Form of Securities Purchase Agreement

EXHIBIT 10.1 ------------ SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March30, 2005, is by and between TAG Entertainment Corp., a Delaware corporationformerly known as Power Marketing, Inc. (the "Company"), and Satellite StrategicFinance Associates, LLC ("Satellite" or the "Investor"). A. The Company wishes to sell to the Investor, and the Investor wishes topurchase, on the terms and subject to the conditions set forth in thisAgreement, (A) a senior secured promissory note of the Company in the formattached hereto as Exhibit A (the "Note") and (B) a Warrant in the form attachedhereto as Exhibit B (the "Warrant")). B. The Company's obligations under the Note, including without limitationits obligation to make payments of principal thereof and interest thereon, areguaranteed by the Company's wholly-owned subsidiary, TAG Entertainment USA Inc.(the "Guarantor"), pursuant to a Subsidiary Guaranty Agreement in the formattached hereto as Exhibit C (the "Subsidiary Guaranty"). C. The Company's obligations under the Note and the obligations of theGuarantor under the Subsidiary Guaranty will be secured by a first prioritysecurity interest on all of the assets of the Company and all of the assets ofthe Guarantor pursuant to a Security Agreement in the form attached hereto asExhibit D the "Security Agreement"). D. The Warrant will entitle the Investor to purchase 500,000 shares ofCommon Stock (the "Warrant Shares"), will have an exercise price per share equalto $1.00 (subject to adjustment as provided therein) and will expire on thefifth (5th) anniversary of the issuance thereof. The Note, the Warrant and theWarrant Shares are collectively referred to herein as the "Securities". E. The Company has agreed to effect the registration of the Warrant Sharesunder the Securities Act of 1933, as amended (the "Securities Act"), pursuant toa Registration Rights Agreement in the form attached hereto as Exhibit E (the"Registration Rights Agreement"). F. The sale of the Note and the Warrant by the Company to the Investor willbe effected in reliance upon the exemption from securities registration affordedby the provisions of Regulation D ("Regulation D"), as promulgated by theCommission (as defined below) under the Securities Act. In consideration of the mutual promises made herein and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the Company and the Investor hereby agree as follows:1. PURCHASE AND SALE OF NOTE AND WARRANT. 1.1 Closing of Purchase and Sale; Purchase Price. Upon the terms andsubject to the satisfaction or waiver of the conditions set forth herein, theCompany agrees to sell and the Investor agrees to purchase (i) the Note and (ii)the Warrant. The purchase price for the Note and Warrant being purchased by theInvestor (the "Purchase Price") shall be equal to $1,000,000.00. The closing of the purchase and sale of the Note and the Warrant (the "Closing") will bedeemed to occur at the offices of Duval & Stachenfeld LLP, 300 East 42nd Street,New York, New York 10017, when (A) this Agreement and the other TransactionDocuments (as defined below) have been executed and delivered by the Company andthe Guarantor and, to the extent applicable, by the Investor, (B) each of theconditions to the Closing described in Section 5 hereof has been satisfied orwaived by the Company or the Investor, as appropriate, and (C) the Investorshall have delivered the Purchase Price to the Company by wire transfer ofimmediately available funds against physical delivery of the duly executed Noteand Warrant. The date on which the Closing occurs is referred to herein as the"Closing Date". 1.2 Certain Definitions. When used herein, the following terms shall havethe respective meanings indicated: "Affiliate" means, as to any Person (the "subject Person"), any otherPerson (a) that directly or indirectly through one or more intermediariescontrols or is controlled by, or is under direct or indirect common controlwith, the subject Person, (b) that directly or indirectly beneficially owns orholds ten percent (10%) or more of any class of voting equity of the subjectPerson, or (c) ten percent (10%) or more of the voting equity of which isdirectly or indirectly beneficially owned or held by the subject Person. For thepurposes of this definition, "control" when used with respect to any Personmeans the power to direct the management and policies of such Person, directlyor indirectly, whether through the ownership of voting securities, throughrepresentation on such Person's board of directors or other management committeeor group, by contract or otherwise. "Board of Directors" means the Company's board of directors. "Business Day" means any day other than a Saturday, a Sunday or a dayon which the New York Stock Exchange or commercial banks located in New YorkCity are authorized or permitted by law to close. "Closing" and "Closing Date" have the respective meanings specified inSection 1.1 hereof. "Commission" means the United States Securities and ExchangeCommission. "Common Stock" means the common stock, par value $0.001 per share, ofthe Company. "Debt" means, as to any Person at any time: (a) all indebtedness,liabilities and obligations of such Person for borrowed money; (b) allindebtedness, liabilities and obligations of such Person to pay the deferredpurchase price of Property or services, except trade accounts payable of suchPerson arising in the ordinary course of business that are not past due by morethan 60 days; (c) all capital lease obligations of such Person; (d) allindebtedness, liabilities and obligations of others guaranteed by