PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BY AND AMONG
CERTAIN INVESTORS
AND
TEAM COMMUNICATIONS GROUP, INC.
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DATED AS OF JUNE 20, 2001
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This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the 20th
day of June, 2001 (this "Agreement"), by and between the investor or investors
identified on Schedule A hereto (each an "Investor" or "Investors"), and Team
Communications Group, Inc., a corporation organized and existing under the laws
of the State of California (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to each Investor,
from time to time as provided herein, and each Investor shall purchase his
Proportionate Share of up to $20,000,000 of the Common Stock (as defined below).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Average Daily Price" shall be the price based on the VWAP.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported by
Bloomberg, L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean, with respect to a Closing the
twelfth (12th) Trading Day following the Optional Purchase Date related to such
Closing and the second Trading Day following the Valuation Period, provided all
conditions to such Closing have been satisfied on or before such Trading Days.
Section 1.6 "Commitment Amount" shall mean the $20,000,000 up to which the
Investors have agreed to provide to the Company in order to purchase Put Shares
pursuant to the terms and conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investors shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of
$20,000,000, (y) the date this Agreement is terminated pursuant to Section 2.5,
or (z) the date occurring twenty-four (24) months from the date of commencement
of the Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, no par
value per share.
Section 1.9 "Common Stock Equivalents" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
Section 1.10 "Condition Satisfaction Date" See Section 7.2.
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Section 1.11 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the regulations promulgated thereunder.
Section 1.14 "Finder" See Section 13.2.
Section 1.15 "Investment Amount" shall mean the dollar amount (within the
range specified in Section 2.2) to be invested by the Investor to purchase Put
Shares with respect to any Optional Purchase Date as notified by the Company to
the Investor in accordance with Section 2.2 hereof.
Section 1.16 "Legend" See Section 9.1.
Section 1.17 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, when
taken as a consolidated whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform its obligations under any of (a) this Agreement and (b)
the Registration Rights Agreement.
Section 1.18 "Maximum Put Amount" shall mean the lesser of (i) ten percent
(10%) of the Average Daily Prices for the twenty-two Trading Days immediately
preceding the Optional Purchase Date multiplied by the reported daily trading
volume of the Common Stock on the Principal Market for each such Trading Day, or
(ii) 19.99% of the Outstanding common stock on the Trading Day immediately
preceding the Optional Purchase Date. The Maximum Put Amount represents the
aggregate of all Proportionate Shares of all Investors.
Section 1.19 "Minimum Put Amount" shall mean $100,000 to all Investors in
the aggregate for each Optional Purchase Notice.
Section 1.20 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.21 "Optional Purchase Date" shall mean the Trading Day during
the Commitment Period that an Optional Purchase Notice to sell Common Stock to
the Investor is deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.22 "Optional Purchase Notice" shall mean a written notice to the
Investor setting forth the Investment Amount that the Company intends to sell to
the Investor.
Section 1.23 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
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Section 1.24 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.25 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small-Cap Market, the NASDAQ OTC Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock. As of the date of this
Agreement, the NASDAQ National Market is the Principal Market.
Section 1.26 "Proportionate Share" shall mean the proportion of the
Commitment Amount agreed to be purchased by each Investor as set forth on
Schedule A.
Section 1.27 "Purchase Price" as used in this Agreement shall mean the
following: For each Trading Day during a Valuation Period (or such other date
on which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement) the Purchase Price shall be 85% of the VWAP.
Section 1.28 "Put" shall mean each occasion the Company elects to exercise
its right to tender an Optional Purchase Notice requiring the Investor to
purchase a discretionary amount as determined by the Company and as limited by
this Agreement of the Company's Common Stock, subject to the terms of this
Agreement, which tender must be given to each Investor for such Investor's
Proportionate Share.
Section 1.29 "Put Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has occurred or may occur in accordance with the
terms and conditions of this Agreement.
Section 1.30 "Registrable Securities" shall mean the Put Shares until the
Registration Statement has been declared effective by the SEC and all Put Shares
have been disposed of pursuant to the Registration Statement.
Section 1.31 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investors as of
the Subscription Date.
Section 1.32 "Registration Statement" shall mean a registration statement
on Form S-1 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
Section 1.33 "Regulation D" shall mean Regulation D of the Securities Act.
Section 1.34 "SEC" shall mean the Securities and Exchange Commission.
Section 1.35 "Section 4(2)" shall mean Section 4(2) of the Securities Act.
Section 1.36 "Securities Act" shall mean the United States Securities Act
of 1933, as amended, and the regulations promulgated thereunder.
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Section 1.37 "SEC Documents" shall mean the Company's latest Form 10-KSB
as of the time in question, all Forms 10-QSB and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.38 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.39 "Trading Cushion" shall mean, at any time, the mandatory
thirty (30) calendar days between Optional Purchase Dates and five (5) Trading
Days after the most recent Closing Date.
