Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into May 5th, 2005, by and between TRIMEDIA ENTERTAINMENT GROUP, INC., a
Delaware corporation (the "Company"), and IL RESOURCES, LLC, a Delaware limited
liability company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Secured Convertible Term Note in the aggregate principal amount of One Million
Five Hundred Ninety Thousand Dollars ($1,590,000) (as amended, modified or
supplemented from time to time, the "Note"), which Note is convertible into
shares of the Company's common stock, $0.001 par value per share (the "Common
Stock"), at an initial conversion price of $.50 per share of Common Stock
("Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase 2,000,000 shares of the Company's Common Stock (subject to adjustment
as set forth therein) in connection with Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as
defined in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$1,590,000 convertible in accordance with the terms thereof into shares of the
Company's Common Stock in accordance with the terms of the Note and this
Agreement. The Note purchased on the Closing Date shall be known as the
"Offering." A form of the Note is annexed hereto as Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note,
Warrant and Common Stock issuable in payment of the Note or upon conversion of
the Note or upon exercise of the Warrant are referred to herein as the
"Securities."
2. Fees and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant to
purchase 2,000,000 shares of Common Stock in connection with the Offering (as
amended, modified or supplemented from time to time, the "Warrant") pursuant to
Section 1 hereof. The Warrant shall be delivered on the Closing Date. A form of
Warrant is annexed hereto as Exhibit B. All the representations, covenants,
warranties, undertakings, and indemnification, and other rights made or granted
to or for the benefit of the Purchaser by the Company are hereby also made and
granted in respect of the Warrant and shares of the Company's Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall
pay to Purchaser a commitment and origination fee in an amount equal to five
percent (5%) of the aggregate principal amount of the Note. The foregoing fee is
referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection with the
preparation and negotiation of this Agreement and the Related Agreements (as
hereinafter defined), and expenses incurred in connection with the Purchaser's
due diligence review of the Company and its Subsidiaries (as defined in Section
4.2) and all related matters. Amounts required to be paid under this Section
2(c) will be paid on the Closing Date and shall be $15,000 for such expenses
referred to in this Section 2(c).
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) shall be paid at closing in accordance with a disbursement
letter to be executed by the Company and Purchaser (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing
of the transactions contemplated hereby (the "Closing"), shall take place on the
date hereof, at such time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. At the Closing on the Closing Date, the Company will
deliver to the Purchaser, among other things, a Note in the form attached as
Exhibit A representing the aggregate principal amount of $1,590,000 and a
Warrant in the form attached as Exhibit B in the Purchaser's name to purchase
2,000,000 Warrant Shares and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Disbursement Letter by certified
funds or wire transfer.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
4.1 Organization, Good Standing and Qualification. Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Security Agreement dated as of the date hereof between the
Company and Purchaser and between certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented from time to time, the "Security
Agreement"), (iv) the Subsidiary Guaranty dated as of the date hereof made by
certain Subsidiaries of the Company (as amended, modified or supplemented from
time to time, the "Subsidiary Guaranty"), (v) the Stock Pledge Agreement, dated
as of the date hereof among the Company, certain Subsidiaries of the Company and
the Purchaser (as amended, modified or supplemented from time to time, the
"Stock Pledge Agreement"), and (vi) all other agreements related to this
Agreement and the Note and referred to herein (the preceding clauses (ii)
through (vi), collectively, the "Related Agreements"), to issue and sell the
Note and the shares of Common Stock issuable upon conversion of the Note (the
"Note Shares"), to issue and sell the Warrant and the Warrant Shares, and to
carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. Each of the Company and each of
its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation, partnership or limited liability
company, as the case may be, in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so has not, or could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects of the
Company and it Subsidiaries, taken individually and as a whole (a "Material
Adverse Effect").
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4.2 Subsidiaries. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (i) a corporation or other entity
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time.
4.3 Capitalization; Voting Rights. The authorized capital stock of
the Company, as of the date hereof consists of 120,000,000 shares, of which
100,000,000 are shares of Common Stock, par value $0.0001 per share, 42,396,317
shares of which are issued and outstanding, and 20,000,000 shares are preferred
stock, par value $0.0001 per share, of which 1,000,000 shares have been
designated as Series A Preferred Stock, of which zero are issued and
outstanding. The authorized capital stock of each Subsidiary of the Company is
set forth on Schedule 4.3.
