by such Purchaser pursuant to this Agreement and the
Registration Rights Agreement.
(b) Subsequent Closings.
(i) Second Closing. Beginning on the date on which the initial
Registration Statement (as defined in the Registration Rights Agreement)
is filed with the Securities and Exchange Commission (the "Commission"),
the Company shall have the right to deliver a written notice to the
Purchasers requiring the Purchasers to purchase an additional $350,000
aggregate principal amount of Debentures and Warrants to purchase an
additional 35,000 shares of Common Stock for an aggregate purchase price
of $350,000 (the "Second Tranche"). The closing of the purchase and sale
of the Second Tranche is hereinafter referred to as the "Second
Closing," the date of the Second Closing is hereinafter referred to as
the "Second Closing Date" and the purchase price paid for the Second
Tranche is hereinafter referred to as the "Second Tranche Purchase
Price."
(ii) Third Closing. Subject to the terms and conditions set
forth in Section 4.2 and elsewhere in this Agreement and beginning on
the date that the Registration Statement is declared effective by the
Commission, the Company shall have the right to deliver a written notice
to the Purchasers requiring the Purchasers to purchase an additional
$400,000 aggregate principal amount of Debentures and Warrants to
purchase an additional 40,000 shares of Common Stock for an aggregate
purchase price of $400,000 (the "Third Tranche"). The closing of the
purchase and sale of the Third Tranche is hereinafter referred to as the
"Third Closing," the date of the Third Closing is
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hereinafter referred to as the "Third Closing Date" and the purchase
price paid for the Third Tranche is hereinafter referred to as the
"Third Tranche Purchase Price."
(iii) Optional Closing. No earlier than 75 days and no later
than 180 days after the date on which the Registration Statement has
been declared effective by the Commission, the Company shall have the
right to deliver a written notice to the Purchasers (a "Optional Closing
Financing Notice") requiring the Purchasers to purchase up to an
additional $400,000 aggregate principal amount of Debentures and
Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000 (the "Optional Securities"). Such
Optional Closing Financing Notice shall set forth the number of Optional
Securities that the Company intends to sell to the Purchasers. The
closing of the purchase and sale of the Optional Securities is
hereinafter referred to as the "Optional Closing," the date of the
Optional Closing is hereinafter referred to as the "Optional Closing
Date" and the purchase price paid for the Optional Securities is
hereinafter referred to as the "Optional Purchase Price."
(iv) At each of the Subsequent Closings (as defined below) (a)
the Company shall deliver to each Purchaser and each Purchaser shall be
obligated (subject to the terms and conditions herein) to purchase such
portion of such Debentures and Warrants (the Second Tranche, the Third
Tranche and the Optional Securities shall be collectively referred to
herein as the "Additional Securities") sold by the Company as equals
such Purchaser's pro rata portion of the purchase price for the Initial
Securities issued and sold at the Initial Closing. Each of the
Subsequent Closings shall take place in the same manner as the Initial
Closing; provided, however, that in no case shall any Subsequent Closing
take place unless and until the conditions listed in Section 4.2 have
been satisfied or waived by the appropriate party.
The Second Closing, the Third Closing and the Optional Closing
are hereinafter collectively referred to as the "Subsequent Closings"
and the Second Closing Date, the Third Closing Date and the Optional
Closing Date are hereinafter collectively referred to as the "Subsequent
Closing Dates."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification; Subsidiaries. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of California, with the requisite corporate power and
authority to own and use its properties and
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assets and to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in Schedule 2.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Debentures or any of the other Transaction Documents (as defined below),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects (insofar as such prospects may reasonably be foreseen) or
financial condition of the Company and the Subsidiaries, taken as a whole or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document, including, without limitation, the
Company's obligations under Section 3.7 hereof (any of (x), (y) or (z), being a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the other Transaction Documents, and
otherwise to carry out its obligations hereunder and thereunder. This Agreement,
the Registration Rights Agreement, the Debentures and the Warrants are
collectively referred to as the "Transaction Documents." The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company. Each of the Transaction Documents has
been duly executed by the Company and when delivered in accordance with the
terms hereof will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective articles
of incorporation, bylaws or other organizational documents.
