Communications and Entertainment Corp.
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Los Angeles, Cal. 90067
September 6, 1996
Xx. Xxxxx Xxxxxxxxxx
00-00 Xxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Dear Xxxxx:
This letter will serve to set forth the mutual understanding and agreement
of Communications and Entertainment Corp. (the "Company") and Xx. Xxxxx
Xxxxxxxxxx, or his designees ("Investor"), to execute and deliver a stock
purchase agreement (the " Definitive Agreement") for the purchase by Investor of
an equity interest in the Company.
The Definitive Agreement will contain the following terms and provisions,
among others:
1. Investor will purchase 1,000,000 shares of the Company's common stock
for a purchase price of $.75 per share (the "Shares"). The Shares will be issued
and sold in a private placement under Rule 506 of Regulation D under the
Securities Act of 1933, as amended.
2. In consideration of the purchase of the Shares, the Company will issue
to Investor at the closing the following warrants to purchase additional shares
of the Company's common stock:
a) A three-year "A" Warrant to purchase 1,000,000 shares of the Company's
common stock at a purchase price of $.75 per share; and
b) A three-year "B" Warrant to purchase 1,000,000 shares of the Company's
common stock at a purchase price of $1.00 per share.
3. Both the "A" and "B" Warrants will contain the usual anti-dilution terms
and will be exercisable at any time during the term, commencing three months and
five months, respectively, from the date of issuance. The Company will have the
right to call the "A" Warrants at a price of $.01 per Warrant at any time after
12 months from the date of issuance on 30 days notice to Investor, provided that
the average closing bid price of the Company's common stock for the 10-day
trading period immediately preceding the giving of notice is not less than 50%
greater than the exercise price of the
"A" Warrants (i.e., $1.125). The Company will have the right to call the "B"
Warrants at a price of $.01 per Warrant at any time after 6 months from the date
the "A" Warrants are called on 30 days notice to Investor, provided that the
average closing bid price of the Company's common stock for the 10-day trading
period immediately preceding the giving of notice is not less than 50% greater
than the exercise price of the "B" Warrants (i.e., $1.50).
4. The Definitive Agreement will contain such warranties, representations
and other terms and provisions as are normally attendant to a purchase and sale
transaction of this type.
5. The closing of the Definitive Agreement will be subject to the following
conditions (the "Conditions"):
a) The filing by the Company, and the effectiveness of, a Registration
Statement on Form S-1, or any other appropriate form available to the Company,
under the Securities Act of 1933, as amended, covering the initial 1,000,000
Shares purchased by Investor and the 2,000,000 shares underlying the Warrants
(the "Underlying Shares"); and
b) The approval by the shareholders of the Company of an amendment to the
Company's Certificate of Incorporation authorizing an increase in the number of
authorized shares of the Company's Common Stock to the extent necessary to
accommodate the number of Shares and Underlying Shares which may be issued to
Investor pursuant to the Definitive Agreement and the Warrants.
6. Investor agrees to bear the first $50,000 of registration costs for the
Shares and the Underlying Shares, including attorneys' fees, accounting fees,
filing fees, and printing, transfer agent and related costs and fees. The
Company will bear the cost of all registration costs in excess of the first
$50,000 of such costs. Notwithstanding the foregoing, if either one of the
closing Conditions set forth in Paragraph 5 above is not satisfied by the
Company, then the Company shall reimburse Investor for all registration costs
advanced by Investor hereunder. Upon the execution and delivery of this letter,
Investor agrees to advance $25,000 to counsel for the Company to initiate the
registration process (the "Advance"). Subject to the $50,000 limitation noted
above, Investor will advance an additional $25,000 to counsel upon filing of the
registration statement, which filing is anticipated to be approximately 60 days
after the execution of this agreement. Counsel to the Company has agreed that
its total legal fees in connection with the registration will not exceed
$75,000.
7. Following the closing, the Company will consult with Investor regarding
the selection of a mutually agreeable public relations firm to represent the
Company.
8. Investor will have the right to participate in all meetings of the Board
of Directors on a non-voting basis, provided, however, if Investor requests to
be a member of the Board of Directors, the Company will use its best efforts to
either appoint Investor to the Board of Directors or nominate Investor for
election to the Board together with management's slate of Directors.
Please indicate your approval of the foregoing by countersigning a copy of
this letter in the space provided below and returning same to the Company (at
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, attn: Xxx X. Xxxxx), together
with a check in the amount of $25,000, payable to Company counsel, Xxxxxx X.
Xxxxxx, P.C., representing the Advance.
Very truly yours,
Communications and Entertainment Corp.
By: Xxx X. Xxxxx, President
Accepted and Agreed:
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Xxxxx Xxxxxxxxxx
