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EXHIBIT 10.16
[GONTARD & METALLBANK AG LETTERHEAD]
Team Communications Group, Inc.
12300 Wilshire Blvd., Suite 400
Los Angeles, CA 90025
U.S.A.
August 2, 1999
SECONDARY LISTING AND PUBLIC OFFERING OF TEAM COMMUNICATIONS GROUP, INC.
(THE "COMPANY") SHARES OF COMMON STOCK IN GERMANY
Dear Sirs,
We are pleased to act as lead manager for the public offering ("Offering") and
listing of shares of the Company in Germany. We appreciate that Gontard &
MetallBank AG shall be appointed as lead manager (the "Lead Manager"). We agree
with such an appointment and will take all necessary steps to facilitate the
co-operation between us and the Co-Manager. In the following we would like to
set out the contractual basis for our services in connection with the Offering:
1. We are hereby appointed by the Company as the lead manager for the offering
of shares of the Company in Germany and the listing of such shares on a
German stock exchange (the "Lead Manager"). In this function the Lead
Manager takes on the following obligations:
- The Lead Manager shall advise the Company, its management and
shareholders on all aspects of the capital increase, the placement of
the shares and
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the admission of the shares to trading in the New Market segment
(Neuer Markt) of the Geregelter Markt of the Frankfurt Stock Exchange.
- The Lead Manager shall advise the Company on the preparation of
offering documents (selling prospectus, Company report
(Unternehmensbericht) to be prepared under the observance of all
applicable rules and regulations. The contents of the offering
documents must in each case be agreed between the Lead Manager and
the Company.
- The Lead Manager will take all necessary steps to obtain admission of
all of the shares of Common Stock of the Company to trading in the
New Market segment (Neuer Markt) of the Geregelter Markt of the
Frankfurt Stock Exchange, and will make presentations vis-a-vis the
Frankfurt Stock Exchange jointly with the Company and its advisors.
- The Lead Manager shall, together with the Company and its advisors,
organise the roadshow and the pre-marketing campaign, and arrange the
necessary meetings with investors. The Lead Manager will provide an
overview of the scheduled dates and locations for the planned roadshow
and the pre-marketing campaign as soon as possible. The schedules for
the roadshow and the pre-marketing campaign shall be finalised jointly
with the Company and its advisors.
- The Lead Manager shall prepare a draft of the underwriting agreement
by not later than August 30, 1999. To the extent that this
engagement letter already contains agreements on certain issues,
these shall be fully reflected in the underwriting agreement. The
underwriting agreement will be subject to German law. The place of
performance and the place of jurisdiction will be Frankfurt am Main.
The underwriting agreement shall be entered into by the Lead Manager
and the Company no later than three days, on which banks are open for
business in Frankfurt am Main, prior to the day on which the Company
and the Lead Manager formally apply to the Admission Board of the
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Frankfurt Stock Exchange for the approval of the preliminary selling
prospectus.
- - The Lead Manager will invite other reputable banks to be agreed upon
between the Lead Manager and the Company to participate in the banking
syndicate and shall further invite VEM Virtuelles Emissionshaus AG,
subsidiary of the Company's financial advisor VMR Value Management &
Research AG, to participate in the selling group for the Offering. The
final composition of the syndicate and the selling group will be decided
jointly by the Company and the Lead Manager.
- - The new shares resulting from the capital increase envisaged by the Company
in connection with the Offering will be underwritten by the Lead Manager
and the Co-Managers subject to the entering into and the provisions of the
underwriting agreement. The Lead Manager agrees to surrender the proceeds
of the sale of the newly issued shares to the Company.
- - The Lead Manager is willing to serve as market maker (Designated Sponsor)
for the New Market for a minimum of two years. In the first year the
services as Designated Sponsor are free of charge to the Company.
Thereafter the Lead Manager shall receive a fee of DM 60.000,--for each
year of service. The Lead Manager agrees that in its function as Designated
Sponsor it will initiate research on the Company by issuing a comprehensive
research report, a comprehensive annual study and take the appropriate
measures to sustain investor interest in the stock. The Lead Manager
further accepts the engagement of other Designated Sponsors by the Company.
- - In order to allow the Lead Manager to stabilize the share price after the
Offering, the Lead Manager shall be entitled to purchase up to 5% of the
offer volume at the offer price and subject to all other terms and
conditions of the Offering.
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The Lead Manager confirms that it will devote its full attention to the
above-mentioned tasks.