Section 1.40 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.41 "Valuation Event" shall mean an event in which the Company at
any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a)
and (b) above or in connection with the acquisition of the assets,
properties, securities of business of any Person who is not an
affiliate of the Company (an "Acquisition"), at a price per share
less, or for other consideration lower, than the Purchase Price in
effect on the Trading Day immediately prior to such issuance, or
without consideration;
(d) issues any warrants, options or other rights to subscribe for
or purchase any Additional Capital Shares, otherwise than as provided
in Subsection (b) above or an Acquisition, and the price per share for
which Additional Capital Shares may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less than
the Purchase Price in effect immediately prior to such issuance;
(e) other than in connection with an Acquisition, issues any
securities convertible into or exchangeable for Capital Shares and the
consideration per share for which Additional Capital Shares may at any
time thereafter be issuable pursuant to the terms of such convertible
or exchangeable securities shall be less than the Bid Price in effect
immediately prior to such issuance; or
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in
liquidation or by way of return of capital or other than as a dividend
payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the
foregoing subsections (a) through (e).
Upon each occurrence of any one or more of the foregoing Valuation Events the
Purchase Price and number of Put Shares to be issued shall be adjusted to offset
the dilutive effect of such one or more Valuation Events.
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Section 1.42 "Valuation Period" shall mean the period of twenty (20)
Trading Days during which the Purchase Price of the Common Stock is determined,
which period shall be with respect to the Purchase Prices on any Optional
Purchase Date, the twenty (20) Trading Days following the day on which an
Optional Purchase Notice is deemed to be delivered.
Section 1.43 "VWAP" shall mean the daily volume weighted average price of
the Common Stock on the Principal Market as reported by Bloomberg, L.P. using
the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Puts. Upon the terms and conditions set forth herein
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(including, without limitation, the provisions of Article III hereof), on any
Optional Purchase Date the Company shall have the right and option (but not the
obligation) to exercise a Put by the delivery of an Optional Purchase Notice.
The number of Put Shares that the Investor shall receive pursuant to such Put
shall be determined by dividing the relevant portions of the Investment Amount
specified in the Optional Purchase Notice by the corresponding Purchase Prices
for each Trading Day during the Valuation Period.
Section 2.2 Mechanics.
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(a) Optional Purchase Notice. At any time during the Commitment
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Period, the Company may deliver an Optional Purchase Notice to the Investor,
subject to the conditions set forth in Section 7.2; provided, however, the
Investment Amount for each Put as designated by the Company in the applicable
Optional Purchase Notices shall be neither less than the Minimum Put Amount in
the aggregate to all Investors nor more than the Maximum Put Amount. The
Optional Purchase Notice shall state the commencement date of the Valuation
Period.
(b) Date of Delivery of Optional Purchase Notice. An Optional Purchase
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Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to 12:00
noon New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon New York time on a Trading
Day or at any time on a day which is not a Trading Day. No Optional Purchase
Notice may be deemed delivered on a day that is not a Trading Day.
(c) Determination of Put Shares Issuable. The Purchase Price shall be
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based on the Average Daily Price on each separate Trading Day during the
Valuation Period. The number of Put Shares to be purchased by each Investor
with respect to such Investor's Proportionate Share shall be determined on a
daily basis during each Valuation Period and settled on the Closing Date. The
portion of Investment Amount for which Put Shares may be issued for each Trading
Day during the Valuation Period may not exceed one-twentieth (1/20th) of the
Investment Amount.
(d) Maximum Optional Purchase Notices/Amount. There shall be a
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maximum of twenty-four (24) Optional Purchase Notices given during the term of
this Agreement. Subject to the terms and conditions of this Agreement, the
Company shall have the right and option (but not the obligation) to issue each
Optional Purchase Notice for an Investment Amount up to the Maximum Put Amount.
The Company may not issue an Optional Purchase Notice in connection with any
amount of shares which would exceed the amount permitted to be issued without
approval of the Company's shareholders, if such approval is required pursuant to
the rules of the Principal Market.
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(e) Trading Halt Limitations. Unless the Investor elects in writing
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to the contrary, the Investor is not require to purchase Put Shares for any
Trading Day during which trading of the Common Stock is suspended or halted for
three or more hours or for any day during which any of the events described in
Section 6.8 has occurred or is continuing. In such case, one-twentieth (1/20th)
of the Investment Amount shall be withdrawn from the Investment Amount for each
such Trading Day. The Investor must notify the Company by facsimile or
otherwise, no later than 6:15 P.M., New York time, on the tenth (10th) and
twentieth (20th) Trading Days of the Valuation Period of the days for which the
foregoing elections are made.
Section 2.3 Closings. On each Closing Date for a Put the Company shall
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deliver to the Investor or to escrow one or more certificates, at the Investor's
option, representing the Put Shares to be purchased by the Investor pursuant to
Section 2.1 herein, after the Optional Purchase Date and on or prior to such
Closing Date, registered in the name of the Investor or, at the Investor's
option, deposit such certificate(s) into such account or accounts previously
designated by the Investor. The Investor shall deliver to escrow the Investment
Amount specified in the Optional Purchase Notice by wire transfer of immediately
available funds to an account designated by the Company on or before the Closing
Date. In addition, on or prior to the Closing Date, each of the Company and the
Investor shall deliver all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Payment
of funds to the Company and delivery of the certificates to the Investor shall
occur out of escrow in accordance with the escrow agreement referred to in
Section 7.2(p) following (x) the Company's deposit into escrow of the
certificates representing the Put Shares and (y) the Investor's deposit into
escrow of the Investment Amount; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 13.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds drawn out of the
deposited funds, at the direction of the Investor, to Investor's counsel with no
reduction in the number of Put Shares issuable to the Investor on such Closing
Date.