(c) Capitalization; Rights to Acquire Capital Stock. On the date
hereof, the authorized capital of the Company consists of (i) 18,000,000 shares
of Common Stock, no par value, of which 3,456,092 are issued and outstanding and
(ii) 2,000,000 shares of preferred stock, no par value, none of which have been
issued. Schedule 2.1(c)(i) hereto sets forth the options, warrants and
convertible securities of the Company (the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Company into which such
Derivative Securities are convertible as of the date hereof,
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(iv) the conversion or exercise price or prices of such Derivative Securities as
of the date hereof and (v) the expiration date of any conversion or exercise
rights held by the owners of such Derivative Securities. All issued and
outstanding shares of capital stock of the Company and each Subsidiary have been
duly authorized and validly issued and are fully paid and non-assessable. No
shares of the capital stock of the Company are entitled to preemptive or similar
rights, nor is any holder of the capital stock of the Company entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of any of the Transaction Documents. To the best knowledge
of the Company, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind. The Common Stock is
quoted and is listed for trading on The Nasdaq Small-Cap Market. Except as
described on Schedule 2.1(c)(ii), the Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing. After giving effect to the transactions
contemplated in this Agreement, the Company believes that it is in compliance
with all such maintenance requirements.
(d) Issuance of Securities. The Debentures have been duly
authorized for issuance, and when duly executed and delivered by the Company in
accordance with this Agreement, shall constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application. The Company
has and, at the Initial Closing Date and each Subsequent Closing Date (each, a
"Closing Date"), as the case may be, will have and at all times while the
Debentures and the Warrants are outstanding will maintain an adequate reserve of
duly authorized shares of Common Stock as may be necessary to effect conversion
of the Debentures and exercise of the Warrants. The shares of Common Stock
issuable upon conversion of , or in lieu of interest payments on, the Debentures
are referred to herein as the "Underlying Shares." When issued in accordance
with the Debentures, the Underlying Shares will be duly authorized, validly
issued, fully paid and nonassessable, free and clear of all liens. The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." When issued and paid for in accordance with the Warrant,
the Warrant Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all liens. The Debentures, the Warrants, the
Underlying Shares and the Warrant Shares are referred to herein as the
"Securities."
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(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its articles
of incorporation, bylaws or other organizational documents (each as amended
through the date hereof) or (ii) subject to obtaining the consents referred to
in Section 2.1(e), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument (evidencing a Company debt or otherwise)
to which the Company is a party or by which any property or asset of the Company
is bound or affected, (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations), or by which any material property or
asset of the Company is bound or affected, or (iv) result in the creation of
imposition of a Lien upon any of the Securities or any of the assets of the
Company, or any of its Affiliates (as such term is defined under Rule 405
promulgated under the Securities Act of 1933, as amended (the "Securities
Act")), except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental authority except for any
such violation as would not, individually or in the aggregate, have or result in
a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing of the Registration Statement with the Commission, which shall be
filed in accordance with and in the time periods set forth in the Registration
Rights Agreement, (ii) the application(s) or any letter(s) acceptable to The
Nasdaq Small-Cap Market for the listing of the Underlying Shares and the Warrant
Shares with The Nasdaq Small-Cap Market (and with any other national securities
exchange or market on which the Common Stock is then listed), and (iv) any
filings, notices or registrations under applicable federal and state securities
laws (together with the consents, waivers, authorizations, orders, notices and
filings referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically set forth in
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries or Affiliates or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
(i) adversely affects or challenges the legality, validity or enforceability of
any of
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the Transaction Documents or the Securities or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Except as set forth in Schedule
2.1(h), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound which could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect, (ii) is in violation of any order of any court,
arbitrator or governmental body applicable to it, or (iii) is in violation of
any statute, rule or regulation of any governmental authority to which it is
subject, which violation could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein not misleading.
(j) Private Offering. The Company and to the best of the
Company's knowledge, all Persons acting on its behalf have not made, and will
not make, offers or sales of the Debentures or the Warrants, and any securities
that might be integrated with offers and sales of the Debentures and the
Warrants, except to "accredited investors" (as defined in Regulation D
("Regulation D") under the Securities Act) without any general solicitation or
advertising and otherwise in compliance with the conditions of Regulation D. The
offer and sale by the Company to the Purchasers of the Debentures and the
Warrants and the Underlying Shares and the Warrant Shares into which the
Debentures and the Warrants are convertible or exercisable, as the case may be,
is exempt from the registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, (the foregoing materials
being collectively referred to herein as the "SEC Documents") on a timely basis
or received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required; neither the Company nor any of the Subsidiaries
is in breach of any agreement where such breach could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
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Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q for the period ended September 30, 1998, there has been no
event, occurrence or development that has had a or could reasonably be expected
to have a Material Adverse Effect which has not been specifically disclosed to
the Purchasers by the Company.
(l) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor, finder, investment banker, or bank
with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section 2.1(m) that may be due in connection with the transactions contemplated
by this Agreement. The Company shall indemnify and hold harmless each of the
Purchasers, its employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees.
(n) Solicitation Materials. The Company has not distributed any
offering materials in connection with the offering and sale of the Securities.