such Person;(e) all indebtedness, liabilities and obligations secured by a Lien existing onProperty owned by such Person, whether or not the 2 indebtedness, liabilities or obligations secured thereby have been assumed bysuch Person or are non-recourse to such Person; (f) all reimbursementobligations of such Person (whether contingent or otherwise) in respect ofletters of credit, bankers' acceptances, surety or other bonds and similarinstruments; and (g) all indebtedness, liabilities and obligations of suchPerson to redeem or retire shares of capital stock of such Person. "Effective Date" has the meaning set forth in the Registration RightsAgreement. "Environmental Law" means any federal, state, provincial, local orforeign law, statute, code or ordinance, principle of common law, rule orregulation, as well as any Permit, order, decree, judgment or injunction issued,promulgated, approved or entered thereunder, relating to pollution or theprotection, cleanup or restoration of the environment or natural resources, orto the public health or safety, or otherwise governing the generation, use,handling, collection, treatment, storage, transportation, recovery, recycling,discharge or disposal of hazardous materials. "ERISA" means the Employee Retirement Income Security Act of 1974, asamended, and the regulations and published interpretations thereunder. "Exchange Act" means the Securities Exchange Act of 1934, as amended(or any successor act), and the rules and regulations thereunder. "Execution Date" means the date of this Agreement. "Film LPs" means limited partnerships or limited liability companies,now existing or subsequently formed, in either such case for the purpose ofproducing and/or distributing films, of which the Company or a Subsidiary of theCompany is the general partner. "Film Vehicle Interest" means an unsecured convertible participationinterest issued by a Film LP and which (x) is not secured by any assets of theCompany or its Subsidiaries (other than such Film LP) and (y) is non-recourse tothe Company and its Subsidiaries (other than such Film LP); provided, however,that the amount of Film Vehicle Interests outstanding at any time shall notexceed $5,000,000 individually or in the aggregate. "Form 8-K Amendment" has the meaning specified in Section 4.2 hereof. "GAAP" means generally accepted accounting principles, applied on aconsistent basis, as set forth in (i) opinions of the Accounting PrinciplesBoard of the American Institute of Certified Public Accountants, (ii) statementsof the Financial Accounting Standards Board and (iii) interpretations of theCommission and the Staff of the Commission. Accounting principles are applied ona "consistent basis" when the accounting principles applied in a current periodare comparable in all material respects to those accounting principles appliedin a preceding period. 3 "Governmental Authority" means any nation or government, any state,provincial or political subdivision thereof and any entity exercising executive,legislative, judicial, regulatory or administrative functions of or pertainingto government, including without limitation any stock exchange, securitiesmarket or self-regulatory organization. "Governmental Requirement" means any law, statute, code, ordinance,order, rule, regulation, judgment, decree, injunction, franchise, license orother directive or requirement of any federal, state, county, municipal, parish,provincial or other Governmental Authority or any department, commission, board,court, agency or any other instrumentality of any of them. "Intellectual Property" means any U.S. or foreign patents, patentrights, patent applications, trademarks, trade names, service marks, brandnames, logos and other trade designations (including unregistered names andmarks), trademark and service mark registrations and applications, copyrightsand copyright registrations and applications, inventions, invention disclosures,protected formulae, formulations, processes, methods, trade secrets, computersoftware, computer programs and source codes, manufacturing research and similartechnical information, engineering know-how, customer and supplier information,assembly and test data drawings or royalty rights. "Key Person" means each of Steve Austin and Ray Skiptunis. "Lien" means, with respect to any Property, any mortgage or mortgages,pledge, hypothecation, assignment, deposit arrangement, security interest, taxlien, financing statement, pledge, charge, or other lien, charge, easement,encumbrance, preference, priority or other security agreement or preferentialarrangement of any kind or nature whatsoever on or with respect to such Property(including, without limitation, any conditional sale or other title retentionagreement having substantially the same economic effect as any of theforegoing). "Material Adverse Effect" means an effect that is material and adverseto (i) the consolidated business, operations, properties, financial condition,prospects or results of operations of the Company and its Subsidiaries taken asa whole or (ii) the transactions contemplated by this Agreement or the otherTransaction Documents or (iii) the Company's ability to perform its obligationsunder this Agreement and the other Transaction Documents. "Material Contracts" means, as to the Company, any agreement requiredpursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K, asapplicable, under the Securities Act to be filed as an exhibit to any report,schedule, registration statement or definitive proxy statement filed or requiredto be filed by the Company with the Commission under the Exchange Act or anyrule or