NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement") is made as of June 19,
1996 between Kat*Man*Du Entertainment Corp., a Delaware corporation (the
"Company"), KatManDu Corporation ("KatCorp."), a Pennsylvania corporation,
KatManDu Investment Partners ("XXX"), a Pennsylvania limited partnership and
T-KAT Corp. ("T-KAT"), a New Jersey corporation, on the one hand, and the
parties listed on Exhibit A hereto (the "Purchasers"), each of whom has executed
a Confidential Purchaser Questionnaire, a copy of which is attached hereto as
Exhibit B, on the other hand.
WHEREAS, the Company desires to sell and the Purchasers desire to
purchase $1,100,000 of the Company's 10% Notes (the "Notes") substantially in
the form set forth on Exhibit C attached hereto on the terms and conditions set
forth herein; and
WHEREAS, KatCorp., XXX and T-KAT (each a "Guarantor" and collectively
the "Guarantors") have agreed to guaranty the obligations of the Company
hereunder.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, the parties hereto agree as follows:
1. Authorization. The Company has authorized the issuance to the
Purchasers of up to $1,100,000 in principal amount of its Notes under the terms
set forth herein and in the Notes, and has authorized the issuance of the
Initial Shares (as hereinafter defined) on the terms and conditions set forth
herein. The Notes and the Initial Shares to be issued pursuant hereto are
collectively referred to as the "Securities".
2. Payment of Notes. Subject to the terms and conditions hereof, the
Notes shall be payable as set forth in the Notes.
2.1 Guaranty. The Notes shall be guaranteed by KatCorp., XXX
and T-KAT, each of which will execute a Guaranty Agreement,
substantially in the form set forth on Exhibit D attached hereto (the
"Guaranty").
2.2 Interest. The Notes shall accrue interest on the unpaid
principal amount at a rate of 10% per annum which interest shall be
payable monthly in arrears beginning on August 1, 1996.
2.3 Due Date of Notes. The entire principal amount of the
Notes plus accrued and unpaid interest thereon shall be due in full on
the earlier of (i) the day following the day on which the Company
closes an offering of shares of its common stock, par value $.001 per
share ("Common Stock") or of any other equity or debt security pursuant
to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission (a "Public Offering"), or (ii) May
31, 1998.
2.4 Optional Prepayments. The Company may at any time or from
time to time upon five (5) days prior written notice to the Purchasers
prepay all or any portion of the Notes; provided that the Company may
only prepay less than all of the Notes, pro-rata (i.e. the Company may
prepay 20% of the principal balance of each of the Notes, etc.)
3. Issuance of Common Stock.
(a) As additional consideration, simultaneously herewith the
Company is issuing to the Purchasers that number of shares of its common stock
in the aggregate the ("Initial Shares") as is equal to $850,000 divided by the
proposed $6.00 sales price (the "Proposed Price") for the Common Stock in its
proposed Public Offering. Such shares (rounded to the nearest whole share) will
be issued to each Purchaser in proportion to the amount of the Notes being
purchased by such Purchaser. In the event that the Public Offering is
consummated and the price per share to the public is less than the Proposed
Price, the Company shall issue to the Purchasers, without any additional
consideration, that number of shares of Common Stock (rounded to the nearest
whole number) as is equal to $850,000 divided by the price to the public in the
Public Offering less the number of Initial Shares. In the event that the Public
Offering is consummated and both (i) the "Pre-IPO Value of the Company" (as
determined below) is less than $14,400,000 and (ii) the price per share to the
public is greater than the Proposed Price, the Purchasers shall transfer to the
Company, without any consideration, such number of shares of Common Stock
(rounded to the nearest whole number) as shall equal the difference between (A)
the number of Initial Shares and (B) the quotient obtained by dividing (1)
$850,000 by (2) the gross sales price per share of the common stock sold in the
Public Offering. The number of Initial Shares, as adjusted pursuant to clause
(i) or clause (ii) of the preceding sentence, as the case may be, is hereinafter
referred to as the "Purchaser Stock". The Purchasers acknowledge that the
certificates evidencing the Purchaser Stock will bear a legend substantially in
the following form:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and
must be held indefinitely unless they are transferred pursuant
to an effective registration statement under that Act, or
after receipt of an opinion of counsel reasonably satisfactory
to the Company and its counsel that registration is not
required."
and that, appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Purchaser Stock so legended.