Section 2.4 Liquidated Damages. In the event the Company issues an
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Optional Put Notice, but fails or refuses to deliver Put Shares on a Closing
Date, the Company will pay the Investor, as liquidated damages for such failure
to deliver, and not as a penalty, five percent (5%) of the applicable Investment
Amount for each seven (7) day period, or part thereof following such failure, in
cash, until such Put Shares have been delivered. The Escrow Agent shall be
directed to pay such liquidated damages to the Investor out of the Investment
Amount delivered by the Investor to the Escrow Agent.
Section 2.5 Termination of Investment Obligation. The obligation of the
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Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop trade order by the SEC or Principal
Market or suspension by the SEC of the effectiveness of the Registration
Statement for a consecutive five day calendar period or for an aggregate of
twenty (20) Trading Days during the Commitment Period, for any reason, or (ii)
the Company shall at any time fail to comply with the requirements of Article VI
hereof, without regard to any cure period or written notice to cure which may be
permitted or required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
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own account and the Investor has no present arrangement (whether or not legally
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binding) at any time to sell the Common
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Stock to or through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold the Common Stock for
any minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) or an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
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or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.6 Disclosure; Access to Information. Investor has received all
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documents, records, books and other information pertaining to Investor's
investment in the Company that has been requested by Investor. The Company is
subject to the periodic reporting requirements of the Exchange Act, and Investor
has had access to copies of any such reports that have been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company. The Company is a corporation duly
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organized and existing in good standing under the laws of the State of
California and has all requisite corporate authority to own its properties and
to carry on its business as now being conducted. Except as set forth in the SEC
Documents, the Company does not have any subsidiaries. The Company is duly
qualified as a
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foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
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and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Put Shares; (ii) the
execution, issuance and delivery of this Agreement and the Registration Rights
Agreement and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) this Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company and constitute
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, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.3 Capitalization. The authorized and outstanding capital stock
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of the Company as of the Subscription Date is set forth on Schedule 4.3 hereto.
Except as set forth in the SEC Documents or Schedule 4.3, as of the Subscription
Date, there are no options, warrants or rights to subscribe for securities,
rights or obligations convertible into or exchangeable for, or giving any rights
to receive any Capital Shares. All of the outstanding shares of Common Stock of
the Company have been duly and validly authorized and issued and are fully paid
and nonassessable.
Section 4.4 Common Stock. As of the commencement of and throughout the
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Commitment Period, the Company will have registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Exchange Act and be in full compliance with all
reporting requirements of the Exchange Act, and the Company will have maintained
all requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is then listed or quoted on the Principal Market. As of the
date hereof, the Common Stock is listed for trading on the NASDAQ National
Market System.
Section 4.5 SEC Documents. The Company has delivered or made available to
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the Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents 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, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company described above
and/or included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of 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).
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Section 4.6 Valid Issuances. The sale by the Company and resale of the
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Put Shares may and will be properly accomplished pursuant to Section 4(2),
Regulation D and/or any applicable state law. When issued, the Put Shares shall
be duly and validly issued, fully paid, and nonassessable. Neither the sales of
the Put Shares pursuant to, nor the Company's performance of its obligations
under, this Agreement or the Registration Rights Agreement will (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Put Shares or any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
to or acquire the Capital Shares or other securities of the Company. The Put
Shares shall not subject the Investor or holder to personal liability by reason
of the possession thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
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Transaction. Neither the Company nor any of its affiliates nor any distributor
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or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
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available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the "By-
Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including, without limitation, the issuance of Common Stock
do not and will not (i) result in a violation of the Company's Articles of
Incorporation or By-Laws or (ii) conflict with, or constitute a default (or an
event that 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 material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state, local
or foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iv), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate does not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
other than any SEC, NASD, Principal Market or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Principal Market.
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Section 4.10 No Material Adverse Change. Since the date of the most
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recent financial statements included in the SEC Documents, no Material Adverse
Effect has occurred or exists with respect to the Company, except as disclosed
in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
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or obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's businesses since the date of
the most recent financial statements included in the SEC Documents and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. Since the date of
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the most recent financial statements included in the SEC Documents, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.13 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 of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set forth
--------------------------------
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the current management and Board of Directors of the Company
threatened, against the Company, nor has the Company received any written or
oral notice of any such action, suit, proceeding or investigation, which might
have a Material Adverse Effect. Except as set forth in the SEC Documents, no
judgment, order, writ, injunction or decree or award has been issued by or, so
far as is known by the Company, requested of any court, arbitrator or
governmental agency which might result in a Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
-------------------------------------
Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral or written
communication in connection with same, which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
-------------------------------
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
-------------------
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
11
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the Registration
-------------------
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
---------------------------
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares; such amount of shares of Common Stock to be reserved shall be calculated
based upon the minimum Purchase Price therefor under the terms of this
Agreement.
Section 6.3 Listing of Common Stock. The Company shall maintain the
-----------------------
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) to list
the Put Shares on the Principal Market. The Company further shall, if the
Company applies to have the Common Stock traded on any other Principal Market,
include in such application the Put Shares, and shall take such other action as
is necessary or desirable in the opinion of the Investor to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. The
Company shall take all action necessary to continue the listing and trading of
its Common Stock on a Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of such Principal Market.
