EXCHANGE AND REORGANIZATION AGREEMENT
AGREEMENT, dated as of the ____ st day of _____, 1996, by and among
KATMANDU ENTERTAINMENT CORP. ("KEC"), a Delaware corporation having an address
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; KATMANDU
INVESTMENT PARTNERS ("▇▇▇"), a Pennsylvania limited partnership having an
address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
CHINATOWN CONVENTION CENTER HOTEL CORPORATION ("Chinatown"), a Pennsylvania
corporation having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; KATMANDU CORPORATION ("Kat Corp."), a Pennsylvania
corporation having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; T-KAT CORPORATION ("T-KAT"), a New Jersey corporation having
an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; ▇.
▇▇▇▇▇ SILVER ("Silver") having an address at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; the ▇. ▇▇▇▇▇ SILVER TRUST (the "Silver
Trust") having an address c/o ▇. ▇▇▇▇▇ Silver, Trustee, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; and the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ TRUST (the "▇▇▇▇▇▇▇ Trust")
having an address c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H
WHEREAS, Chinatown is the general partner of ▇▇▇, owning a 1% general
partnership interest therein; and
WHEREAS, Silver and ▇▇▇▇▇▇▇ own all of the issued and outstanding stock
of Chinatown; and
WHEREAS, the Silver Trust and the ▇▇▇▇▇▇▇ Trust own all of the limited
partnership interests in ▇▇▇; and
WHEREAS, ▇▇▇ is the owner of the restaurant located on Pier 25 on the
Delaware River waterfront, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, operated under the name "KatManDu" ("KatManDu-Philadelphia"); and
WHEREAS, Kat Corp. is the holder of the liquor license for
KatManDu-Philadelphia and is the operator of KatManDu-Philadelphia pursuant to a
management agreement, dated March 1, 1991, between Kat Corp. and ▇▇▇; and
WHEREAS, Silver and ▇▇▇▇▇▇▇ own all of the issued and outstanding stock
of T-KAT; and
WHEREAS, T-KAT was formed for the purpose of developing, owning and
operating a KatManDu restaurant/nightclub similar to KatManDu-Philadelphia
on the Delaware River waterfront in Trenton, ▇▇▇▇▇▇ County, New Jersey
("KatManDu-Trenton"); and
WHEREAS, KEC has filed a registration statement on Form SB-2 with the
Securities and Exchange Commission (the "SEC") for the purpose of offering and
selling to the public (the "Offering") 1,600,000 shares of its common stock,
$.001 par value (the "Common Stock") and 1,600,000 Redeemable Common Stock
Purchase Warrants (the "Redeemable Warrants"); and
WHEREAS, the KEC Common Stock being offered to the public in connection
with the Offering will represent approximately forty (40%) per cent of the total
issued and outstanding shares of KEC at the time of the Offering; and
WHEREAS, immediately prior to the date on which the Offering is
declared effective by the SEC (the "Effective Date"), each of Silver, ▇▇▇▇▇▇▇,
the Silver Trust and the ▇▇▇▇▇▇▇ Trust will transfer all of their respective
rights, title and interests in and to Chinatown, ▇▇▇, Kat Corp. and T-KAT in
exchange for an aggregate of 1,606,884 shares of KEC Common Stock and
immediately thereafter KEC will liquidate Chinatown and ▇▇▇ and Kat Corp. and
T-KAT will survive as wholly-owned subsidiaries of KEC with Kat Corp. owning and
operating KatManDu-Philadelphia and T-KAT owning and operating KatManDu-Trenton;
and
WHEREAS, Silver and ▇▇▇▇▇▇▇ each presently owns 200,000 shares of the
Common Stock of KEC; and
WHEREAS, as a result of the transactions described herein, Silver,
▇▇▇▇▇▇▇, the Silver Trust and the ▇▇▇▇▇▇▇ Trust will, in the aggregate, own in
excess of 2,000,000 shares of the Common Stock of KEC, constituting
approximately fifty (50%) of the total issued and outstanding shares of KEC
Common Stock.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
representations, warranties and covenants set forth below and other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Basic Transactions
------------------
Immediately prior to the Effective Date:
(a) each of Silver and ▇▇▇▇▇▇▇ will transfer all of their right, title
and interest in and to Chinatown, representing all of the issued and outstanding
shares of Chinatown, to KEC in exchange for _____ shares of KEC Common Stock
(___ shares each), and KEC will immediately thereafter liquidate and dissolve
Chinatown;
(b) each of the Silver Trust and the ▇▇▇▇▇▇▇ Trust will transfer all of
its right, title and interest in and to ▇▇▇, representing all of the limited
partnership interests in ▇▇▇, to KEC in exchange for ____ shares of KEC Common
Stock (___ shares each), and KEC will immediately thereafter liquidate and
dissolve ▇▇▇;
(c) each of Silver and ▇▇▇▇▇▇▇ will transfer all of their right, title
and interest in and to Kat Corp., representing all of the issued and outstanding
shares of Kat. Corp., to KEC in exchange for _____ shares of KEC Common Stock
(___ shares each), and thereafter Kat Corp. will own and operate
KatManDu-Philadelphia as a wholly-owned subsidiary of KEC;
(d) each of Silver and ▇▇▇▇▇▇▇ will transfer all of their right, title
and interest in and to T-KAT, representing all of the issued and outstanding
shares of T-KAT, to KEC in exchange for ____ shares of KEC Common Stock (___
shares each), and thereafter T-KAT will continue to
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develop and, ultimately own and operate, KatManDu-Trenton as a wholly-owned
subsidiary of KEC.