(b) The Pre-IPO Value of the Company shall be equal to the
number of shares of Common Stock outstanding immediately prior to the issuance
of the shares of Common Stock to be sold in the Public Offering multiplied by
the per share price to the public at which such Public Offering has been
consummated.
3.1 Optional Redemption of Common Stock. Commencing on
February 28, 1997 and only if a Public Offering shall not have occurred
prior to February 28, 1997, then and in such event, upon five (5) days
prior written notice to the Purchasers, the Company shall have the
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option to redeem all (but not less than all) of the Initial Shares;
provided, however, that the Company shall not have the right to
exercise such option unless prior to, or simultaneously with, such
exercise the Company shall have repaid the Notes in full. The aggregate
amount to be paid by the Company for such optional redemption shall be
paid in cash and shall be equal to:
(a) $110,000, if such redemption shall occur on or before May
31, 1997;
(b) $165,000, if such redemption shall occur after May 31, 1997
but on or before November 30, 1997; and
(c) $220,000, if such redemption shall occur after December 1,
1997 but on or before May 31, 1998.
3.2 Mandatory Redemption. If a Public Offering shall not have
occurred prior to February 28, 1997 and if the Initial Shares shall not
have previously been redeemed in accordance with Section 3.1 above,
then, and in such event, the Company shall be required to redeem such
Initial Shares on May 31, 1998 in cash for an aggregate amount of
$220,000.
3.3 Legends. The Initial Shares shall bear a legend, which
legend shall indicate that such shares are subject to optional and
mandatory redemption as provided in this Agreement.
3.4 Additional Shares of Common Stock. If the Notes shall not
have been paid in full on or before June 15, 1998, then, and in such
event, the Company shall issue to the Purchasers in the aggregate that
number of shares that when added to the number of Initial Shares shall,
after the issuance thereof, equal 20% of the then outstanding shares of
the Common Stock of the Company. Such shares shall be issued pro rata
to each of the Purchasers based upon the amount of the Initial Shares
held by each such Purchaser.
4. Registration. The Company agrees to include the Purchasers Stock in
any registration statement filed by the Company in connection with a Public
Offering (the "Registration Statement"). The Company agrees to keep such
registration statement effective with respect to the Purchaser Stock until the
earlier of (a) the 45th day after the day on which the Purchaser Stock is no
longer subject to any "lock-up" agreement with the underwriter of such Public
Offering or (b) the 15th day after which the Purchaser Stock may be sold without
registration pursuant to Rule 144 promulgated under the Securities Act (as
defined below) or such other successor or similar rule which permits such sales.
4.1 Registration Statement.
(a) Following the effective date of the Registration
Statement, the Company shall, upon the request of any
Purchaser, forthwith supply to such Purchaser such reasonable
number of copies of the Registration Statement, preliminary
prospectus and prospectus meeting the requirements of the
Securities Act as shall have been requested.
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(b) The Company shall pay all costs, fees and expenses in
connection with the Registration Statement; provided, however,
that the Purchaser shall be solely responsible for the fees of
any counsel retained by the Purchaser in connection with such
registration and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Purchaser Stock sold by
the Purchaser pursuant thereto.
(c) The Company shall indemnify and hold harmless the
Purchaser from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material
fact contained in the Registration Statement, any other
registration statement filed by the Company under the
Securities Act with respect to the registration of the
Purchaser Stock, any post-effective amendment to such
registration statements, or any prospectus included therein or
caused by any omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
untrue statement or omission based upon information furnished
or required to be furnished in writing to the Company by the
Purchaser expressly for use therein, which indemnification
shall include each person, if any, who controls the Purchaser
within the meaning of the Securities Act and each officer,
director, employee and agent of the Purchaser; provided,
however, that the indemnification in this Section with respect
to any prospectus shall not inure to the benefit of the
Purchaser (or to the benefit of any person controlling the
Purchaser) on account of any such loss, claim, damage or
liability arising from the sale of Purchaser Stock by the
Purchaser, if a copy of a subsequent prospectus correcting the
untrue statement or omission in such earlier prospectus was
provided to the Purchaser by the Company prior to the subject
sale and the subsequent prospectus was not delivered or sent
by the Purchaser to the buyer prior to such sale; and provided
further, that the Company shall not be obligated to so
indemnify the Purchaser or other person referred to above
unless the Purchaser or other person, as the case may be,
shall at the same time indemnify the Company, its directors,
each officer signing the Registration Statement and each
person, if any, who controls the Company within the meaning of
the Securities Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement
of a material fact contained in the Registration Statement,
any registration statement or any prospectus required to be
filed or furnished by reason of this Agreement or caused by
any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission
based upon information furnished in writing to the Company by
the Purchaser expressly for use therein.