(a) Except as disclosed on Schedule 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option plans; and (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. Except as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the
Note or the Warrant, or the issuance of any of the Note Shares or Warrant
Shares, nor the consummation of any transaction contemplated hereby will result
in a change in the price or number of any securities of the Company outstanding,
under anti-dilution or other similar provisions contained in or affecting any
such securities.
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(b) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(c) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's Certificate of
Incorporation, including its Certificate of Designations (the "Charter"). The
Note Shares and Warrant Shares have been duly and validly reserved for issuance.
When issued in compliance with the provisions of this Agreement and the
Company's Charter, the Securities will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Securities may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate, partnership
or limited liability company, as the case may be, action on the part of the
Company and each of its Subsidiaries (including the respective officers and
directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and the Related
Agreements, when executed and delivered and to the extent it is a party thereto,
will be valid and binding obligations of each of the Company and each of its
Subsidiaries, enforceable against each such person in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability
of equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
any contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any of the Company's filings
under the Securities Exchange Act of 1934 (collectively, the "Exchange Act
Filings"), copies of which have been provided to the Purchaser.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
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(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any of its Subsidiaries is a party or by which it is bound which
may involve: (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business); or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products); or (iii) provisions restricting the development, manufacture or
distribution of the Company's products or services; or (iv) indemnification by
the Company with respect to infringements of proprietary rights.
(b) Since January 31, 2005, neither the Company nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock;
(ii) incurred any indebtedness for money borrowed or any other liabilities
(other than ordinary course obligations) individually in excess of $50,000 or,
in the case of indebtedness and/or liabilities individually less than $50,000,
in excess of $100,000 in the aggregate; (iii) made any loans or advances to any
person not in excess, individually or in the aggregate, of $50,000, other than
ordinary course advances for travel expenses; or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
4.7 Obligations to Related Parties. Except as set forth on Schedule
4.7, there are no obligations of the Company or any of its Subsidiaries to
officers, directors, stockholders or employees of the Company or any of its
Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the Company and its Subsidiaries;
(c) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or
disclosed in any of its Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, or have any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company. Except as described above, no officer, director or stockholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
Except as set forth on Schedule 4.7, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
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4.8 Changes. Since January 31, 2005 , except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the Company or
any of its Subsidiaries, which individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(b) any resignation or termination of any officer, key employee
or group of employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company or any of its
Subsidiaries by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of
its Subsidiaries to any stockholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the ordinary
course of business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the Company or
any of its Subsidiaries;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company or any of its Subsidiaries;
(i) any labor organization activity related to the Company or
any of its Subsidiaries;
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(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except those for
immaterial amounts and for current liabilities incurred in the ordinary course
of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company or any
of its Subsidiaries;
(l) any change in any material agreement to which the Company or
any of its Subsidiaries is a party or by which either the Company or any of its
Subsidiaries is bound which either individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through (m)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth
on Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
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4.10 Intellectual Property. Each of the Company and each of its
Subsidiaries owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted and to the Company's knowledge, as presently proposed
to be conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or agreements
of any kind relating to the foregoing proprietary rights, nor is the Company or
any of its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase of "off the shelf" or standard
products.
(a) Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity, nor
is the Company or any of its Subsidiaries aware of any basis therefor.
(b) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or any of its
Subsidiaries, except for inventions, trade secrets or proprietary information
that have been rightfully assigned to the Company or any of its Subsidiaries.
4.11 Compliance with Other Instruments. either the Company nor any
of its Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws, or (y) of any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or by which it is bound
or of any judgment, decree, order or writ, which violation or default, in the
case of this clause (y), has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of and compliance with this Agreement and
the Related Agreements to which it is a party, and the issuance and sale of the
Note by the Company and the other Securities by the Company each pursuant hereto
and thereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term or provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any of its Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there
is no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its Subsidiaries
that prevents the Company or any of its Subsidiaries from entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated hereby or thereby, or which has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect or any change in the current equity ownership of the Company or any of
its Subsidiaries, nor is the Company aware that there is any basis to assert any
of the foregoing. Neither the Company nor any of its Subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries currently
pending or which the Company or any of its Subsidiaries intends to initiate.