regulation promulgated thereunder, and any and all amendments,modifications, supplements, renewals or restatements thereof, including withoutlimitation any such agreements (and amendments, modifications, supplements,renewals and restatements thereof) existing on the date hereof that will berequired to be so filed as an exhibit to the Registration Statement. "NASD" means the National Association of Securities Dealers, Inc. 4 "Pension Plan" means an employee benefit plan (as defined in ERISA)maintained by the Company for employees of the Company or any of its Affiliates. "Permitted Debt" means the following: (a) Debt that is outstanding on the Execution Date and disclosedon Schedule 3.5 hereto; (b) Non-convertible Debt consisting of revolving working capitalcredit facilities obtained from commercial lending institutions on commerciallyreasonable terms and secured only by the Company's and/or its Subsidiaries'accounts receivable and/or inventory; (c) Debt consisting of capitalized lease obligations and purchasemoney indebtedness incurred in connection with acquisition of capital assets andobligations under sale-leaseback or similar arrangements, provided in each casethat such obligations are not secured by Liens on any assets of the Company orits Subsidiaries other than the assets so leased; (d) Debt consisting of indebtedness to financial institutionsincurred by a Film LP or advances from film distributors to the Company or aSubsidiary, in either case for the purpose of financing the production ordistribution of films and which (x) is not secured by any assets of the Companyor its Subsidiaries (other than such Film LP), (y) is non-recourse to theCompany and its Subsidiaries (other than such Film LP) and (z) constitutesSubordinated Debt; (e) Debt consisting of Film Vehicle Interests; (f) Subordinated Debt assumed or incurred in connection with theacquisition by the Company or its Subsidiaries of all or substantially all ofthe capital stock or other equity interests in, or all or substantially all ofthe assets (constituting a business unit) of any Person; provided, that thetotal amount of such Debt assumed or incurred in connection with any suchacquisition shall not exceed the product of four (4) times the amount of theacquired entity's or business unit's net earnings before interest, taxes,depreciation and amortization (as determined in accordance with GAAP) for thetwelve (12) full calendar months immediately prior to such acquisition; and (g) Shares of a class of redeemable preferred stock of theCompany that may be classified as a Debt obligation of the Company on itsfinancial statements and which is expressly subordinated to the obligations ofthe Company under the Note. "Permitted Liens" means the following: (a) encumbrances consisting of easements, rights-of-way, zoning restrictions or other restrictions on the use of real property or imperfections to title that do not (individually or in the aggregate) materially impair the ability of the Company or any 5 of its Subsidiaries to use such Property in its businesses, and none of which is violated in any material respect by existing or proposed structures or land use; (b) Liens for taxes, assessments or other governmental charges that are not delinquent or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject to such Liens, and for which adequate reserves (as determined in accordance with GAAP) have been established; and (c) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar statutory Liens securing obligations that are not yet due and are incurred in the ordinary course of business or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject to such Liens, for which adequate reserves (as determined in accordance with GAAP) have been established; and (d) Liens expressly permitted by the definition of Permitted Debt. "Person" means any individual, corporation, trust, association,company, partnership, joint venture, limited liability company, joint stockcompany, Governmental Authority or other entity. "Property" means property and/or assets of all kinds, whether real,personal or mixed, tangible or intangible (including, without limitation, allrights relating thereto). "Purchase Price" has the meaning specified in Section 1.1 hereof. "Registrable Securities" means the Warrant Shares, any other shares ofCommon Stock issuable pursuant to the terms of the Warrant, and any shares ofcapital stock issued or issuable from time to time (with any adjustments) inreplacement of, in exchange for or otherwise in respect of the Warrant Shares;provided, however, that "Registrable Securities" shall not include any suchshares that have been sold to the public pursuant to the Registration Statementor Rule 144. "Registration Statement" has the meaning set forth in the RegistrationRights Agreement. "Rule 144" means Rule 144 under the Securities Act, or any successorprovision. "SEC Documents" has the meaning specified in Section 3.4 hereof. "Securities" has the meaning specified in the preamble to thisAgreement. 