(d) If for any reason the indemnification provided for in the
preceding section is held by a court of competent jurisdiction
to be unavailable to an indemnified party with respect to any
loss, claim, damage, liability or expense referred to therein,
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then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such
loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations.
(e) Neither the filing of the Registration Statement by the
Company nor the making of any request for prospectuses by the
Purchaser shall impose upon the Purchaser any obligation to
sell the Purchaser Stock.
(f) The Purchaser, upon receipt of notice from the Company
that an event has occurred which requires a post-effective
amendment to the Registration Statement or a supplement to the
prospectus included therein, shall promptly discontinue the
sale of Purchaser Stock until the Purchaser receives a copy of
a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such
notice.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as follows:
5.1 Organization and Standing; Articles and Bylaws. The
Company is a corporation duly organized, validly existing and in good
standing under, and by virtue of, the laws of the State of Delaware.
The Company has requisite corporate power and all materials licenses,
permits and authorizations necessary to own and operate its properties
and assets, and to carry on its business as currently conducted and as
proposed to be conducted. The Company is qualified to do business as a
foreign corporation in each state where the ownership or leasing of
property or the nature of business transacted requires such
qualification and no other qualification is currently required in any
other jurisdiction wherein the failure to be so qualified would be
materially adverse to the Company.
5.2 Corporate Power. The Company has all requisite legal and
corporate power to execute and deliver this Agreement, issue the
Securities, and to carry out and perform its obligations under the
terms of this Agreement.
5.3 Authorization. All corporate action on the part of the
Company and its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement by
the Company, the authorization, issuance and delivery of the
Securities, and the performance of the Company's obligations hereunder
have been taken. This Agreement, when executed and delivered by the
Company and the Purchasers shall constitute a valid, legal and binding
obligation of the Company, enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
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5.4 Capitalization. The Company is authorized to issue
1,000,000 shares of Common Stock par value $.001 per share. As of May
31, 1996, there were issued and outstanding a total of 657,136 shares
of Common Stock.
5.5 No Consent. No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or filing
with, any federal, state, local or other governmental authority or any
court of any other tribunal is required by the Company for the
execution, delivery or performance by the Company of this Agreement or
the execution, issuance, sale or delivery of the Securities. No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement or understanding to which the Company is a party or to
which any of its properties or assets are subject is required for the
execution, delivery and performance by the Company of this Agreement,
or the execution, issuance, sale or delivery of the Securities.
5.6 No Conflict. The execution, delivery and performance of
this Agreement, and the execution, issuance, sale or delivery of the
Securities will not violate, result in a breach of, conflict with (with
or without the giving of notice or the passage of time or both) or
entitle any party to terminate or call a default under any contract,
agreement, instrument, lease, license, arrangement or understanding or
violate or result in a breach of any term of the certificate of
incorporation or by-laws of, or conflict with any law, rule,
regulation, order, judgment or decree binding upon the Company or to
which any of its operations, businesses, properties or assets are
subject.
5.7 Proposed Public Offering. The Company currently
contemplates a proposed Public Offering of 1,600,000 shares of its
Common Stock. The Company expects that immediately prior to the closing
of such Public Offering the Company will issue approximately 1,600,000
shares of its Common Stock in exchange for all of the issued and
outstanding shares of the capital stock of KatCorp and T-KAT and all of
the partnership interests in XXX and after such issuance the Company
will have issued and outstanding approximately 2,400,000 shares of its
Common Stock; so that, therefore, immediately after the closing of such
Public Offering the Company will have outstanding approximately
4,000,000 shares of its Common Stock. The Company further expects that
no other shares of any class of the Company's equity securities will be
outstanding immediately after the closing of such Public Offering.