Section 6.4 Exchange Act Registration. The Company shall cause its Common
-------------------------
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
said Act, and will not take any action or file any document (whether or not
permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act. The Company will take all action to continue the listing and
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
-------
sold by the Investor pursuant to Section 9.1 shall be free of legends.
Section 6.6 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will deliver to the
------------------------
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Blackout Period. Subject to the requirements of Regulation FD
---------------
under the Exchange Act, the Company will immediately notify the Investor upon
the occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities; (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii)
12
receipt of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any
Optional Purchase Notice during the continuation of any of the foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within ten
------------------------------------------------
(10) days after the commencement of each calendar quarter occurring subsequent
to the commencement of the Commitment Period, the Company undertakes to notify
the Investor as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Optional Purchase Notices. Such notification shall constitute only the Company's
good faith estimate and shall in no way obligate the Company to raise such
amount, or any amount, or otherwise limit its ability to deliver Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Consolidation; Merger. Prior to sixty (60) days after any
---------------------
Closing, the Company shall not, at any time after the date hereof, effect any
merger or consolidation of the Company with or into, or a transfer of all or
substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Investor such shares of stock and/or securities as the Investor is entitled to
receive pursuant to this Agreement.
Section 6.11 Issuance of Put Shares. The sale and issuance of the Put
----------------------
Shares shall be made in accordance with the provisions and requirements of
applicable state law.
ARTICLE VII
CONDITIONS TO DELIVERY OF OPTIONAL
PURCHASE NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
--------------------------------------------------------------
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
---------------------
the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
--------------------------------------------------------
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
13
(b) Performance by the Investor. The Investor shall have performed,
---------------------------
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver an
--------------------------------------------------------------
Optional Purchase Notice and the Obligation of the Investor to Purchase Put
---------------------------------------------------------------------------
Shares. The right of the Company to deliver an Optional Purchase Notice and the
------
obligation of the Investor hereunder to acquire and pay for the Put Shares
incident to a Closing is subject to the satisfaction, on (i) the date of
delivery of such Optional Purchase Notice, (ii) for each day during the
Valuation Period; and (iii) the applicable Closing Date (each a "Condition
Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. As set forth in the
---------------------------------------------
Registration Rights Agreement, the Company shall have filed with the SEC a
Registration Statement with respect to the resale of the Registrable Securities
that shall have been declared effective by the SEC prior to the first Optional
Purchase Date, but in no event later than the date set forth in the Registration
Rights Agreement and shall have filed a prospectus supplement on the first
trading day after each Closing Date.
(b) Effective Registration Statement. As set forth in the
--------------------------------
Registration Rights Agreement, the Registration Statement shall have previously
become effective and shall remain effective on each Condition Satisfaction Date
and (i) neither the Company nor the Investor shall have received notice that the
SEC has issued or intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends or
has threatened to do so, and (ii) no other suspension of the use or withdrawal
of the effectiveness of the Registration Statement or related prospectus shall
exist.
(c) Accuracy of the Company's Representations and Warranties. The
--------------------------------------------------------
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(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 and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) 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 that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's most
---------------
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The
--------------------------------------------------------
trading of the Common Stock (including without limitation the Put Shares) shall
not have been suspended by the SEC, the Principal Market or the NASD and the
Common Stock (including without limitation the
14
Put Shares) shall have been approved for listing or quotation on and shall not
have been delisted from the Principal Market. The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(h) Legal Opinions. The Company shall have caused to be delivered to
--------------
the Investor, within five (5) Trading Days of the effective date of the
Registration Statement, an opinion of the Company's independent counsel in the
form of Exhibit B hereto, addressed to the Investor; provided, however, that in
the event that such an opinion cannot be delivered by the Company's independent
counsel to the Investor, the Company shall promptly revise the Registration
Statement and shall not deliver an Optional Purchase Notice. If an Optional
Purchase Notice shall have been delivered in good faith without knowledge by the
Company that an opinion of independent counsel can not be delivered as required,
at the option of the Investor, either the applicable Closing Date shall
automatically be postponed for a period of up to five (5) Trading Days until
such an opinion is delivered to the Investor, or such Closing shall otherwise be
canceled. Liquidated damages determined pursuant to Section 2.4 shall be
calculated and payable on the Closing Date. The Company's independent counsel
shall also deliver to the Investor upon execution of this Agreement an opinion
in form and substance reasonably satisfactory to the Investor addressing, among
other things, corporate matters and the exemption from registration under the
Securities Act of the issuance of the Registrable Securities by the Company to
the Investor under this Agreement.
(i) Due Diligence. No dispute between the Company and the Investor
-------------
shall exist pursuant to Section 8.2(c) as to the adequacy of the disclosure
contained in the Registration Statement.