2. The Lead Manager agrees to co-operate with the Company and its advisors and
with the Co-Manager in good faith. The Lead Manager agrees to inform the
Company and its advisors immediately on all issues having a bearing on the
proposed offering and listing of the shares of the Company.
3. The parameters of the Offering of the Company are presently the following:
Objectives: (i) to provide new funds to the Company for its future
development, (ii) provide a large enough "float" on the
chosen stockmarket, (iii) obtain excellent research coverage
through the participation of the Lead Manager and other
investment banking firms, (iv) allow for a limited disposal
of Shares by certain current shareholders and (v) to provide
liquidity for the existing shareholders after a certain
lock-up period to be phased out on a period of no more than
one year.
Volume of the
Offering: 1) Gross proceeds of USD 25-30 M10 USD
excluding greenshoe.
2) In addition, up to a maximum of 10% of the offered shares
may be offered by agreed upon current shareholders, the
exact amount to be decided after discussion with such
shareholders.
Valuation: The shares of Common Stock shall be offered at an offer
price (the "Offer Price") which will be mutually agreed
between the Lead Manager and the Company based (i) either on
the arithmetical average of the moving average share price
of the
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TMTV shares of Common Stock on the Frankfurt, Berlin and
Munich OTC Markets (Freiverkehr) and on the NASDAQ during an
appropriate period preceding the commencement of the
Offering, from which arithmetical average an appropriate
discount will be made if necessary, or (ii) based on the
outcome of a pre-marketing with institutional investors
prior to the Offering and a bookbuilding conducted by the
Lead Manager.
Listing
of the shares: Regulated Market (Geregelter Markt) with admission to
trading on the New Market (Neuer Markt) of the Frankfurt
Stock Exchange.
Greenshoe: Up to 10% of the volume of the Offering, coming from newly
issued shares of the Company
Preferred
Allocation: Up to 10% of the Offering in agreement with the Lead
Manager; any larger amount to be discussed between the
Company, its advisors and the Lead Manager
Timing: Offering and listing in October/November 1999 or, if this
time frame cannot be achieved due to restrictions existing
for the finally selected stock exchange market segment,
during the course of the fourth quarter of 1999, at the
latest.
Offering: Public offering in Germany, private placement with
institutional investors in the rest of Europe (UK, France
and possibly other countries). VMR responsible for
institutional investors within the agreed private placement
Investor Profile: 40% of the offered shares to be allocated to private
investors, 60% of institutional investors.
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4. The underwriting quota of the Lead Manager and the underwriting quota of the
other syndicate members will be agreed upon by the Lead Manager, the
Co-Managers and the Company in the Underwriting Agreement. The Lead Manager
will ensure full access for the Company and its advisors to all materials
connected with, and full transparency of, the marketing process. This
includes daily information on the results of the marketing discussions of
the Lead Manager.
5. The Lead Manager co-ordinates the research of the banking syndicate for the
purpose of this Offering. The banks in the syndicate will disclose research
reports, analytical material or disseminate any other information in
connection with this Offering only after the contents have been discussed
with the Company and its advisors and the Company has had the opportunity to
clarify possible misunderstandings. All communication of the Lead Manager
with the press in connection with the Offering will be co-ordinated with the
Company and its advisors and vice versa.
6. Prior to the allocation of the shares to investors, the Lead Manager and the
Company, together with its advisors, will agree on objective investor
quality criteria. The allocation of shares to the banking syndicate and
investors will be decided jointly by the Lead Manager and the Company based
upon the agreed criteria. The Company and its advisors must be invited to
all relevant meetings dealing with allocation of shares to investors.
7. In the framework of the due diligence to be conducted by the Lead Manager
for the purposes of the Offering, the Company agrees to grant the Lead
Manager access to all relevant documents, specified people and customers as
well as strategic elaborations which the Lead Manager or its advisors have
reasonably requested to see. The Company and the Lead Manager shall agree on
a list of appropriate people and customers to be contacted by the Lead
Manager, before any such individuals are approached by the Lead Manager. The
Company, its management and its auditors will assist the Lead Manager in the
due diligence process and will, at the reasonable request of the Lead
Manager, be available for questions and discussions. The legal due
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diligence will be conducted by the Lead Manager and its advisors. The Lead
Manager shall ensure that the auditors appointed, if any, keep in constant
contact with the management of the Company and its advisors during the
financial due diligence and that a draft of the report to be rendered by
the auditors is discussed with the Company and its advisors prior to its
finalisation. The Company shall receive one original copy of the report.