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4.13 Tax Returns and Payments. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been
or are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the
Company nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company or any of
its Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule
4.14, neither the Company nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the Company or any of its Subsidiaries, nor any consultant with whom the
Company or any of its Subsidiaries has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company or any of its Subsidiaries because of the nature of
the business to be conducted by the Company or any of its Subsidiaries; and to
the Company's knowledge the continued employment by the Company or any of its
Subsidiaries of its present employees, and the performance of the Company's and
its Subsidiaries' contracts with its independent contractors, will not result in
any such violation. Neither the Company nor any of its Subsidiaries is aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has received any notice alleging that
any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.
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4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15, neither the Company nor any of its Subsidiaries is presently
under any obligation, and neither the Company nor any of its Subsidiaries has
granted any rights, to register any of the Company's or its Subsidiaries'
presently outstanding securities or any of its securities that may hereafter be
issued. Except as set forth on Schedule 4.15, to the Company's knowledge, no
stockholder of the Company or any of its Subsidiaries has entered into any
agreement with respect to the voting of equity securities of the Company or any
of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of
its Subsidiaries is in violation of any applicable statute, rule, regulation,
order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or any
other Related Agreement and the issuance of any of the Securities, except such
as has been duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing, as will be filed in a timely manner. Each
of the Company and its Subsidiaries has all material franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any of
its Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or any of its Subsidiaries or, to
the Company's knowledge, by any other person or entity on any property owned,
leased or used by the Company or any of its Subsidiaries. For the purposes of
the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal and/or foreign
laws and regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials; or
(b) any petroleum products or nuclear materials.
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4.18 Valid Offering. Assuming the accuracy of the representations
and warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full Disclosure. Each of the Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and Warrant,
including all information the Company and its Subsidiaries believe is reasonably
necessary to make such investment decision. Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document
delivered by the Company or any of its Subsidiaries to Purchaser or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, contain any untrue statement of a material fact
nor omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading. Any financial projections and other estimates provided to
the Purchaser by the Company or any of its Subsidiaries were based on the
Company's and its Subsidiaries' experience in the industry and on assumptions of
fact and opinion as to future events which the Company or any of its
Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.
4.20 Insurance. Each of the Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with
coverages which the Company believes are customary for companies similarly
situated to the Company and its Subsidiaries in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
has filed all proxy statements, reports and other documents required to be filed
by it under the Securities Exchange Act 1934, as amended (the "Exchange Act").
The Company has provided public access to copies of: (i) its Annual Report on
Form 10-KSB for its fiscal years ended October 31, 2004; and (ii) its Quarterly
Report on Form 10-QSB for its fiscal quarter ended January 31, 2005, and the
Form 8-K filings which it has made during the fiscal year 2005 to date
(collectively, the "SEC Reports"). Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.22 Listing. The Company's Common Stock is traded on the NASD Over
the Counter Bulletin Board ("OTCBB") and satisfies all requirements for the
continuation of such trading . The Company has not received any notice that its
Common Stock will be ineligible to trade or that its Common Stock does not meet
all requirements for such trading .
4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or 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 under circumstances that would cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
Subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
11
4.24 Stop Transfer. The Securities are restricted securities as of
the date of this Agreement. Neither the Company nor any of its Subsidiaries will
issue any stop transfer order or other order impeding the sale and delivery of
any of the Securities at such time as the Securities are registered for public
sale or an exemption from registration is available, except as required by state
and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
5.1 Requisite Power and Authority. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.2 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering, the Note, the Warrant and
the Securities and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the Purchaser or to
which the Purchaser had access.
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5.3 Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company. The Purchaser
must bear the economic risk of this investment until the Securities are sold
pursuant to: (i) an effective registration statement under the Securities Act;
or (ii) an exemption from registration is available with respect to such sale.