6. Representations and Warranties of the Purchasers. The Purchasers for
themselves only hereby represent and warrant to the Company with respect to this
Agreement and to the issuance of the Securities as follows:
6.1 Authorization of Agreement. The execution, delivery and
performance of this Agreement by such Purchaser has been duly
authorized by all necessary action on the part of each such Purchaser,
does not violate any laws or regulations applicable to such Purchaser
and is the valid binding and enforceable obligation of such Purchaser
in accordance with its terms.
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6.2 Experience; Accredited Investor. Such Purchaser is
experienced in evaluating and investing in the type of companies such
as the Company. Such Purchaser is an "accredited investor" as that term
is defined in rule 501(a) of the Securities Act of 1933, as amended
(the "Securities Act"), and the rules promulgated thereunder, and such
Purchaser has accurately completed a Confidential Purchaser
Questionnaire substantially in the form attached hereto as Exhibit B.
Such Purchaser is financially able to bear the economic risk
represented by the purchase of the Securities, including the ability to
afford holding the Securities for an indefinite period or to afford a
complete loss of this investment.
6.3 Investment. Such Purchaser is acquiring the Securities for
investment for the Purchaser's own account and not with the view to, or
for resale in connection with, any distribution thereof. Such Purchaser
understands that the Securities have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent as expressed
herein; and shall not make any sale, transfer or other disposition of
the Securities without registration under the 1933 Act and applicable
state securities laws unless an exemption from registration is
available under those laws.
6.4 Access to Data. Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with
the Company's management or its representatives and the opportunity to
review the Company's facilities. Such Purchaser has reviewed (or has
had reviewed on his behalf) the combined financial statements of
KatCorp. and XXX attached hereto on Annex I, and the risk factors set
forth on Annex II hereto.
6.5 Knowledge and Experience. Such Purchaser, together with
his, her or its representatives have such knowledge and experience in
financial business matters as to be capable of evaluating the merits
and risks of an investment in the Securities.
7. Representations and Warranties of KatCorp., XXX and T-KAT. Each of
KatCorp., XXX and T-KAT represent and warrant as follows:
7.1 Authorization of Agreement. The execution, delivery and
performance of the Guaranty has been duly authorized by all necessary
action on the part of such Guarantor, does not violate any laws or
regulations applicable to such Guarantor and is the valid binding and
enforceable obligation of such Guarantor in accordance with its terms.
8. Further Covenants.
(a) Lock-Up Agreements. The Purchasers agree that upon demand
of the underwriter of the Public Offering, each of the Purchasers will enter
into a "lock-up" agreement with such underwriter with respect to the public
sale, transfer or other disposition of the Purchaser Stock as may be required by
the underwriters of such offering, such lock-up agreement: (a) to contain such
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terms and conditions as are customarily contained in such agreements, (b) to
contain substantially the same terms and conditions as the lock-up agreements to
be entered into between such underwriter and the holders of a majority of the
outstanding shares of the Common Stock of the Company and (c) to provide for a
"lock-up" period of no longer than seven (7) months.
(b) Resales of Securities. The Purchasers acknowledge that
even if the Company is a "reporting company" under the Securities Exchange Act
of 1934, as amended, the provisions of Rule 144 as currently promulgated under
the 1933 Act to permit resales of the Securities are not available for at least
two (2) years from the date the Securities are paid for and accepted, there can
be no assurance that the conditions necessary to permit routine sales of the
Securities under Rule 144 will be satisfied in that such sales require that the
Company be current in filing periodic reports under the Securities Exchange Act
of 1934, and, if Rule 144 should become available, sales made in reliance on its
provisions could be made only in limited amounts and in accordance with the
terms and conditions of the Rule. The Purchasers acknowledge that the Company is
under no obligation to the Purchaser to register the Securities or to comply
with the conditions of Rule 144 or take any other action necessary in order to
make available any exemption for the resale of the Securities without
registration.
(c) Company Covenants. The Company hereby covenants and agrees
(i) that until payment in full of all principal and interest due on the Notes,
it will not pay or declare any cash or in kind dividends or other distributions
with respect to its capital stock; and (ii) if the Company should receive
proceeds in excess of $5,000,000 from the sale of any of its equity or debt
securities it will, within three (3) days after the receipt of such proceeds
prepay all of the Notes.