The Company confirms that it has not provided the Purchasers or their agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
(o) Exclusivity. The Company shall not issue and sell Debentures
or Warrants to any Person other than the Purchasers pursuant to this Agreement
other than with the prior written consent of each of the Purchasers.
(p) Patents and Trademarks. The Company has sufficient title and
ownership of all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights that
are necessary for use in connection with its business, as currently conducted
and as described in the SEC Documents, and such business does not and would not
conflict with or constitute an infringement on such rights of others.
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(q) Acknowledgment of Dilution. The Company acknowledges that
the issuance of (i) the Underlying Shares upon conversion of the Debentures,
(ii) the Warrant Shares upon exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue (i) the Underlying Shares upon conversion of the Debentures and (ii)
the Warrant Shares upon exercise of the Warrants is unconditional and absolute
regardless of the effect of any such dilution.
(r) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (A) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction Document.
(s) Title. Except as disclosed in Schedule 2.1(s), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company or the Subsidiaries, in each case free and clear of all liens,
except for liens, claims or encumbrances that do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company or the Subsidiaries. Any real property and
facilities held under lease by the Company or the Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or the Subsidiaries.
(t) Permits. The Company and the Subsidiaries possess all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct their respective businesses as described in the
SEC Documents except where the failure to possess such permits would not,
individually or in the aggregate, have a Material Adverse Effect ("Material
Permits"), and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material
Permit.
(u) Employment Matters. The Company and each Subsidiary is in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company or any Subsidiary would have any
liability; neither the Company nor any Subsidiary has incurred and expects to
incur liability under (i) Title IV of ERISA with respect to termination of, or
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withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(v) Insurance. The Company and each Subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards. Neither the Company nor any Subsidiary has received notice from, and
has any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Company or any Subsidiary) that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
(w) Taxes. All applicable tax returns required to be filed by
the Company and each of the Subsidiaries have been filed, or if not yet filed
have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Company, the Subsidiaries, or upon any of their respective properties,
income or franchises, shown in such returns and on assessments received by the
Company or the Subsidiaries to be due and payable have been paid, or adequate
reserves therefor have been set up if any of such taxes are being contested in
good faith; or if any of such tax returns have not been filed or if any such
taxes have not been paid or so reserved for, the failure to so file or to pay
would not in the aggregate or individually have a Material Adverse Effect.
(x) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any securities under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of The Nasdaq Stock Market, as applicable. The Company has not
conducted any offering that will be integrated with the issuance of the
Securities solely for purpose of Rule 4460(i) of The Nasdaq Stock Market, Inc.'s
Marketplace Rules.
(y) Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiaries' business and
operations that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, except as set forth on Schedule 2.1(y), the
Company believes that the computer applications that are currently material to
its or any Subsidiaries' business and operations are reasonably expected to be
able to perform properly date-sensitive functions for all
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dates before and after January 1, 2000, except to the extent that a failure to
do so would not reasonably be expected to have a Material Adverse Effect. For
the avoidance of doubt, this Section 2.1(y) applies only to the Company and the
Subsidiaries.
(z) Full Disclosure. The representations and warranties of the
Company set forth in this Agreement do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, at all
times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and in
compliance with applicable State securities laws or under an exemption from such
registration subject to the provisions of this Agreement and the Registration
Rights Agreement,.
(b) Purchaser Status. At the time such Purchaser was offered the
Securities, and at each Closing Date, (i) it was and will be, an "accredited
investor" (as defined in Regulation D), or (ii) such Purchaser either alone or
together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and had and will have so evaluated the merits and risks of such
investment. Such Purchaser has the authority and is duly and legally qualified
to purchase and own the Securities.
(c) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(d) Reliance. Each Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.
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The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby or the other Transaction Documents other than those specifically set
forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any Debentures
(and upon conversion thereof any of the Underlying Shares) or Warrants (and upon
exercise thereof any of the Warrant Shares) held by it, each Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act.
In connection with any transfer of any Securities other than pursuant to an
effective registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the foregoing,
the Company hereby consents to and agrees to register (i) any transfer of
Securities by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer by any Purchaser to an Affiliate of such
Purchaser or to an Affiliate of another Purchaser, or any transfer among any
such Affiliates, provided that transferee certifies in writing to the Company
that it is an "accredited investor" (as defined in Regulation D). Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
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The Underlying Shares issuable upon conversion of the Debentures and the
Warrant Shares issuable upon exercise of the Warrants shall not contain the
legend set forth above if such conversion or exercise occurs at any time while
the Registration Statement is effective under the Securities Act or in the event
there is not an effective Registration Statement at such time, if in the written
opinion of counsel to the Company (such opinion to be furnished at the sole
expenses of the Company at the request of a Purchaser) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares and/or Warrant
Shares, free from such legend at such time as such legend is no longer required
hereunder.