(j) Beneficial Ownership Limitation. On each Closing Date, the number
-------------------------------
of Put Shares then to be purchased by the Investor shall not exceed the number
of such shares that, when aggregated with all other shares of Common Stock then
owned by the Investor beneficially or deemed beneficially owned by the Investor,
would result in the Investor owning more than 9.99% of all of such Common Stock
as would be outstanding on such Closing Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Optional Purchase Notice associated with such Closing Date
is given, the amount of Common Stock outstanding on such Closing Date shall
govern for purposes of determining whether the Investor, when aggregating all
purchases of Common Stock made pursuant to this Agreement and, if any, Shares,
would own more than 9.99% of the Common Stock following such Closing Date.
(k) Cross Default. The Company shall not be in default of a material
--------------
term, covenant, warranty or undertaking of any other agreement to which the
Company and any Investor are parties, nor shall there have occurred an event of
default under any such other agreement
(l) No Knowledge. The Company shall have no knowledge of any event
------------
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen Trading Days following the Trading Day on which such
Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed since the
---------------
immediately preceding Optional Purchase Date and Closing Date.
15
(n) Shareholder Vote. The issuance of shares of Common Stock with
----------------
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market or the laws of any jurisdiction to
which the Company is subject.
(o) Escrow Agreement. The parties hereto shall have entered into a
----------------
mutually approved escrow agreement for the Purchase Price due hereunder and the
Company shall have agreed to pay the fees and expenses of the Escrow Agent and
not be in default of any such payments.
(p) Voting Restrictions. The Investors shall not be subject to voting
-------------------
or other restrictions arising under any applicable "anti-takeover" laws, rules
or regulations.
(q) Other. On each Condition Satisfaction Date, the Investor shall
-----
have received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 Due Diligence Review. If and only if the Company issues an
--------------------
Optional Redemption Notice, the Company shall make available for inspection and
review by the Investor, advisors to and representatives of the Investor (who may
or may not be affiliated with the Investor and who are reasonably acceptable to
the Company), any underwriter participating in any disposition of the
Registrable Securities on behalf of the Investor pursuant to the Registration
Statement, any such registration statement or amendment or supplement thereto or
any blue sky, NASD, Principal Market, or other filing, all financial and other
records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
----------------------------------------
(a) The Company represents and warrants that the Company and its
officers, directors, employees and agents have not disclosed any non-public
information to the Investor or advisors to or representatives of the Investor.
The Company covenants and agrees that it shall refrain from disclosing, and
shall cause its officers, directors, employees and agents to refrain from
disclosing, unless prior to disclosure of such information the Company
identifies such information as being non-public information and provides the
Investor, such advisors and representatives with the opportunity to accept or
refuse to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
16
(b) The Company acknowledges and understands that the Investor is
entering into this Agreement and the Registration Rights Agreement at the
request of the Company and in good faith reliance on the Company's
representation set forth in Section 4.16 that neither it nor its agents have
disclosed to the Investor any material non-public information.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, in violation of Regulation FD of the Exchange Act provided,
subject to its compliance with Regulation FD of the Exchange Act, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
Section 8.3 Confidentiality. The Company agrees that it will not publicly
---------------
or privately disclose the identities of the Investors, or Finders unless
expressly agreed to in writing by the Investor or otherwise required by law.
ARTICLE IX
LEGENDS
Section 9.1 Legends. Unless otherwise provided below, each certificate
-------
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A
17
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF
CREDIT AGREEMENT AMONG TEAM COMMUNICATIONS GROUP, INC. AND CERTAIN
INVESTORS DATED JUNE 20, 2001. A COPY OF THE PORTION OF THE AFORESAID
AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE
COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit D hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one or
more certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered, or prior to issuance of a certificate;
provided that (i) the Registration Statement shall then be effective; (ii) the
Investor confirms to the transfer agent that it has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona fide transaction to a third party that is not an affiliate of the
Company; and (iii) the Investor or sales agent confirms to the transfer agent
that the Investor or sales agent has complied with the prospectus delivery
requirement; and
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities. Any of the notices referred to above in this Section 9.1 may be
sent by facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
----------------------------------------------
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article IX shall
---------------------
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
18
ARTICLE X
CHOICE OF LAW/VENUE
Section 10.1 Choice of Law/Venue. This Agreement and the Registration
-------------------
Rights Agreement shall be governed by and construed in accordance with the laws
of the State of New York without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the transactions
contemplated by this Agreement or the Registration Rights Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this
Agreement and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
----------
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, and be binding upon, any
transferee of any of the Common Stock purchased or acquired by the Investor
hereunder with respect to the Common Stock held by such person unless such
Common Stock is free from restrictions on further transfer of such Common Stock.
The Company shall have the right to require any transferee to execute a
counterpart of this Agreement unless the Common Stock held by such transferee is
free from further restrictions on transfer.
Section 11.2 Termination. This Agreement shall terminate twenty-four (24)
-----------
months after the commencement of the Commitment Period; provided, however, that
the provisions of Articles VI, VIII, IX, X, XI, XII and XIII shall survive the
termination of this Agreement.
Section 11.3 Entire Agreement, Amendment. This Agreement and the
---------------------------
Registration Rights Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt
19
requested, postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to Team Communications Group, Inc.:
Team Communications Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
To the address and telecopier number set forth on Schedule A hereto
with a copy to (which communication shall not constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
c/o Grushko & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 12.2 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Investor,
its partners, Affiliates, officers, directors, employees, and duly authorized
agents, and each Person or entity, if any, who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Controlling Persons (as defined in the Registration Rights
Agreement) from and against any Damages, joint or several, and any action in
respect thereof to which the Investor, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Controlling
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement in
any event as such Damages are incurred.