5.4 Acquisition for Own Account. The Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
5.5 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.6 Legends. The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO TRIMEDIA ENTERTAINMENT GROUP,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(a) The Note Shares and the Warrant Shares, shall bear a legend
which shall be in substantially the following form until such shares are covered
by an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE
STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
TRIMEDIA ENTERTAINMENT GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(b) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO TRIMEDIA ENTERTAINMENT GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Trading. The Company shall promptly secure the trading of the
shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the OTCBB (the "Principal Market") upon which shares
of Common Stock are traded (subject to official notice of issuance) and shall
maintain such trading so long as any other shares of Common Stock shall be so
traded. The Company will maintain the trading of its Common Stock on the
Principal Market or Nasdaq, and will comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. The Company will timely file with the
SEC all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to file
reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
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6.5 Use of Funds. The Company agrees that it will use the proceeds
of the sale of the Note and the Warrant to fund development, production,
marketing and promotion of music and film productions and for general working
capital purposes only.
6.6 Access to Facilities. Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser), upon reasonable notice and during normal business
hours, at such person's expense and accompanied by a representative of the
Company, to:
(a) visit and inspect any of the properties of the Company or
any of its Subsidiaries;
(b) examine the corporate and financial records of the Company
or any of its Subsidiaries (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company or
any of its Subsidiaries with the directors, officers and independent accountants
of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and its
Subsidiaries; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company and/or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and its Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
6.8 Insurance and Properties. Each of the Company and each of its
Subsidiaries shall keep its business and properties insured at all times with
responsible insurance companies and carry such types and amounts of insurance as
are required by all federal, state and local governments in the areas which the
Company and its subsidiaries does business and as are usually carried by
entities engaged in the same or similar business similarly situated. In
addition, Each of the Company and each of its Subsidiaries shall maintain in
full force and effect policies of liability insurance in amounts at least equal
to that currently in effect.
15
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
6.10 Properties. Each of the Company and each of its Subsidiaries
will keep its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all needful and proper
repairs, renewals, replacements, additions and improvements thereto; and each of
the Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 Notice of Proceedings. Upon an officer or director of the
Company obtaining knowledge of any material litigation, dispute or proceedings
being instituted or threatened against the Company, or any attachment, levy,
execution or other process being instituted against any assets of the Company,
cause such officer to promptly, within no more than ten (10) business days, give
the Purchaser written notice of such litigation, dispute, proceeding, levy,
execution or other process.
6.12 Required Approvals. For so long as twenty-five percent (25%) of
the principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not, and shall not permit any of its
Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends,
other than dividends paid to the Parent of any of its wholly-owned Subsidiaries,
(ii) issue any preferred stock that is mandatorily redeemable prior to one year
anniversary of Maturity Date (as defined in the Note) or (iii) redeem any of its
preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company dissolve, liquidate or merge
with any other person or entity (unless the Company is the surviving entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict the Company's or any of its
Subsidiaries right to perform the provisions of this Agreement, any Related
Agreement or any of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt and debt incurred to finance the purchase
of equipment (not in excess of five percent (5%) of the fair market value of the
Company's and its Subsidiaries' assets) whether secured or unsecured other than
(x) the Company's indebtedness to the Purchaser, (y) indebtedness set forth on
Schedule 6.12(e) attached hereto and made a part hereof and any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any debt incurred in
connection with the purchase of assets in the ordinary course of business, or
any refinancings or replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or replaced; (ii) cancel any
debt owing to it in excess of $50,000 in the aggregate during any 12 month
period; (iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except the endorsement of negotiable instruments by the Company for deposit or
collection or similar transactions in the ordinary course of business or
guarantees of indebtedness otherwise permitted to be outstanding pursuant to
this clause (e); (iv) incur, create, assume or permit to exist, any lien (other
than the liens set forth in Schedule 4.9), mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including liens arising under
conditional sales or other title retention agreements upon any of its or any
Subsidiary's assets or properties of any character other than in the ordinary
course of business, without the prior written consent of the Purchaser;
16
(f) create or acquire any Subsidiary after the date hereof
unless (i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii)
such Subsidiary becomes party to the Master Security Agreement, the Stock Pledge
Agreement and the Subsidiary Guaranty (either by executing a counterpart thereof
or an assumption or joinder agreement in respect thereof) and, to the extent
required by the Purchaser, satisfies each condition of this Agreement and the
Related Agreements as if such Subsidiary were a Subsidiary on the Closing Date;
or
(g) Transfer, sell, assign, lease or otherwise dispose of a
material portion of its properties or assets, or any assets or properties
necessary or desirable for the proper conduct of its business, or transfer,
sell, assign or otherwise dispose of any of the Note, a material portion of its
accounts, or contract rights to any Person, or change the nature of its
business, wind-up, liquidate or dissolve, or agree to any of the foregoing,
other than in the ordinary course of business, without the prior written consent
of the Lender.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.6 above at such time as:
(a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with
the Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose,
and will not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
17
7.2 Non-Public Information. The Purchaser agrees not to effect any
sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company's Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its Subsidiaries
of any covenant or undertaking to be performed by Company or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered into by the Company and/or any of its Subsidiaries and Purchaser
relating hereto or thereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto. In no event
shall the amount of indemnification due from Purchaser under this Section 8.2
exceed the purchase price of the Note and Warrant.