(c) Each Purchaser further agrees that should it decide to dispose of
any Debentures, Underlying Shares, Warrants or Warrant Shares (collectively
referred to herein as the "Securities"), held by it, such Purchaser will dispose
of no more Securities per day in the aggregate than would equal the greater of
(i) 10% of the average per day trading volume for the five previous consecutive
Trading Days (as defined in the Debentures) and (ii) such number of Securities
having a value of $50,000 based on the previous Trading Day's Per Share Market
Value, provided, however, such restriction shall no longer apply if the Per
Share Market Value (as defined in the Debentures) is at least $4.00 per share
for five out of any seven consecutive Trading Days, subject to adjustment for
stock splits, stock dividends, combinations and other similar recapitalizations,
and so long as the average daily trading volume during the preceding seven
Trading Days is at least 50,000 shares per day.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Purchasers, promptly after it receives notice
of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
3.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Purchasers with true and complete
copies of all such filings. As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required
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by Section 13(a) or 15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have been required
to have been made under the Exchange Act. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares and/or Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Underlying Shares under the securities or Blue Sky
laws of such jurisdictions as the Purchasers may request and shall continue such
qualification at all times through the third anniversary of the last Closing
Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of any or all of such securities to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns Debentures, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of all of the Debentures then outstanding, (i) amend its articles
of incorporation, bylaws or other organizational documents so as to adversely
affect any rights of any Purchaser; (ii) declare, authorize, set aside or pay
any dividend or other distribution with respect to the Common Stock as would
adversely affect the rights of any Purchaser hereunder or under the Debentures;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; or (iv) enter into any agreement with
respect to any of the foregoing.
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law.
(a) The Company shall (i) not later than the fifth Business Day
following the applicable Closing Date prepare and file with The Nasdaq Small-Cap
Market (as well as any other national securities exchange or market on which the
Common Stock is then listed) an additional shares listing application or a
letter acceptable to The Nasdaq Small-Cap Market covering and listing a
sufficient number of shares of Common Stock to cover the maximum number of
Underlying Shares and Warrant Shares then issuable, (ii) take all steps
necessary to cause the Underlying Shares and the Warrant Shares to be approved
for listing in The Nasdaq Small Cap Market (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock on
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such market. As used herein, "Business Day" means any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York generally are authorized or required by
law or other government actions to close.
(b) The Company shall at all times have authorized and reserved
for issuance upon conversion of the Debentures and upon exercise of the Warrants
a sufficient number of shares of Common Stock to provided for the conversion of
the Debentures and exercise of the Warrants.
(c) The Company shall notify the Commission and NASD, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Purchasers and promptly provide copies
thereof to the Purchasers.
(d) Until at least two (2) years after the last of the
Debentures has been converted into Underlying Shares or the last of the Warrants
has been exercised for the Warrant Shares, (i) the Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
such Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement or the Registration Rights Agreement
and will not take any action or file any document (whether or not permitted by
the Securities Act or the Exchange Act or the rules and regulations thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Securities Act and Exchange Act,
except as permitted herein and (ii) the Company will take all action within its
power to continue the listing or trading of its Common Stock on The Nasdaq
Small-Cap Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and The
Nasdaq Stock Market.
3.8 Notice of Breaches.
(a) Each of the Company and each Purchaser shall give prompt
written notice to the other of any breach of any representation, warranty or
other agreement contained in this Agreement, the Debentures, the Warrants or the
Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to any Closing Date, which would reasonably be
likely to cause any representation or warranty or other agreement of such party,
as the case may be, contained herein to be incorrect or breached as of such
Closing Date. However, no disclosure by any party pursuant to this Section 3.8
shall be deemed to cure any breach of any representation, warranty or other
agreement contained herein or in the Registration Rights Agreement.
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(b) Notwithstanding the generality of Section 3.8(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby, by the Debentures, by the
Warrants and by the Registration Rights Agreement violates or would violate any
written agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to each Purchaser a copy of any
written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser with respect to any outstanding Debentures, Warrants, Underlying
Shares or Warrant Shares.
3.9 Conversion Obligations of the Company. The Company covenants to
convert Debentures and to deliver the Underlying Shares in accordance with the
terms and conditions and within the time period set forth in the Debentures.