9. Closing Conditions. The Company's and each Purchasers' obligation to
consummate the transaction contemplated by this Agreement is subject to the
satisfaction of the following conditions:
9.1. Conditions to the Purchasers' Obligations. Each
Purchaser's obligation to purchase the Notes shall be subject to the
satisfaction by the Company of the following conditions:
All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents
and instruments necessary to the consummation thereof, shall
be satisfactory in form and substance to Purchasers and their
counsel, and the Purchasers and their counsel shall have
received copies (executed or certified as may be appropriate)
of all legal documents or proceedings which they requested in
connection with the consummation of the transaction.
9.2. Conditions to the Company's Obligations. The Company's
obligation to consummate the transactions contemplated in this
Agreement is subject to all proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents and
instruments necessary to the consummation thereof, including the
Company's receipt of a confidential Purchaser Questionnaire from each
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Purchaser, shall be satisfactory in form and substance to the Company,
and the Company's counsel.
10. Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by the internal law, and not the law of conflicts, of New York.
11. Waivers and Amendments. With the written consent of the Purchasers
then holding at least 66 2/3% of the outstanding principal amount of the Notes,
the obligations of the Company under this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), and with the same consent the Company may enter into a
supplementary agreement for the purpose of adding any provisions to this
Agreement or to any supplemental agreement or modifying in any manner the rights
and obligations of the Purchasers and of the Company. Notwithstanding anything
to the contrary above, the payment of interest, time of payment of interest, the
interest rate payable, payment of principal and time of payment of principal on
the Notes may not be changed without the written consent of the Purchaser
affected thereby. Written notice of any such waiver, consent or agreement of
amendment, modification or supplement shall be given by the Company to the
Purchasers who have not previously consented thereto in writing.
12. Changes, Waivers, Etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but rather may
only be changed by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, except to
the extent provided in Section 11 hereof.
13. Notice. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when (a) delivered in
person, (b) the day following dispatch by an overnight courier service (such as
Federal Express or UPS, etc.) or (c) five (5) days after dispatch by certified
or registered first class mail, postage prepaid, return receipt requested, to
the party to whom the same is so given or made:
If to the Company: Kat*Man*Du Entertainment Corp.
000 X. Xxxxxxxx Xxxx.
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xx. X. Xxxxx Silver
Telephone No. (000) 000-0000
with a copy to: Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
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If to the Purchasers at the addresses set forth on Exhibit A.
with a copy to: Xxxxxxxxx, Xxxxxxx & XxXxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. XxXxxxx, Esq.
14. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts will constitute one and the same Agreement.
15. New York Notification. Any Purchaser who is a resident of New York
understands that: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE ATTORNEY
GENERAL OF NEW YORK OR ANY OFFICIAL OR SIMILAR CAPACITY OF ANY STATE PASSED UPON
THE ACCURACY, ADEQUACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS
AGREEMENT OR THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
16. Florida Notification. Any Purchaser who is a resident of Florida
understands that: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA
SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN.
ss.517.061(11)(a)(5) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE
"FLORIDA ACT") PROVIDES THAT ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE
EXEMPTED FROM REGISTRATION UNDER ss.517.061(11) OF THE FLORIDA ACT MAY WITHDRAW
HIS AGREEMENT AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE
BUSINESS DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE, ANY
FLORIDA RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING
STATUTORY RESCISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING
CONSIDERATION FOR THE SECURITIES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE
COMPANY AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH ON PAGE 10 HEREOF. ANY
TELEGRAM OR LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD
BUSINESS DAY. A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ENSURE ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL
REQUESTS SHOULD BE CONFIRMED IN WRITING.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
Kat*Man*Du Entertainment Corp. KatManDu Corporation
By:___________________________________ By: ________________________________
KatManDu Investment Partners T-KAT Corp.
By:___________________________________ By: ________________________________
PURCHASER:
______________________________________
______________________________________ ____________________________________
Xxxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxx
______________________________________ ____________________________________
______________________________________ ____________________________________
______________________________________ ____________________________________
______________________________________ ____________________________________
______________________________________ ____________________________________
______________________________________ ____________________________________
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EXHIBIT A
List of Purchasers
EXHIBIT B
Confidential Purchaser Questionnaire
EXHIBIT C
Form of Promissory Note
EXHIBIT D
Form of Guaranty
ANNEX I
Financials
ANNEX II
Risk Factors
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY, HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THIS NOTE IS SUBJECT TO THE TERMS OF A NOTE PURCHASE AGREEMENT, MADE AS OF JUNE
19, 1996, AMONG THE HOLDER OF THIS NOTE KAT*MAN*DU ENTERTAINMENT CORP. AND
CERTAIN OTHER PARTIES, A COPY OF WHICH IS ON FILE AT THE EXECUTIVE OFFICES OF
KAT*MAN*DU ENTERTAINMENT CORP.