9. Registration Rights.
9.1 Definitions. The following terms used in Section 9 shall have
the following:
(a) "Person" shall mean an individual, partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(b) "Register," "registered," and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or order of
effectiveness of such registration statement or document.
18
(c) "Registration Statement" shall mean any registration
statement of the Company filed with the SEC pursuant to the provisions of this
Section 9.2, which covers the resale of the Restricted Stock on an appropriate
form then permitted by the SEC to be used for such registration and the sales
contemplated to be made thereby under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including any pre- and post-effective amendments
thereto, in each case including the prospectus contained therein, all exhibits
thereto and all materials incorporated by reference therein.
(d) "Restricted Stock" shall mean: (i) the Shares; and (ii) any
additional shares of Common Stock of the Company issued or issuable after the
date hereof in respect of any of the foregoing securities, by way of a stock
dividend or stock split; provided that as to any particular shares of Restricted
Stock, such securities shall cease to constitute Restricted Stock when: (x) a
Registration Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder, (y) such securities are permitted to be transferred
pursuant to Rule 144(k) (or any successor provision to such rule) under the
Securities Act, or (z) such securities are otherwise freely transferable to the
public without further registration under the Securities Act.
(e) "Selling Stockholder" shall mean the Purchaser and its
successors and assigns.
(f) "Shares" shall mean the Note Shares and Warrant Shares.
9.2 Registration of Shares.
(a) The Company shall use its reasonable best efforts to prepare
and file with the SEC, within 60 days of the date hereof, a Registration
Statement under the Securities Act to permit the public sale of the Restricted
Stock, and to cause such Registration Statement to be declared effective within
150 days of the date hereof. The Selling Stockholders shall furnish such
information as may be reasonably requested by the Company in order to include
such Restricted Stock in such Registration Statement. If any Selling Stockholder
decides not to include all of its Restricted Stock in any registration statement
thereafter filed by the Company, such Selling Stockholder shall nevertheless
continue to have the right to include any Restricted Stock in any subsequent
registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein. In the event that any registration pursuant to this Section
9.2(a) is terminated or withdrawn, the Company shall use its reasonable best
efforts to prepare and file with the SEC, as soon thereafter as practicable, a
Registration Statement under the Securities Act to permit the public sale of the
Restricted Stock purchased hereby.
(b) Notwithstanding anything to the contrary contained herein,
the Company's obligations in Sections 9.2(a) above shall extend only to the
inclusion of the Restricted Stock in a Registration Statement. The Company shall
have no obligation to assure the terms and conditions of distribution, to obtain
a commitment from an underwriter relative to the sale of the Restricted Stock or
to otherwise assume any responsibility for the manner, price or terms of the
distribution of the Restricted Stock.