3.10 Use of Proceeds. The Company shall use all of the proceeds from the
sale of the Securities for working capital and general corporate purposes and
not for the satisfaction of any portion of Company borrowings outside the normal
course of business, including, without limitation, any obligation or liability
of any kind whatsoever owed to a shareholder, officer or director of the
Company, or to redeem Company equity or equity-equivalent securities, except as
specifically set forth on Schedule 3.10 hereto. Pending application of the
proceeds of this placement in the manner permitted hereby, the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.
3.11 Indemnification. The Company also will indemnify and hold the
Purchasers harmless against any and all losses, claims, damages or liabilities
to any such Person (including, without limitation, in connection with any
action, proceeding or investigation brought by or against any such Person,
including by shareholders of the Company) in connection with or as a result of
any matter referred to in this Transaction Documents, including, without
limitation, for any misrepresentation by the Company, for breaches of
representations and warranties contained in any of the Transaction Documents,
and for any breach, non-compliance or nonfulfillment by the Company of any
covenant, agreement or undertaking to be complied with or performed by it
contained in or pursuant to the Transaction Documents. If for any reason the
foregoing indemnification is unavailable to such Purchaser or is insufficient to
hold such Person harmless, then the Company shall contribute to the amount paid
or payable by such Purchaser as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative economic
interests of the Company and its shareholders on the one hand and the Purchasers
on the other hand in the matters contemplated by the Transaction Documents as
well as the relative fault of the Company and the Purchasers with respect to
such loss, claim, damage or liability and
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any other relevant equitable considerations. The reimbursement, indemnity and
contribution obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and the
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers, any such affiliate and any such
Person. The Company also agrees that neither the Purchasers nor any of such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this Agreement except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or bad faith of, or knowing breach of this Agreement by, the Purchasers.
Promptly after receipt by the Purchasers or any affiliate, partners, directors,
agents, employees and controlling persons, as the case may be, of notice of any
claim or other commencement of any action in respect of which indemnity may be
sought, such party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the indemnified parties and the payment of fees and expenses of
such counsel). The indemnified party shall cooperate with the Company and the
Company's counsel in the defense of such claim or action. The Purchasers
understand that the Company shall not in connection with any one such claim or
action or separate but substantially similar related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all of the indemnified parties unless the defense of one
indemnified party is unique or separate from that of another indemnified party
or one or more legal defenses are available to an indemnified party but not to
other indemnified parties subject to the same claim or action. In the event the
Company does not promptly assume the defense of a claim or action, the
indemnified parties shall have the right to employ counsel reasonably
satisfactory to the Company, at the Company's expense, to defend such claim or
action. The indemnified party shall not admit any liability with respect to the
claim or action or settle, compromise, pay or discharge the same without the
prior written consent of the Company so long as the Company is reasonably
contesting or defending the same in good faith. The Company shall not
compromise, settle or discharge any claim or action without the Purchasers'
consent, as applicable, which consent will not be unreasonably withheld, unless
there is no finding or admission of any violation of any law against the
indemnified party and the sole relief is monetary damages paid in full by the
Company. The provisions of this Section 3.11 shall survive any termination or
completion of the Transaction Documents.
3.12 Subsequent Sales and Registrations. (a) Until the later of (i) 180
days after the Optional Closing Date, or if there is no Optional Closing Date,
after the Third Closing Date and (ii) 60 days after all Underlying Shares and
Warrant Shares have been registered under the Securities Act pursuant to an
effective registration statement, the Company shall not, directly or
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indirectly, without the prior written consent of the Purchasers, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant of any option to purchase or other disposition) any of its or its
Affiliates' equity or equity-equivalent securities or any instrument that
permits the holder thereof to acquire Common Stock at a price that is less than
the market price of the Common Stock at the time of issuance of such security or
instrument and, if such security or instrument contains a conversion feature, at
a conversion price that is less than the market price of the Common Stock at the
time of issuance of such security or instrument, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereinafter duly adopted by the Company (including any stock options plans
which are restated after the date hereof), (ii) shares issued upon exercise of
any currently outstanding warrants disclosed in Schedule 2.1(c)(i), and (iii)
shares of Common Stock issued upon conversion of Debentures or upon exercise of
the Warrants.