June , 0000
Xxx Xxxx, Xxx Xxxx
KAT*MAN*DU ENTERTAINMENT CORP.
10% NOTE DUE MAY 31, 1998
FOR VALUE RECEIVED, Kat*Man*Du Entertainment Corp., a Delaware
corporation (the "Company"), hereby promises to pay to the order of ___________
______________________, or registered assigns, at the offices of ___________
_____________ the principal sum of ___________ Dollars on May 31, 1998, with
interest thereon at the rate of ten percent (10%) per annum. This Note shall be
subject to the following terms:
1. Maturity.
The entire principal amount of this Note shall be paid upon the earlier
of (i) the day following the day on which the Company closes an offering of any
equity or debt security pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange commission or (ii) May 31,
1998.
2. Interest.
The Company promises to pay interest on the unpaid principal amount of
this Note at the rate of ten percent (10%) per annum. Interest will be payable
monthly in arrears beginning on August 1, 1996 (an "Interest Payment Date").
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
3. Method of Payment.
The Company will pay interest on this Note to the person who is the
holder of this Note on the Interest Payment Date (the "Holder"). The Holder must
surrender this Note to the Company to collect payment of principal. The Company
will pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts.
4. Note Purchase Agreement, Limitations.
This Note is one of a series of similar notes (the "Notes") issued by
the Company pursuant to the Note Purchase Agreement dated as of June 19, 1996
(the "Note Agreement") between the Company, the purchasers of the Notes
(including the Holder) and certain other parties. The terms of this Note include
those stated in the Note Agreement and the Holder of this Note is entitled to
the benefits of the Note Agreement, including the Guaranty set forth therein.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Note Agreement.
5. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Note Agreement and this Note may be
amended or supplemented to the extent and in the manner provided in the Note
Agreement.
6. Defaults and Remedies.
An Event of Default shall occur if:
(i) the Company defaults in the due and punctual payment of the
principal of, or interest on, any Note when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise and such default continues for a period of fifteen
(15) days;
(ii) there occurs any material breach by the Company of any covenant
contained in this Note and/or material default by the Company in any provision
of the Note Agreement and such breach or default continues for a period of
fifteen (15) days after the Holder shall have notified the Company in writing as
to such occurrence; or
2
(iii) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or
(iv) an order, judgment or decree is entered adjudicating the Company
or any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the
appointment of a trustee or receiver of the Company, or of any substantial part
of the assets of the Company, or commences any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a subsidiary)
relating to the Company or a subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction whether now or hereafter in effect; or
(vi) any such petition or application is filed, or any such proceedings
are commenced, against the Company, and the Company by any act indicates its
approval thereof, consent or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee or receiver, or approving the
petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(vii) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such order,
judgment or decree remains unstayed and in effect for more than sixty (60) days;
or
(viii) any order, judgment or decree is entered in any proceedings
against the Company decreeing a split-up of the Company which requires the
divestiture of a substantial part of the assets of the Company and such order,
judgment or decree remains unstayed and in effect for more than sixty (60) days;
or
(ix) the Company is in material default under the terms of any of the
Company's credit facilities, or, is in material default under any other
agreement for, or instrument evidencing, borrowed money and such default
continues for a period in excess of any applicable grace period with respect
thereto.
If an Event of Default occurs and is continuing, the Holder may declare
all unpaid principal of and accrued interest to the date of acceleration on this
Note to be due and payable immediately, all as and to the extent provided herein
and in the Note Agreement.
7. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
principals.
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8. Note Agreement to Control.
In the case of any conflict between the provisions of this Note and the
Note Agreement, the provisions of the Note Agreement shall control.
The Company will furnish to any Holder, upon written request and
without charge, a copy of the Note Agreement. Requests may be made to:
Kat*Man*Du Entertainment Corp.