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9.3 Registration Procedures. Whenever it is obligated to register
any Restricted Stock pursuant to this Agreement, the Company shall:
(a) prepare and file with the SEC a Registration Statement with
respect to the Restricted Stock in the manner set forth in Section 9.2(a) hereof
and use its reasonable best efforts to cause such Registration Statement to
become effective as promptly as possible and to remain effective until the
earlier of: (i) the sale of all shares of Restricted Stock covered thereby, (ii)
the availability under Rule 144(k) for the Selling Stockholders to immediately,
freely resell without restriction, all Restricted Stock covered thereby, or
(iii) two (2) years from the effective date of the first Registration Statement
filed by the Company with the SEC pursuant to this Agreement or with respect to
any subsequent Registration Statement, 180 days from the effective date of such
Registration Statement;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the period specified in Section 9.3(a)
above and to comply with the provisions of the Securities Act with respect to
the disposition of all Restricted Stock covered by such Registration Statement
in accordance with the intended method of disposition set forth in such
Registration Statement for such period;
(c) furnish to each Selling Stockholder such number of copies of
the Registration Statement and the prospectus included therein (including each
preliminary prospectus) as such person may reasonably request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such Registration Statement;
(d) use its reasonable best efforts to register or qualify the
Restricted Stock covered by such Registration Statement under the state
securities laws of such jurisdictions as any Selling Stockholder shall
reasonably request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. In the event
the Company is a party to such an agreement, the Selling Stockholder shall also
enter into and perform its obligations under the agreement;
(f) immediately notify each Selling Stockholder at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus contained
in such Securities Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required or
necessary to be stated therein in order to make the statements contained therein
not misleading in light of the circumstances under which they were made. The
Company will use reasonable efforts to amend or supplement such prospectus in
order to cause such prospectus not to include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made;
20
(g) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement;
(h) make available for inspection by any Selling Stockholder and
any attorney, accountant or other agent retained by any Selling Stockholder, all
financial and other records, pertinent corporate documents and properties of the
Company reasonably requested by any Selling Stockholder, attorney, accountant or
agent in connection with such Registration Statement, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any Selling Stockholder, attorney, accountant or agent in connection with
such Registration Statement; provided, however, that such Selling Stockholder,
underwriter, attorney or accountant shall agree in writing to hold in confidence
and trust all information so provided;
(i) use its reasonable best efforts to list the Restricted Stock
covered by such Registration Statement on each exchange or automated quotation
system on which similar securities issued by the Company are then listed (with
the listing application being made at the time of the filing of such
Registration Statement or as soon thereafter as is reasonably practicable);
(j) notify each Selling Stockholder of any threat by the SEC or
state securities commission to undertake a stop order with respect to sales
under the Registration Statement; and
(k) cooperate in the timely removal of any restrictive legends
from the shares of Restricted Stock in connection with the resale of such shares
covered by an effective Registration Statement.
9.4 Delay of Registration.
(a) The Company and the Selling Stockholders agree that the
Selling Stockholders may suffer damages if the Registration Statement is not
filed on or prior to the date that is 90 days after the date hereof (the "Target
Filing Date") and maintained in the manner contemplated herein. The Company and
the Selling Stockholders further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if the
Registration Statement is not filed on or prior to the Target Filing Date, the
Company shall pay in cash or in shares of Common Stock (at the Company's option)
as liquidated damages for such failure and not as a penalty to the Selling
Stockholders, an amount equal to two percent (2%) of the purchase price for the
Note and Warrant (the "Purchase Price") and an additional amount equal to one
percent (1%) of the Purchase Price at the end of each subsequent 30-day period
during which the Registration Statement is not filed (the "Late Filing
Damages"). Any payments to be made to the Selling Stockholders pursuant to this
Section 9.4(a) shall be due and payable within three (3) business days of any
demand therefor by the Selling Stockholders. The parties agree that the Late
Filing Damages represent the sole and exclusive remedy, whether at law or in
equity, available to the Selling Stockholders if the Registration Statement is
not filed on or prior to the Target Filing Date.