If the Lead Managers require help from outside technical consultants, such
consultants will be appointed at the Lead Manager's own expense. The Lead
Manager will mutually agree on its advisors, including legal advisors and
auditors, together with the Company and its advisor Value Management &
Research AG.
8. The Company shall pay to the banking syndicate a fee of 5% of the gross
proceeds of the Offering (including proceeds from the Green Shoe
allocation but excluding proceeds from the purchase of shares by the Lead
Manager at the occasion of the Offering as contemplated under no. 1
hereof). The Company furthermore agrees to pay to the banking syndicate a
fee of 5% of the gross proceeds from the sale of shares to the Lead
Manager at the occasion of the Offering as contemplated under no. 1
hereof.
The total fees payable pursuant to the foregoing consist of three
components: the management commission (20%), the underwriting commission
(20%) and the selling concession (60%). The selling commission and the
underwriting commission shall be allocated among the Syndicate Banks in
accordance with their respective underwriting commitment. However, the
share of the Lead Manager in the selling concession shall be 80%
irrespective of the respective selling efforts of the Syndicate members.
The remaining selling concession shall be allocated among the other
Syndicate members in relation to the total number of shares for which
each such Syndicate member has generated investor orders in the framework
of the Offering and in share trading within the three weeks directly
following the first quotation of the shares on the Frankfurt Stock
Exchange's Neuer Markt; such allocation shall be the Lead Manager's
responsibility. We recognise the Company's desire to provide an allocation
that fosters competition between banks on the Syndicate Banks, provides
incentives for our best efforts and minimises distracting and
time-consuming disputes about compensation and we commit to participate
in the Offering in that spirit.
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The Company shall also pay a fee for the Lead Manager's participation in
the listing of the shares for trade on Frankfurt Stock Exchange's New
Market Segment of USD 0.01 per share.
The above fees are gross fees and include value added tax, if any.
9. The Company will bear the following expenses incurred in connection with
certain activities relating to the Offering: preparing, translating,
printing, filing with the Frankfurt Stock Exchange, and publishing a
registration statement for Neuer Markt; preparing, translating, printing,
and delivering such number of preliminary, final and any supplemental
prospectuses as reasonably requested by the banks; photocopying and
delivering all underwriting and selling documents; fees and expenses of
the Company's legal counsel; all the Company's costs related to the road
show; and fees and costs charged by the Frankfurt Stock Exchange/Neuer
Markt in connection with the listing. The Company furthermore agrees to
bear the fees (including value added tax, if any) of a limited financial
and business due diligence review by Ernst & Young incurred by the Lead
Manager in connection with the Offering, provided, however, that the due
diligence criteria shall be mutually agreed upon between the Lead Manager
and the Company in each case. The Lead Manager agrees to bear all
expenses related to the syndication and travel costs of its employees and
advisors and post-offering advertising of the Offering (e.g. tombstone),
but shall bear none of the expenses of a private placement of shares with
institutional investors outside Germany.
10. As regards information obtained by the Lead Manager and its advisors from
the Company in connection with the Engagement, the Lead Manager agrees to
treat all such information as being strictly confidential. However, the
Lead Manager shall:
(a) be free to make disclosures or announcements required by any law,
regulation or order of a court or regulatory body, or pursuant to
governmental action, regulatory requirement or request, or necessary
in the view of the Lead
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Manager to seek to establish any defence in any legal proceeding or
investigation; and
(b) be free to make any disclosure if the Company specifically consents
to such disclosure.
The Lead Manager shall pass on such information only to employees involved
in the offering strictly on a "need-to-know" basis.
Any reports analyses or other material supplied by the Company and its
advisors to the Lead Manager in connection with the engagement are solely
for the Lead Manager's information and use and may not be used for any
other purpose or be delivered to any third party, including, but not
limited to, the shareholders of the Company, without the prior written
consent of the Company.
11. This letter is subject to German law. Place of performance and place of
jurisdiction shall be Frankfurt/Main.
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As a sign of your agreement with the contents of this letter we would like to
ask you to counter-sign the second copy of this letter and return it to us.
Gontard & MetalBank AG
by: [SIGNATURE ILLEGIBLE]
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Name in print: [ILLEGIBLE]
Position in print: Member of the board
by: [SIGNATURE ILLEGIBLE]
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Name in print:
Position in print: Corporate Finance
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We agree with the above:
Team Communications Group, Inc.
by: /s/ Drew S. Levin
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Name in print: DREW S. LEVIN
Position in print: Chairman & CEO
by: /s/ Timothy Hill
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Name in print: TIMOTHY HILL
Position in print: Sr. Vice President,
CFO and Secretary
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