2. Tax Considerations
------------------
It is the intent of the parties hereto that:
(a) the transaction described in paragraph (a) of Section 1 of this
Agreement constitute and qualify as tax free reorganization described in
section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
(b) the closing of the Offering and the consummation of the
transactions described in paragraphs (a) - (d) of Section 1 are interdependent
transactions and are to be considered as component parts of the same transaction
effected pursuant to Section 351 of the Code so that, upon consummation of the
Offering and the transactions described in Section 1 hereof, Silver, ▇▇▇▇▇▇▇,
the Silver Trust and the ▇▇▇▇▇▇▇ Trust together with purchasers of KEC Common
Stock pursuant to the Offering will be in "control" of KEC for purposes of
section 368(c) of the Code; and
(c) The parties hereto will report the transactions described in
Section 1 hereof for federal, state and local income tax purposes consistent
with the provisions of this Section 2 and will timely file all such returns,
forms, statements and agreements as may be required by the Internal Revenue
Service (the "IRS") on such basis. The provisions of this Section 2 shall
survive the closing of the Offering and the transactions described herein.
3. Representations and Warranties
------------------------------
(a) Each of Silver, ▇▇▇▇▇▇▇, the Silver Trust and the ▇▇▇▇▇▇▇
Trust (each a "Transferor" and, collectively, the "Transferors") on his or its
own behalf and not on behalf of any other Transferor represents and warrants as
follows:
(i) Each Transferor is the legal and equitable owner of his or
its respective interests in each of Chinatown, ▇▇▇, Kat Corp.
and T-KAT and that such interests, on the date the exchanges
described in Section 1 hereof are consummated, will be owned
free and clear of all mortgages, liens, pledges and other
security interests.
(ii) Each Transferor has the full power and authority to
execute and deliver this Agreement and to perform his or its
obligations hereunder, that he or it has duly executed and
delivered this Agreement and that this Agreement constitutes a
valid and legally binding obligation as to such
Transferor, enforceable in accordance with its terms.
(iii) That neither the execution and the delivery of this
Agreement by such Transferor, nor the consummation of
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the transactions contemplated hereby by such Transferor, will
(A) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency or court to which such
Transferor is subject or (B) conflict with, result in a breach
of or constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, cancel, or require any notice under any contract,
agreement, instrument of indebtedness, security interest or
other arrangement to which he or it may be a party or by which
he or it is bound or to which any of his or its assets is
subject.
(b) Each of Kat Corp., KEC and T-KAT, on its own behalf and
not on behalf of any other entity, represent and warrant as follows:
(i) It is a corporation duly organized, validly existing and
in good standing under the laws of the state of its
incorporation.
(ii) It has the full power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder, that this Agreement has been duly executed and
delivered, and that this Agreement constitutes a valid and
legally binding obligation, enforceable in accordance with its
terms and conditions.
(iii) Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby
will (A) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency or court to
which it may be subject or any provision of its charter or
By-laws or (B) conflict with, result in a breach of,
constitute a default under, result in acceleration of, create
in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of
indebtedness, security interest, or other arrangement to which
it may be a party or by which it may be bound or to which any
of its assets is subject and which will have a material
adverse effect on them.
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(c) KEC represents and warrants that the shares of its Common
Stock to be issued pursuant to this Agreement, at the time of such
issuance, will be free and clear of any restrictions on transfer (other than
restrictions under the Securities Act of 1933 and state securities laws and
restrictions under the Underwriters Agreement executed in connection with the
Offering) claims, taxes, security interests, options, warrants, rights,
contracts, calls, commitments, equities and demands.
(d) Kat Corp. represents and warrants that it is the holder of
a valid and existing liquor license for KatManDu-Philadelphia. Such license is
free from all defects, liens, mortgages, pledges and other security interests.
(e) T-KAT represents and warrants that it is the lessee under
a legal, valid, binding and enforceable lease for the premises known as the
▇▇▇▇▇▇ Iron Works Building located on the Delaware River waterfront in Trenton,
New Jersey and has the right to occupy such premises and to conduct therein a
restaurant/nightclub facility.
(f) ▇▇▇ represents and warrants as follows:
(i) it is a limited partnership duly organized, validly
existing, and in good standing under the laws of Pennsylvania
and is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction in which it is
conducting business.