21
(b) The Company and the Selling Stockholders agree that the
Selling Stockholders may suffer damages if the Registration Statement is not
declared effective by the SEC on or prior to the date that is 180 days after the
date hereof (the "Effectiveness Deadline"). The Company and the Selling
Stockholders further agree that it would not be feasible to ascertain the extent
of such damages with precision. Accordingly, if the Registration Statement is
not declared effective by the SEC prior to the Effectiveness Deadline, the
Company shall pay in cash as liquidated damages for such failure and not as a
penalty to the Selling Stockholders, an amount equal to two percent (2%) of the
Purchase Price and an additional amount equal to one percent (1%) of the
Purchase Price at the end of each subsequent 30-day period during which the
Registration Statement is not declared effective (the "Non-Effectiveness
Damages"). Payments to be made to the Selling Stockholders pursuant to this
Section 9.4(b) shall be due and payable within three (3) business days of any
demand therefor by the Selling Stockholders. The parties agree that the
Non-Effectiveness Damages represent the sole and exclusive remedy, whether at
law or in equity, available to the Selling Stockholders if the Registration
Statement is not declared effective on or prior to the date that is 180 days
after the Target Filing Date.
9.5 Expenses.
(a) For the purposes of this Section 9.5, the term "Registration
Expenses" shall mean: all expenses incurred by the Company in complying with
Section 9.2 of this Agreement, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, reasonable fees and
disbursements of a single special counsel for the Selling Stockholders, fees
under state securities laws, fees of the National Association of Securities
Dealers, Inc., fees and expenses of listing shares of Restricted Stock on any
securities exchange or automated quotation system on which the Company's shares
are listed and fees of transfer agents and registrars. The term "Selling
Expenses" shall mean: all underwriting discounts and selling commissions
applicable to the sale of Restricted Stock and all accountable or
non-accountable expenses paid to any underwriter in respect of such sale.
(b) Except as otherwise provided herein, the Company will pay
all Registration Expenses in connection with the Registration Statements filed
pursuant to Section 9.2 of this Agreement. All Selling Expenses in connection
with any Registration Statements filed pursuant to Section 9.2 of this Agreement
shall be borne by the Selling Stockholders pro rata on the basis of the number
of shares registered by each Selling Stockholder whose shares of Restricted
Stock are covered by such Registration Statement, or by such persons other than
the Company (except to the extent the Company may be a seller) as they may
agree.
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9.6 Obligations of the Selling Stockholders.
(a) In connection with each registration hereunder, each Selling
Stockholder will furnish to the Company in writing such information with respect
to it and the securities held by it and the proposed distribution by it, as
shall be reasonably requested by the Company in order to assure compliance with
applicable federal and state securities laws as a condition precedent to
including the Selling Stockholder's Restricted Stock in the Registration
Statement. Each Selling Stockholder shall also promptly notify the Company of
any changes in such information included in the Registration Statement or
prospectus as a result of which there is an untrue statement of material fact or
an omission to state any material fact required or necessary to be stated
therein in order to make the statements contained therein not misleading in
light of the circumstances under which they were made.
(b) In connection with the filing of the Registration Statement,
each Selling Stockholder shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with such Registration Statement or prospectus.
(c) In connection with each registration pursuant to this
Exhibit, each Selling Stockholder agrees that it will not effect sales of any
Restricted Stock until notified by the Company of the effectiveness of the
Registration Statement, and thereafter will suspend such sales after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a Registration Statement or prospectus. At the end
of any period during which the Company is obligated to keep a Registration
Statement current, each Selling Stockholder shall discontinue sales of
Restricted Stock pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the Restricted
Stock covered by such Registration Statement which remains unsold, and each
Selling Stockholder shall notify the Company of the number of shares registered
which remain unsold immediately upon receipt of such notice from the Company.
9.7 Blackouts. If the Company has determined in good faith: (i) that
filing a Registration Statement or maintaining the effectiveness of a current
Registration Statement, or that sales of Restricted Stock by the Selling
Stockholder pursuant to a current Registration Statement, would have a material
adverse effect on the Company or its shareholders in relation to any
contemplated or pending material financing, acquisition or other corporate
transaction, and that disclosure is not in the best interests of the Company and
its shareholders, or (ii) that filing a Registration Statement or maintaining
the effectiveness of a current Registration Statement, or that sales of
Restricted Stock by the Selling Stockholder pursuant to a current Registration
Statement, would require disclosure of material non-public information, the
Company shall be entitled to postpone the filing of the Registration Statement,
suspend the use by the Selling Stockholders of the Registration Statement and
suspend sales of Restricted Stock pursuant to such Registration Statement, as
the case may be, until such time as the Company notifies the Selling
Stockholders that such material information has been disclosed to the public or
has ceased to be material, or that sales pursuant to such Registration Statement
may otherwise be resumed; provided, however, that in no event shall such period
of time exceed an aggregate of 60 calendar days during any 12-month period.