(b) The Investor agrees to indemnify and hold harmless the Company,
its partners, Affiliates, officers, directors, employees, and duly authorized
agents, and each Person or entity, if any, who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20 of
20
the Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages, joint or several,
and any action in respect thereof to which the Company, its partners,
Affiliates, officers, directors, employees, and duly authorized agents, and any
such Controlling Person becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Investor contained
in this Agreement in an aggregate amount not to exceed one-third of each such
---------
Investor's Proportionate Share.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
------------------------------------------
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 12.2 (an "Indemnified
Party") might seek indemnity under Section 12.2 is asserted against or sought to
be collected from such Indemnified Party by a person other than the Company, the
Investor or any affiliate of the Company (a "Third Party Claim"), the
Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of Section 12.2 against any person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under Section 12.2 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
1. If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this Section 12.3(a),
then the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
which affects the Indemnified Party, other than the payment of monetary damages,
or that provides for the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to Section 12.2). The
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this clause 1, file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause 1, and except as provided in the
preceding sentence, the Indemnified Party will bear its own costs
21
and expenses with respect to such participation. Notwithstanding the foregoing,
the Indemnified Party may take over the control of the defense or settlement of
a Third Party Claim at any time if it irrevocably waives its right to indemnity
under Section 12.2 with respect to such Third Party Claim.
2. If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to Section 12.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions
of this clause 2, if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause 3 below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause 2 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause 2, and
the Indemnifying Party will bear its own costs and expenses with respect to such
participation.
3. If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under Section 12.2 or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability or the amount of its liability to the Indemnified
Party with respect to such Third Party Claim, the loss in the amount specified
in the Claim Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 12.2 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. In the event any Indemnified Party
should have a claim under Section 12.2 against the Indemnifying Party that does
not involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under Section 12.2 specifying the nature
of and basis for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an
"Indemnity Notice") with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 12.2 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand.
ARTICLE XIII
22
FEES-EXPENSES
Section 13.1 Fees and Expenses. Each of the Company and the Investor
-----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the reasonable fees, expenses and
disbursements of the Investor's counsel in an amount of $15,000 which shall be
payable on or before the Subscription Date.
Section 13.2 Finders. Each of the parties hereto represents that it has
-------
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the Company or Investor
except as described on Schedule 13 ("Finder"). The Company agrees to pay to the
Finder a fee equal to two percent (2%) ("Finder's Fee") of the Investment Amount
received by the Company as set forth on Schedule 13 hereto. The Investor may
designate itself to be the recipient of the Finder's Fee. In such case, the
Investment Amount to be delivered shall be reduced by two percent as an offset
of such Finder's Fee. A default by the Company of the Company's obligations to
the Finders shall be deemed a default under the Agreement, shall terminate the
Investor's obligation to comply with any Optional Purchase Notices provided such
default is not due to a failure by an escrow agent to comply with his
obligations. The Company on the one hand, and the Investor, on the other hand,
agree to indemnify the other against and hold the other harmless from any and
all liabilities to any other persons claiming brokerage commissions or finder's
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement may be delivered by
telecopier transmission which such copy shall be deemed an original executed
Agreement.
Section 14.2 Entire Agreement. This Agreement, the Exhibits hereto, the
----------------
documents delivered in connection herewith, and the Registration Rights
Agreement set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as if fully set forth
herein.
Section 14.3 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 14.4 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
23
Section 14.5 Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the Bid Price, VWAP, trading price or
trading volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ any
other reporting entity.
Section 14.6 Remedies for Breach. The Company and each Investor
-------------------
acknowledges that the other party's remedy at law for the breach of the
provisions provided in this Agreement is inadequate. Therefore, the Company and
each Investor agrees that a breach or violation of this Agreement by the
Company, on the one hand, and the Investors, on the other hand, will entitle the
other party, as a matter of right, to an injunction or other equitable relief,
issued by any court or arbitration panel of competent jurisdiction, restraining
any further or continued breach or violation of this Agreement. Such right to
an injunction will be cumulative and in addition to, and not in lieu of, any
other remedies to which the Company and the Investors may show themselves justly
entitled.
Section 14.7 Publicity. Except as required by applicable law, neither the
---------
Company nor the Investor shall issue any press release or otherwise make any
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement without the
prior consent of the other party, which consent shall not be unreasonably
withheld or delayed.
Section 14.8 Confidentiality. Investor agrees to maintain the
---------------
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally as contemplated by Regulation FD
of the Exchange Act other than as a result of any disclosure by Investor.
[THIS SPACE INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
TEAM COMMUNICATIONS GROUP, INC.