6 "Subordinated Debt" means Debt of the Company which meets each of thefollowing requirements: (a) such Debt is wholly unsecured or the Liens securingsuch Debt are permitted pursuant to the terms of this Agreement; and (b) suchDebt is contractually subordinated, as to payment and liquidation, to thepayment in full of the Note on terms, and pursuant to written agreements in formand substance, reasonably satisfactory to the Investor (the "Subordinated DebtDocuments"). "Subsidiary" means, with respect to the Company, any corporation orother entity (other than an entity having no material operations or businessduring the twelve month period immediately preceding the Execution Date) ofwhich at least a majority of the outstanding shares of stock or other ownershipinterests having by the terms thereof ordinary voting power to elect a majorityof the board of directors (or Persons performing similar functions) of suchcorporation or entity (regardless of whether, in the case of a corporation,stock of any other class or classes of such corporation shall or might havevoting power by reason of the happening of any contingency) is at the time,directly or indirectly, owned or controlled by the Company and/or one or more ofits Affiliates. Notwithstanding the foregoing, (i) the Film LPs shall be deemedSubsidiaries of the Company and (ii) the term "Subsidiary" shall not include anylimited partnership that would be a "Subsidiary" solely by reason of the factthat an officer or director of the Company (or an Affiliate of an officer ordirector of the Company which is not otherwise an Affiliate of the Company)serves as general partner thereof. "Termination Date" means the first date following the date on whichthe Note has been has been indefeasibly paid in full. "Transaction Documents" means (i) this Agreement, (ii) the Note, (iii)the Warrant, (iv) the Registration Rights Agreement, (v) the SubsidiaryGuaranty, (vi) the Security Agreement, and (vii) all other agreements, documentsand other instruments executed and delivered by or on behalf of the Company orthe Guarantor or any of their respective officers at the Closing. 1.3 Other Definitional Provisions. All definitions contained in thisAgreement are equally applicable to the singular and plural forms of the termsdefined. The words "hereof", "herein" and "hereunder" and words of similarimport referring to this Agreement refer to this Agreement as a whole and not toany particular provision of this Agreement.2. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby represents and warrants to the Company and agrees withthe Company that: 2.1 Authorization; Enforceability. The Investor is duly and validlyorganized, validly existing and in good standing under the laws of thejurisdiction of its incorporation or organization with the requisite corporatepower and authority to purchase the Note and Warrant being purchased by ithereunder and to execute and deliver this Agreement and the other TransactionDocuments to which it is a party. This Agreement constitutes, and upon executionand delivery thereof, each other Transaction Document to which the Investor is aparty will constitute, the Investor's valid and 7 legally binding obligation, enforceable in accordance with its terms, subject to(i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization,moratorium or other similar laws of general application relating to or affectingthe enforcement of creditors' rights generally and (ii) general principles ofequity. 2.2 Accredited Investor. The Investor is an "accredited investor" as thatterm is defined in Rule 501 of Regulation D; (ii) is acquiring the Note andWarrant solely for its own account, for investment purposes only, and not with apresent view to the public resale or distribution of all or any part thereof,except pursuant to sales that are registered under, or are exempt from theregistration requirements of, the Securities Act; provided, however, that, inmaking such representation, the Investor does not agree to hold the Securitiesfor any minimum or specific term and reserves the right to sell, transfer orotherwise dispose of the Securities at any time in accordance with theprovisions of this Agreement and with Federal and state securities lawsapplicable to such sale, transfer or disposition. The Investor does not have anyagreement or understanding, directly or indirectly, with any Person todistribute the Note or the Warrant. The Investor either alone or together withits representatives, has such knowledge, sophistication and experience inbusiness and financial matters so as to be capable of evaluating the merits andrisks of the prospective investment in the Note and the Warrant and, in relianceupon the Company's representations and warranties set forth in this Agreement,has so evaluated the merits and risks of such investment. The Investor is ableto bear the economic risk of an investment in the Note and the Warrant and, atthe present time, is able to afford a complete loss of such investment. 2.3 Information. The Company has, prior to the Execution Date, provided theInvestor with information regarding the business, operations and financialcondition of the Company, and has, prior to the Execution Date, granted to theInvestor the opportunity to ask questions of and receive satisfactory answersfrom representatives of the Company, its officers, directors, employees andagents concerning the Company and materials relating to the terms and conditionsof the purchase and sale of the Note and the Warrant hereunder, and basedthereon believes it can make an informed decision with respect to its investmentin the Securities. Neither such information nor any other investigationconducted by the Investor or its representatives shall modify, amend orotherwise affect the Investor's right to rely on the Company's representationsand warranties contained in this Agreement. 2.4 Limitations on Disposition. The Investor acknowledges that, except asprovided in the Registration Rights Agreement, the Securities have not been andare not being registered under the Securities Act and may not be transferred orresold without registration under the Securities Act or unless pursuant to anexemption therefrom. 