(ii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will
(A) violate any statute, regulation, rule judgment, order,
decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency or court to which it is
subject or any provision of its limited partnership agreement
or (B) conflict with, result in a breach of, constitute a
default under, result in acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement
or mortgage for borrowed money, instrument of indebtedness,
security interest, or other arrangement to which it may be a
party or by which it may
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be bound or to which any of its assets is subject and which
will have a material adverse effect on them.
(iii) It owns or leases all of the tangible and intangible
assets necessary for the conduct of the business conducted by
KatManDu-Philadelphia, other than the liquor license relevant
thereto. Each such tangible asset is free from defects, has
been maintained in accordance with normal industry practice,
and is in good operating condition and repair (subject to
normal wear and tear). It is the lessee under a legal, valid,
binding and enforceable lease for the premises on which it
conducts the operations of KatManDu-Philadelphia at Pier 25,
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ and has
the right to occupy such premises and to conduct therein the
operations of KatManDu-Philadelphia.
(g) All of the representations, warranties and covenants set
forth in this Section 3 shall be true as of the date hereof and as of the date
the transactions described in Section 1 hereof are consummated.
(h) Each party hereto indemnifies and holds each other party
hereto harmless from any and all losses, damages, costs (including, but not
limited to, reasonable attorneys fees), claims and/or liabilities arising,
directly or indirectly, from a breach of any representations, warranties or
covenants made by such indemnifying party as set forth herein.
4. Conditions and Obligations to Closing
-------------------------------------
(a) The obligation of KEC to consummate the transactions to be
performed by it under this Agreement is subject to the following conditions:
(i) The representations and warranties set forth in Section 3
above made by the parties hereto other than KEC shall be true
and correct in all material respects at and as of the date the
transactions described in Section 1 hereof are consummated;
(ii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following
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consummation or (C) have an adverse effect on the right of KEC
to own and control Kat Corp. and T-KAT or have an adverse
effect on the right of Kat Corp. to own, operate or control
KatManDu-Philadelphia and the right of T-KAT to develop, own,
operate or control KatManDu-Trenton; and
(iii) the Offering shall have been declared effective by the
SEC.
KEC may waive any condition specified in this Section 4(a), other than
the condition set forth in clause (iii) thereof, if it executes a writing so
stating at or prior to the closing of the transactions described in Section 1
hereof.
(b) The obligation of each Transferor to consummate the
transactions to be performed by such Transferor under this Agreement is subject
to the following conditions:
(i) The representations and warranties set forth in Section
3 above made by the parties hereto other than such Transferor
shall be true and correct in all material respects at and as
of the date the transactions described in Section 1 hereof
are consummated.
(ii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation or (C)
have an adverse effect on the right of such Transferor to own
or control the shares of KEC Common Stock issued pursuant to
this Agreement; and
(iii) the Offering shall have been declared effective by the
SEC.
A Transferor may waive any condition specified in this Section 4(b),
other than the condition set forth in clause (iii) thereof, if such Transferor
executes a writing so stating at or prior to the closing the transactions
described in Section 1 hereof.
5. Miscellaneous
-------------
(a) This Agreement shall not confer any rights or remedies upon any
person other than the parties and their respective successors and permitted
assigns.
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(b) This Agreement (including the documents referred to herein)
constitutes the entire agreement among the parties with respect to the matters
set forth herein, and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties named herein and their respective successors and permitted assigns.
No party may assign either this Agreement or any of his, her or its rights,
interests, or obligations hereunder without the prior written approval of the
other parties hereto.
(d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument. A facsimile, telecopy or other reproduction of this
Agreement may be executed by one or more parties hereto, and an executed copy of
this Agreement may be delivered by one or more parties hereto by facsimile or
similar instantaneous electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties hereto agree to execute an original
of this Agreement as well as any facsimile, telecopy or other reproduction
hereof.
(e) The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(f) All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at the
address set forth following the name of such person in the preamble of this
Agreement. Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual and/or entity for whom it is intended.
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
(g) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware.
(h) No Amendment of any provisions of this Agreement shall be valid
unless the same shall be in writing and signed by the parties hereto. No waiver
by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default,
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misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
(i) Each party hereto acknowledges and agrees that the other parties
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each party hereto agrees that the other parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
KATMANDU ENTERTAINMENT CORP.
By: ______________________________
Name:
Title:
KATMANDU CORPORATION
By: ______________________________
Name:
Title:
T-KAT CORP.
By: ______________________________
Name:
Title:
KATMANDU INVESTMENT PARTNERS
By: Chinatown Convention Center Hotel
Corporation, General Partner
By: ______________________________
Name:
Title:
CHINATOWN CONVENTION CENTER
HOTEL CORPORATION
By: ______________________________
Name:
Title:
10
▇. ▇▇▇▇▇ SILVER TRUST
By: ______________________________
Name:
Title:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ TRUST
By: ______________________________
Name:
Title:
------------------------------
▇. ▇▇▇▇▇ SILVER
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