By: ______________________________________
_________________________________________
REFCO CAPITAL MARKETS LTD. - Investor
25
SCHEDULE A
----------
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INVESTOR SHARE OF PROPORTIONATE
COMMITMENT SHARE OF
AMOUNT COMMITMENT
AMOUNT
-----------------------------------------------------------------------------------------------------------
REFCO CAPITAL MARKETS LTD. $20,000,000.00 100%
A Bermuda corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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26
EXHIBIT B
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
WITHIN 5 TRADING DAYS FOLLOWING EFFECTIVE DATE OF
REGISTRATION STATEMENT
TO:
We have acted as counsel to __________________, a ___________ corporation
(the "Company"), in connection with the Private Equity Line of Credit Agreement
between the Company and you, dated as of ______________, 2001 (the "Line of
Credit Agreement"), pursuant to which the Company will issue to you from time to
time shares of Common Stock, $____ par value (the "Put Shares") and the
Registration Rights Agreement between you and the Company, dated __________,
2001 (the "Registration Rights Agreement," and together with the Line of Credit
Agreement, the "Agreements"). This opinion is rendered to you pursuant to
Section 7.2(h) of the Line of Credit Agreement. Capitalized terms used without
definition in this opinion have the meanings given to them in the Line of Credit
Agreement.
In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates. We have based our opinion upon our review of the following
records, documents and instruments:
(a) The Articles of Incorporation of the Company, as amended to date (the
"Articles"), certified by the Secretary of State [the jurisdiction of
incorporation] as of ____________, 2001 and certified to us by an officer of the
Company as being complete and in full force and effect as of the date of this
opinion;
(b) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this opinion
(the "Bylaws");
(c) Records certified to us by an officer of the Company as constituting
all records of proceedings and actions of the Board of Directors and the
shareholders of the Company relating to the transactions contemplated by the
Agreement;
(d) The Agreements;
(e) A certificate related to the good standing of the Company issued by the
Secretary of State of the State of [the jurisdiction of incorporation] dated
__________, 2001;
(f) A Certificate of the Chief Executive Officer of the Company as to
certain factual matters (the "Officer's Certificate");
(g) The SEC Documents.
With your consent, we have based our opinion expressed in paragraph 1 below
as to the good standing of the Company solely upon the documents enumerated in
(e) and (f) above.
27
Where our opinion relates to our "knowledge," such knowledge is based upon
our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company on
matters related to the Agreements. With your consent, we have not examined any
records of any court, administrative tribunal or other similar entity in
connection with our opinion expressed in paragraph 2 of Part III below. We have
assumed for purposes of our opinion to the effect that the Put Shares are fully
paid and that the consideration for such Put Shares will be received by the
Company in accordance with the Line of Credit Agreement.
We express no opinion as to any anti-fraud provisions of applicable federal
or state securities laws, any tax, anti-trust, land use, export, safety,
environmental or hazardous materials laws, rules or regulations.
This opinion is limited to the federal laws of the United States of America
and the laws of the States of [jurisdiction of incorporation] and New York. We
disclaim any opinion as to the laws of any other jurisdiction and we further
disclaim any opinion as to any statute, rule, regulation, ordinance, order or
other promulgation of any regional or local governmental body.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of [jurisdiction of incorporation] and
has all requisite power and authority to carry on its business and to own, lease
and operate its properties and assets as described in the SEC Documents. To our
knowledge the Company does not have any subsidiaries other than as set forth in
the SEC Documents.
2. To our knowledge, except as described in the SEC Documents, there are no
claims, actions, suits, proceedings or investigations that are pending against
the Company or its properties, or to our knowledge, any officer or director of
the Company in his or her capacity as such, nor to our knowledge has the Company
received any written threat of any such claims, actions, suits, proceedings or
investigations.
3. To our knowledge, except as described in the Company's representations
and warranties contained in Article IV of the Line of Credit Agreement, there
are no outstanding options, warrants, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understanding, or arrangements by which
the Company is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common Stock.
4. Subject to the accuracy of your representations in Article III of the
Line of Credit Agreement on the date hereof and on the date of issuance of any
Put Shares, and the statement in the Officer's Certificate that the Company has
not offered or sold, and will not offer or sell, any Put Shares by means of
advertising or public solicitation, the issuance of the Put Shares in conformity
with the terms of the Line of Credit Agreement constitutes transactions exempt
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended. The Put Shares when issued in compliance with the Line of Credit
Agreement, when issued in compliance with the Line of Credit Agreement and
Registration Rights Agreement, will be duly authorized, validly issued, fully
paid, and non-assessable and
28
free of preemptive rights set forth in the Articles, Bylaws and any agreement
filed as an exhibit to the SEC Documents, provided, however, that the Put Shares
may be subject to restrictions on transfer under state and federal securities
laws, but only to the extent set forth in the Line of Credit Agreement.
5. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the Put
Shares.
Each of the Agreements has been duly authorized, executed and delivered by
the Company and the consummation by it of the transactions contemplated thereby
has been duly authorized by all necessary corporate action and no further
consent or authorization of the Company's board of directors or shareholders is
required. Each of the Agreements has been duly executed and delivered on the
part of the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject, as to
enforcement, (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other laws of general applicability relating to or affecting
creditors' rights, (ii) to general principles of equity, whether such
enforcement is considered in a proceeding in equity or at law, and (iii) to
limitations imposed by applicable law or public policy on the enforceability of
the indemnification provisions contained in the Agreements.
6. The execution, delivery and performance of and compliance with the
respective terms of each of the Agreements, and issuance of the Put Shares in
accordance with the Line of Credit Agreement, will not violate any provision of
the Articles or Bylaws or any law applicable to the Company.