2.5 Legend. The Investor understands that the certificates representing theSecurities may bear at issuance a restrictive legend in substantially thefollowing form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, and may not be offered or sold unless a registration statement under the Securities Act and 8 applicable state securities laws shall have become effective with regard thereto, or an exemption from registration under the Securities Act and applicable state securities laws is available in connection with such offer or sale. Notwithstanding the foregoing but subject to compliance with the requirements of the Securities Act and applicable state securities laws, these securities and the securities issuable upon exercise hereof (i) may be pledged or hypothecated in connection with a bona fide margin account or other loan secured by such securities and (ii) may be transferred or assigned to an affiliate of the holder hereof." Notwithstanding the foregoing, it is agreed that, as long as (A) theresale or transfer (including without limitation a pledge) of any of theSecurities is registered pursuant to an effective registration statement and theholder represents in writing to the Company that such Securities have been orwill be sold pursuant to such registration statement and in compliance with theprospectus delivery requirements under the Securities Act, (B) such Securitieshave been sold pursuant to Rule 144, subject to receipt by the Company ofcustomary documentation in connection therewith, or (C) such Securities areeligible for resale under Rule 144(k) or any successor provision and the holderthereof represents in writing to the Company that it is eligible to use suchrule for public resales of such Securities, the certificates representing suchSecurities shall be issued without any legend or other restrictive language and,with respect to Securities upon which such legend is stamped, the Company shallissue new certificates without such legend to the holder upon request. 2.6 Reliance on Exemptions. The Investor understands that the Securitiesare being offered and sold to it in reliance upon specific exemptions from theregistration requirements of federal and state securities laws and that theCompany is relying upon the truth and accuracy of the representations andwarranties of the Investor set forth in this Section 2 in order to determine theavailability of such exemptions and the eligibility of the Investor to acquirethe Securities. 2.7 Non-Affiliate Status. The Investor is not an Affiliate of the Companyand is not acting in association or concert with any other Person with regard toits purchase of the Note and the Warrant or otherwise in respect of the Company.The Investor's investment in the Securities is not for the purpose of acquiring,directly or indirectly, control of, and it has no intent to acquire or exercisecontrol of, the Company or to influence the decisions or policies of the Boardof Directors. 2.8 General Solicitation. The Investor is not purchasing the Note and theWarrant as a result of any advertisement, article, notice or other communicationregarding the Note and the Warrant published in any newspaper, magazine orsimilar media or broadcast over television or radio or presented at any seminar. 2.9 Certain Restrictions. The Investor will not use any of the restrictedsecurities acquired pursuant to this Agreement to cover any short position inthe Common Stock of the Company if doing so would be in violation of applicablesecurities laws. Further, the Investor is aware of and understands itsobligations under Regulation M promulgated by the Commission in connection withtransactions in the Company's securities. 2.10 Independent Investment Decision. The Investor has independentlyevaluated the merits of its decision to purchase the Note and the Warrantpursuant to this Agreement, such decision has been independently made by theInvestor and the Investor confirms that it has relied 9 on the advice of its own business and/or legal counsel and not on the advice ofthe Company's legal counsel in making such decision.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby representsand warrants to the Investor as of the Execution Date (except that, to theextent that any representation or warranty relates to a particular date, theCompany hereby makes such representation or warranty as of that particulardate), and agrees with the Investor, as follows and acknowledges that theInvestor is relying on the representations, acknowledgments and agreements madeby the Company in this Article 3 and elsewhere in this Agreement in makinginvesting, trading and other decisions concerning the Company's securities: 3.1 Organization, Good Standing and Qualification. Each of the Company andits Subsidiaries is duly organized, validly existing and in good standing underthe laws of the jurisdiction of its incorporation or organization and has allrequisite power and authority to carry on its business as now conducted, exceptas described on Schedule 3.1. Each of the Company and its Subsidiaries is dulyqualified to transact business and is in good standing in each jurisdiction inwhich it conducts business except as described on Schedule 3.1 or where thefailure so to qualify has not had or would not reasonably be expected to have aMaterial Adverse Effect. 3.2 Authorization; Consents. 3.2.1 The Company has the requisite corporate power and authority toenter into and perform its obligations under this Agreement and the otherTransaction Documents, including without limitation its obligations to issue andsell the Note and the Warrant to the Investor in accordance with the termsthereof and to issue ...