000 Xxxxxxxx Xxxx.
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its duly authorized officer, effective as of the date of issuance hereof.
KAT*MAN*DU ENTERTAINMENT CORP.
By: ______________________________
Name:
Title:
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AGREEMENT entered into among KATMANDU ENTERTAINMENT CORP. (the
"Company"), a Delaware corporation having its principal place of business at 000
Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx, Pennsylvania on the one hand and XXXXXXX
XXXXXX & CO. EMPLOYEE PROFIT SHARING TRUST, XXXXXX XXXXXX FOUNDATION, XXXXXX
FOUNDATION #2 and ASTRO COMMUNICATION (collectively, the "Noteholders") on the
other, all having an address c/o Xxxxxx X. Xxxxx, 0 Xxxxx XxXxxxx, Xxxxx 000,
Xxxxxxx XX 00000.
WITNESSETH
WHEREAS, the Company and the Noteholders entered into a Note Purchase
Agreement, dated as of June 19, 1996, pursuant to which the Noteholders agreed
to purchase from the Company and the Company agreed to sell to the Shareholders
the Company's 10% promissory notes due May 31, 1998 in the aggregate principal
amount of $550,000 (the "Notes"); and
WHEREAS, under the terms of the Note Purchase Agreement and the Notes
the Notes are due upon the earlier of May 31, 1998 and the day which follows the
day on which the Company closes an offering of shares of its common stock, par
value $.001 per share (the "Common Stock"), pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
(a "Public Offering"); and
WHEREAS, in connection with the purchase of the Notes, the Company
issued to the Noteholders an aggregate of 70,834 shares of Common Stock; and
WHEREAS, the Company has entered into a new letter of intent with a new
underwriter (the "Underwriter") concerning a proposed public offering of its
Common Stock (the "Public Offering") and as an inducement to the underwriter to
issue such letter of intent the Shareholders have agreed to certain amendments
and modifications to the Note Purchase Agreement; and
WHEREAS, the Company and the Shareholders wish to amend the terms of
the Note Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. The maturity date of the Notes shall be the day which is one year
after the date on which the Public Offering of the Company's Common Stock is
consummated.
>
2. Immediately prior to the Public Offering, each Noteholder shall sign
a "lock-up" agreement with the Underwriter and the Company which will provide
that for a period of twelve (12) months following the effective date of the
Company's Registration Statement on Form SB-2 (the "Lock-up Period"), he, she or
it will not, directly or indirectly, issue, offer, agree or offer to sell, sell,
grant an option for the purchase or sale of, transfer, pledge, assign,
hypothecate, distribute or otherwise encumber or dispose of any shares of Common
Stock or options, rights, warrants or other securities convertible into,
exchangeable or exercisable for or evidencing any right to purchase or subscribe
for shares of Common Stock (whether or not beneficially owned by such
Noteholder), or any beneficial interest therein. Upon the expiration of the
Lock-Up Period, the Company will use its best efforts to register the Shares
under the Securities Act of 1933, as amended, and any corresponding state
securities laws, such appropriate registration form promulgated by the
Securities and Exchange Commission as shall be selected by the Company.
3. The Company will not include the Noteholders as "selling
securityholders" in its Registration Statement filed in connection with the
Public Offering.
4. Except as otherwise set forth herein all other terms of the Note
Purchase Agreement shall remain in full force and effect.
5. Nothwithstanding anything contained herein to the contrary, in the
event, the Public Offering is not consummated by March 31, 1997, this Agreement
shall be null and void.
6. This Agreement may be executed in one or more counterparts which
when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this ___ day of December, 1996.
KATMANDU ENTERTAINMENT CORP.
By:___________________________________________
X. Xxxxx Silver, Chief Executive Officer
XXXXXXX XXXXXX & CO. EMPLOYEE
PROFIT SHARING TRUST
By:___________________________________________
Xxxxxx X. Xxxxx, Portfolio Manager
XXXXXX XXXXXX FOUNDATION
By:___________________________________________
Xxxxxx X. Xxxxx, Portfolio Manager
XXXXXX FOUNDATION #2
By:___________________________________________
Xxxxxx X. Xxxxx, Portfolio Manager
ASTRO COMMUNICATION
By:___________________________________________
Xxxxxx X. Xxxxx, President