7. The holders of the Common Stock will not be subject to the provisions of
the States of [states of incorporation and principal office location] anti-
takeover statutes.
In connection with the registration of the Put Shares, we advised the
Company as to the requirements of the Securities Act and the applicable Rules
and Regulations and rendered other legal advice and assistance in the course of
preparation of the Registration Statement and Prospectus, including review and
discussion of the contents thereof. On the basis of the information that was
developed in the course of the performance of such services considered in the
light of our understanding of the Securities Act, including the requirements of
Forms S-1 and SB-2, we have no reason to believe that (i) the Registration
Statement (other than the financial statements and related statements and
schedules, as to which we express no belief) as of its Effective Date contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or (ii) the Prospectus (other than the financial
statements and related statements and schedules, as to which we express no
belief) as of the Effective Date of the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The limitations inherent in the independent verification of factual
matters and the character of determinations involved in the registration process
are such, however, that except as set forth in this opinion letter we do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the rights
and remedies of creditors generally, including without limitation the effect of
statutory or other law regarding fraudulent conveyances and preferential
transfers.
29
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants or
other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether enforcement
of any such agreement is considered in a proceeding in equity or at law.
C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this opinion
letter should be read in conjunction therewith.
This opinion is rendered as of the date first written above, is solely for
your benefit in connection with the Agreement and may not be relief upon or used
by, circulated, quoted, or referred to nor may any copies hereof by delivered to
any other person without our prior written consent. We disclaim any obligation
to update this opinion letter or to advise you of facts, circumstances, events
or developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
30
EXHIBIT C
COMPLIANCE CERTIFICATE
__________________________________
The undersigned, _______________, hereby certifies, with respect to the
shares of Common Stock of _____________________ (the "Company") issuable in
connection with the Optional Purchase Notice, dated (the "Notice"), delivered
pursuant to Article II of the Private Equity Line of Credit Agreement, dated
_____________, 2001, by and among the Company and certain Investors (the
"Agreement"), as follows:
1. The undersigned is the duly elected ______________________________ of
the Company.
2. The representations and warranties of the Company set forth in the
Agreement are true and correct in all material respects as though made on and as
of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The amount of Common Stock remaining registered in an effective
registration statement on behalf of each Investor as of this date is set forth
on the schedule hereto.
5. The purchase price of the Common Stock previously issued to each of the
Investors is set forth on the schedule hereto.
The undersigned has executed this Certificate this ____ day of ________,
2001.
____________________________________
By:_____________________________________
Name:
Title:
31
EXHIBIT D
INSTRUCTIONS TO TRANSFER AGENT
_____________________________________
[TRANSFER AGENT]
Dear Sirs:
Reference is made to the Private Equity Line of Credit Agreement (the
"Agreement"), dated as of ________________, 2001 among certain Investors (the
"Investor") and _____________________ (the "Company"). Pursuant to the
Agreement, subject to the terms and conditions set forth in the Agreement the
Investor has agreed to purchase from the Company and the Company has agreed to
sell to the Investor from time to time during the term of the Agreement shares
of Common Stock of the Company, $____ par value (the "Common Stock"). As a
condition to the effectiveness of the Agreement, the Company has agreed to issue
to you, as the transfer agent for the Common Stock (the "Transfer Agent"), these
instructions relating to the Common Stock to be issued to the Investor (or a
permitted assignee) pursuant to the Agreement. All terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file with the
Commission, and maintain the effectiveness of, a registration statement or
registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement. The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investor the certificates representing the Common Stock not bearing the
Legend, in such names and denominations as the Investor shall request, provided
that:
(a) in connection with such event, the Investor (or its permitted assignee)
shall confirm in writing to the Transfer Agent that (i) the Investor confirms to
the transfer agent that it has sold, pledged or otherwise transferred or agreed
to sell, pledge or otherwise transfer such Common Stock in a bona fide
32
transaction to a transferee that is not an affiliate of the Company; and (ii)
the Investor confirms to the transfer agent that the Investor has complied with
the prospectus delivery requirement;
(b) the Investor (or its permitted assignee) shall represent that it is
permitted to dispose thereof with limitation as to amount of manner of sale
pursuant to Rule 144(k) under the Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers
confirms to the transfer agent that (i) the Investor has held the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to the
Investor (or the Trading Day immediately following if such date is not a Trading
Day), the Investor will not have sold more than the greater of (a) one percent
(1%) of the total number of outstanding shares of Common Stock or (b) the
average weekly trading volume of the Common Stock for the preceding four weeks
during the three months ending upon such delivery date (or the Trading Day
immediately following if such date is not a Trading Day), and (iii) the
Investor has complied with the manner of sale and notice requirements of Rule
144 under the Securities Act.
Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of __________.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
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4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investor is an express third party beneficiary of these Irrevocable Instructions
and shall be entitled to rely upon, and enforce, the provisions hereof.
[THE COMPANY]
By:______________________________________
Name:
Title:
AGREED:
[TRANSFER AGENT]
By:_______________________________
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SCHEDULE 13
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Company Finder: None
Investor Finder: None
Pursuant to Section 13.2, Refco Capital Markets, Ltd. shall be entitled to
receive the 2% Finder's Fee.
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