(b) Other than Underlying Shares, Warrant Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall not, for
a period of not less than 90 Trading Days (as defined in the Debentures) after
the dates that any registration statement relating to the Securities is declared
effective by the Commission, without the prior written consent of the
Purchasers, (i) register for resale any securities of the Company, except as set
forth on Schedule 2.1(r), or (ii) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities except for (A) securities
issued upon the exercise or conversion of the securities set forth on Schedule
2.1(c)(i) or (B) securities sold pursuant to the Company's employee benefit
plans. Any days that any Purchaser is unable to sell Underlying Shares or
Warrant Shares under the Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.13 Shareholder Approval. The Company shall, as promptly as possible,
but in no event later than 60 days after the Initial Closing Date, convene a
shareholders' meeting, held in accordance with the Company's Certificate of
Incorporation and bylaws, and use its best efforts to obtain the approval
("Shareholder Approval") by a majority of the total votes cast on the proposal
at such shareholders' meeting, in person or by proxy, of (i) the issuance of the
Underlying Shares as a consequence of the conversion of the Debentures and (ii)
the issuance of the Warrant Shares as a consequence of the exercise of the
Warrants, in each case in a number exceeding the maximum number of shares of
Common Stock issuable without shareholder approval at a price less than the
greater of the book or market value on the Original Issue Date (as defined in
the Debentures) as and to the extent required pursuant to Rule 4460(i) of The
Nasdaq Stock Market, Inc.'s Marketplace Rules (or any successor or replacement
provision thereof).
3.14 Incorporation of the Debentures By Reference. The Debentures are
hereby incorporated herein by reference and made a part hereof.
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3.15 Board of Directors. While any of the Debentures remain outstanding,
the Purchasers shall have the right to approve the appointment of any new or
replacement member to the Board of Directors, such approval not to be
unreasonably withheld.
3.16 Additional Warrants. If, on the 90th day after the Registration
Statement is declared effective, the Holders have not converted more than 50% of
the principal amount of Debentures issued prior to such date, then the Company
shall issue to each Holder additional warrants, on the same terms as the
Warrants, to purchase such number of shares of Common Stock, equal to principal
amount of Debentures not yet converted by such Holder as of that date divided by
20.
3.17 Short Sales. At any time the Common Stock is trading below $3.00
per share, no Purchaser shall engage in a short selling transaction.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Initial Securities
(a) Conditions Precedent to the Obligation of the Company to
Sell the Initial Securities. The obligation of the Company to sell the Initial
Securities hereunder is subject to the satisfaction or waiver by the Company, at
or before the Initial Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made
and as of the Initial Closing Date, as though made on and as of such
date;
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to
the Initial Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement.
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(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Initial Securities. The obligation of each Purchaser
hereunder to acquire and pay for the Initial Securities is subject to
the satisfaction or waiver by such Purchaser, at or before the Initial
Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth
in this Agreement and in the Registration Rights Agreement shall be true
and correct in all material respects as of the date when made and as of
the Initial Closing Date as though made on and as of such date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied with in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Certificate of
Designation, the Warrants or the Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the SEC Document last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect and no
material adverse change in the financial condition of the Company shall
have occurred (for purposes hereof changes in the market price of the
Common Stock may be considered as a factor in determining whether there
has occurred an event which has had a Material Adverse Effect or whether
a material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on The Nasdaq Small Cap Market which suspension shall
remain in effect;
(vi) Listing of Common Stock. The Company shall have
filed a listing application to list the Underlying Shares and the
Warrant Shares for trading on The Nasdaq Small Cap Market;
(vii) Legal Opinion. The Company shall have delivered to
the Purchasers the opinion of Xxxxx Xxxxxx Xxxxx & Xxxx LLP, outside
counsel to the Company, in substantially the form annexed hereto as
Exhibit D;
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(viii) Required Approvals. All Required Approvals shall
have been obtained;
(ix) Shares of Common Stock. On or prior to the Initial
Closing Date, the Company shall have duly reserved the number of
Underlying Shares and Warrant Shares required by the Transaction
Documents to be reserved for issuance upon conversion of the Debentures
and upon exercise of the Warrants;
(x) Delivery of Debentures and Warrant Certificates. The
Company shall have delivered to each Purchaser or such Purchaser's
designee, (i) the Debentures representing the Initial Debentures,
registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and (ii) warrant certificate(s) representing the Initial
Warrants, registered in the name of such Purchaser, in form satisfactory
to the Purchaser;
(xi) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement;
(xii) Change of Control. No Change of Control shall have
occurred between the date hereof and the Initial Closing Date. "Change
of Control" means the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in
Rule 13d5(b)(1) promulgated under the Exchange Act) of in excess of 50%
of the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Board of Directors which is not approved
by those individuals who are members of the Board of Directors on the
date hereof in one or a series of related transactions, (iii) the merger
of the Company with or into another entity, consolidation or sale of all
or substantially all of the assets of the Company in one or a series of
related transactions or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii);
(xiii) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in the form of Exhibit E annexed hereto,
shall have been delivered to and acknowledged in writing by the
Company's transfer agent; and
(xiv) Officer's Certificate. On the Initial Closing Date
the Company shall deliver to the Purchasers an Officer's Certificate
dated the Initial Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the
compliance by the Company with the conditions precedent set forth in
this Section 4.1 as of the Initial Closing Date.