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9.8 Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by
law, each Selling Stockholder, such Selling Stockholder's respective partners,
officers and directors, any underwriters, and each Person, if any, who controls
any Selling Stockholder within the meaning of the Securities Act, against all
losses, claims, damages, liabilities and expenses caused by: (i) any untrue
statement of or alleged untrue statement of material fact contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment or
supplement thereto, (ii) any omission of or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement ("Violations"); provided, however, that the indemnity agreement
contained in this Section 9.8(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld, nor shall the Company be liable in for any loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Selling Stockholder, partner, officer, director, underwriter or controlling
person of such Selling Stockholder.
(b) To the extent permitted by law, each Selling Stockholder
shall indemnify and hold harmless the Company, each of its officers and
directors, any underwriter, each person, if any, who controls the Company within
the meaning of the Securities Act, and any other Selling Stockholder selling
securities under such registration statement or any of such other Selling
Stockholder's partners, directors or officers or any person who controls such
Selling Stockholder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, underwriter or other such Selling Stockholder, or partner, director,
officer or controlling person of such other Selling Stockholder, may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation: (i) occurs in reliance
upon and in conformity with information furnished in writing by such Selling
Stockholder for use in connection with such registration; (ii) occurs as a
result of any failure to deliver a copy of the prospectus relating to such
Registration Statement, or (iii) occurs as a result of any disposition of the
Restricted Stock in a manner that fails to comply with the permitted methods of
distribution identified within the Registration Statement.
(c) Any Person entitled to indemnification hereunder shall: (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party), and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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(d) If the indemnification provided for in Section 9.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) described in Sections
9.8(a) and (b) that resulted in such loss, claim, damage or liability, as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall any contribution by a Selling Stockholder hereunder exceed the net
proceeds from the offering received by such Selling Stockholder.
(e) The indemnification provided for under Section 9.8 shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
indemnifying party also agrees to make such provisions as are reasonably
requested by any indemnified party for contribution to such party in the event
the indemnifying party's indemnification is unavailable for any reason. In no
event shall the amount of indemnification due from any indemnifying party under
this Section 9.8 exceed the purchase price of the Note and Warrant.
10. Miscellaneous.
10.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION
BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF PENNSYLVANIA OR IN THE FEDERAL COURTS LOCATED IN THE
COMMONWEALTH OF PENNSYLVANIA. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS
AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO
THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY RELATED 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 THIS AGREEMENT OR ANY RELATED AGREEMENT.
25
10.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
10.3 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of Common Stock
which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement.
10.4 Entire Agreement. This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
10.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.6 Amendment and Waiver. This Agreement may be amended or modified
only upon the written consent of the Company and the Purchaser.
(a) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written consent of
the Purchaser.
(b) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written consent of the
Company.
10.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
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10.8 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
If to the Company, to: TriMedia Entertainment Group, Inc.
1080 N. Delaware Avenue
Philadelphia, PA 19125
Attention: Chief Executive Officer
Facsimile: (215) 426-5536
If to the Purchaser, to: IL Resources, LLC
111 Presidential Boulevard
Bala Cynwyd, PA 19004
Attention:
Facsimile: (610) 660-5905
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
10.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
10.10 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
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10.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
10.12 Transaction Fees. Except as set forth on Schedule 10.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 10.12 being untrue.
10.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
TRIMEDIA ENTERTAINMENT GROUP, INC. IL RESOURCES, LLC
By: /s/Christopher Schwartz By: /s/Howard Appel
------------------------------------------ -----------------------------------------------
Name: Chris Schwartz Name: Howard Appel
------------------------------------------ -----------------------------------------------
Title: Chief Executive Officer Title: President, 1025 Investments, Inc., Managing
Member
------------------------------------------ -----------------------------------------------
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EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1