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4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase
the Additional Securities. The obligation of each Purchaser hereunder to acquire
and pay for the Additional Securities is subject to the satisfaction or waiver
by each Purchaser, at or before any Subsequent Closing, of each of the following
conditions:
(a) Initial Closing. The Initial Closing shall have occurred.
(b) Subsequent Closings. With respect to the Third Tranche, the
Second Closing shall have occurred and with respect to the Optional Closing, the
Second Closing and the Third Closing shall have occurred;
(c) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct as of the date when made
and as of the Additional Closing Date, as though made on and as of such date,
except where the event causing such representation or warranty to be untrue or
incorrect would not result in a Material Adverse Effect;
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Debentures, the
Warrants and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to any Subsequent Closing Date;
(e) Registration Statements. With respect to the Optional
Closing, the Registration Statement with respect to the Underlying Shares
issuable on conversion of all Debentures and with respect to the Warrant Shares
issuable upon exercise of all Warrants shall have been declared effective under
the Securities Act by the Commission; and on the Optional Closing Date such
Registration Statement shall be effective, not subject to any stop order and not
be subject to any suspension pursuant to Section 3(p) of the Registration Rights
Agreement, and shall have been effective and shall not have been subject to any
stop order for the 30 Trading Days prior to the Optional Closing Date and no
stop order shall be pending or threatened as of the Optional Closing Date;
(f) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement, the Debentures, the Warrants or the Registration
Rights Agreement relating to the issuance, conversion or exercise of any of the
Securities;
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(g) Litigation; Proceedings. No action, suit, notice of
violation, proceeding or investigation shall have been instituted or threatened
against the Company which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect;
(h) Management. In the reasonable judgment of each Purchaser,
there have been no substantial changes in the senior management of the Company,
and for changes which could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect;
(i) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on The
Nasdaq Small-Cap Market (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company);
(j) Listing of Common Stock. The Common Stock shall have been at
all times since the Initial Closing Date listed for trading on The Nasdaq
Small-Cap Market and the Company shall have no knowledge of any action or
proceeding, pending or threatened, that may result in the delisting of the
Common Stock from the Nasdaq Small-Cap Market;
(k) Change of Control. No Change of Control shall have occurred
since the Initial Closing Date;
(l) Legal Opinion. The Company shall have delivered to the
Purchasers the opinion of the Company's legal counsel, in substantially the form
annexed hereto as Exhibit D, dated the Additional Closing Date;
(m) Required Approvals. All Required Approvals shall have been
obtained;
(n) Shareholder Approval. The Company shall have obtained
Shareholder Approval.
(o) Shares of Common Stock. On any Subsequent Closing Date the
Company shall have duly reserved the number of Underlying Shares and Warrant
Shares required by this Agreement to be reserved for issuance upon conversion or
exercise of any Additional Securities, as applicable.
(p) Delivery of Securities. The Company shall have delivered to
each Purchaser or such Purchaser's designee the Additional Securities,
registered in the name of such Purchaser, and in form satisfactory to such
Purchaser;
(q) Performance of Conversion/Exercise Obligations. The Company
shall have delivered Underlying Shares upon conversion of the Debentures and
otherwise performed
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its obligations in accordance with the terms, conditions and timing requirements
of each Debenture;
(r) Common Stock Price; Trading Volume. For each of the twenty
consecutive Trading Days immediately preceding any Subsequent Closing Date (i)
the Per Share Market Value (as defined in the Debentures) shall not have been
less than $1.75 and (ii) the trading volume of the Common Stock shall have been
at least 40,000 shares per day;
(s) Adverse Changes. During the period which is ten consecutive
Trading Days prior to any Subsequent Closing Date, the Per Share Market Value of
the Common Stock shall not have decreased by more than 50% from the highest Per
Share Market Value during such period; provided, however, that if the Per Share
Market Value shall have so decreased by more than 50%, but shall have
subsequently increased so that on such Subsequent Closing Date it has been, for
the three consecutive Trading Days immediately prior to such Subsequent Closing
Date, no more than 25% below the highest Per Share Market Value during such
period, then this condition shall be satisfied;
(t) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E annexed hereto, shall have been delivered
to and acknowledged in writing by the Company's transfer agent; and
(u) Officer's Certificate. On each Subsequent Closing Date the
Company shall deliver to the Purchasers an Officer's Certificate dated as of
such Subsequent Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such Subsequent Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
such Subsequent Closing Date.
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ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. (a) The Company shall pay the reasonable legal
fees and expenses of Stroock & Stroock & Xxxxx LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement and the other Transaction Documents, which legal fees shall not
exceed $15,000 in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Transaction Documents. The Company
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by the Company incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other Transaction Documents. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Securities
pursuant to the Transaction Documents.
(b) The Company shall pay Libra Finance S.A. at the Initial Closing and
at each Subsequent Closing a fee equal to 8% of the aggregate principal amount
of Debentures sold at such closing. Libra Finance S.A. is an intended
third-party beneficiary of this Section 5.1(b).
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the other Transaction Documents, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Purchaser at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
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Team Communications Group, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Purchaser shall be sent to Stroock &
Stroock & Xxxxx LLP, 000 Xxxxxx Xxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention:
Xxxxx X. Xxxxxxxxx, Esq., Facsimile No.: (000) 000-0000. Copies of notices to
the Company shall be sent to Xxxxx Xxxxxx Xxxxx & Xxxx LLP, 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxx Esq.,
Facsimile No.: (000) 000-0000.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter. Notwithstanding the foregoing, no
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Securities outstanding. The Company shall not offer or pay
any consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any assignee must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities or transfer
or assign rights under the Registration Rights Agreement.
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5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without regard to
the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations, warranties and
provisions contained in this Agreement shall survive the delivery of the
Securities pursuant to this Agreement and each Closing hereunder and any
conversion of the Debentures or exercise of the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other Party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent unless otherwise required by
law, in which case the Company shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.
5.12 Consent to Jurisdiction; Attorneys' Fees (a) The Company
(including, but not limited to, its affiliates, subsidiaries, officers,
directors and controlling persons) and each Purchaser hereby (i) irrevocably
submits to the exclusive jurisdiction of any New York State court or Federal
court sitting in the Borough of Manhattan, The City of New York in any action
related to, connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Company subsequent to the purchase by such Purchaser or
Persons claimed to be affiliated with such Purchaser, (ii) agrees that all
claims in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum and
(iv) consents to the service of process by certified mail, return
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receipt requested. Nothing herein shall affect the right of any party to serve
legal process in any manner permitted by law or affect its right to bring any
action in any other court.
(b) In connection with any dispute between the Company and any
Purchaser, related to, connected with or arising out of, in whole or in part,
the Transaction Documents including, but not limited to, transactions in the
securities of the Company subsequent to the purchase, by a Purchaser or Persons
claimed to be affiliated to a Purchaser, the prevailing party shall be awarded
all reasonable attorneys' fees and expenses incurred by it. In that connection
fees and expenses actually paid by a party in connection with the litigation of
any dispute shall be deemed presumably reasonable.
(c) In the event that any Purchaser or any Person claimed to be
affiliated or associated with such Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including shareholders of the Company, in connection with or as a result of any
matter referred to in the Transaction Documents, the Company will reimburse such
Purchaser and/or those claimed to be affiliated or associated with such
Purchaser for its legal fees and expenses and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as those
fees and expenses are incurred; provided, however, that if at the conclusion of
such action, proceeding or investigation it shall be finally judicially
determined by a court of competent jurisdiction that indemnity for such fees and
expenses is contrary to law, or that such Purchaser is not the prevailing party
then in that event, such Purchaser and/or any other Person having received such
advances of fees and expenses shall reimburse the Company in full for the sums
advanced.
(d) The provisions of this Section 5.12 shall survive any termination or
completion of the Transaction Documents.
5.13 Waiver of Jury Trial (a) The parties hereto each waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to the Transaction Documents, or the transactions
contemplated by the Transaction Documents, in any action, proceeding or other
litigation of any type brought by any of the parties against any other party or
parties, whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be tried
by a court trial without a jury. Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this Section 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof or
thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any termination or
completion of the Transaction Documents.
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5.14 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents and injunctive relief. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation or injunctive relief
the defense that a remedy at law would be adequate.
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
TEAM COMMUNICATIONS GROUP, INC.
By:
--------------------------------------
Name:
Title:
AUSTINVEST ANSTALT BALZERS
By:
--------------------------------------
Name:
Title:
ESQUIRE TRADE & FINANCE INC.
By:
--------------------------------------
Name:
Title:
AMRO INTERNATIONAL, S.A.
By:
--------------------------------------
Name:
Title:
NESHER INC.
By:
--------------------------------------
Name:
Title:
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Schedule 1
Principal Amount of
Debentures Purchased Number of Warrants
Name of Investor in Initial Closing Purchased in Initial Closing
---------------- -------------------- ----------------------------
Austinvest Anstalt Balzers $292,190.00 29,219
Esquire Trade & Finance Inc. $292,190.00 29,219
Amro International, S.A. $212,500.00 21,250
Nesher Inc. $ 53,120.00 5,312
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