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Exhibit: 10.49FT
PROMISSORY NOTE
FOR $1.5 MILLION LOAN
TO FUTECH INTERACTIVE PRODUCTS, INC.
FROM ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
May 5, 1998 Phoenix, Arizona
This Agreement is made and entered into on the date set forth above, by
and between, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇")
(jointly known as "PAYEE") and FUTECH INTERACTIVE PRODUCTS, INC. ("PROMISOR").
The purpose of this Agreement is to arrange for the following:
- $1.5 million in additional operating loans from Payee to
Promisor
- Shareholder advances/loans to compensate Payee for
subordinating loans due Payee
- Promisor's common stock for compensation for providing
additional operating loans
RECITAL:
Subject to the terms and conditions of this Agreement:
1. Payee desires and is willing to provide a $1.5 million loan ("Loan")
to Promisor for repayment in quarterly installments of PRINCIPAL AND
INTEREST at an annual interest rate of 10%. The term of the loan is
for 24 months starting on the first day of the first succeeding month
after the loan is received by Promisor.
2. Upon maturity, Promisor will repay principal and interest calculated
as of that date. If full payment of the Loan is not made at that time,
interest will continue to accrue at an annual rate of interest of 16%.
There is no penalty for prepayment of the loan.
3. Payee reserves the right to convert all or a portion or the
outstanding principal and interest due and owing to shares of common
stock of Promisor. The conversion rate will be 20 shares of the
Promisor's common stock for every one dollar of principal plus
interest outstanding. The Payee may elect to exercise this conversion
option at anytime prior to the maturity date of the Loan or up to 180
days after the Loan's maturity date if the Promisor has not been able
to fulfill the outstanding obligation monetarily. The only restriction
is the Promisor's number of unencumbered shares available for
distribution.
3 In addition to the additional $1.5 million in principal that will be
due and owing the Payee from Promisor, the Promisor agrees to provide
to Payee the following:
1. 3.0 million stock options of Promisor's common stock. The options
are granted at an exercise price of $0.05 per share, they become
exercisable one year from the execution date of this Agreement and they
expire five years from the exercise date. The stock options will be
issued as follows:
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- 1.5 million stock options to ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇.
- 1.5 million stock options to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
4. The sum of $500,000.00 will be provided to ▇▇▇▇▇ as a shareholder
advance/loan as approved by the Shareholder Loan and Master Promissory
Note for Credit Line Agreement dated January 1, 1997. This amount shall
be payable to ▇▇▇▇▇ immediately upon receipt of the Loan proceeds. This
advance/loan is for ▇▇▇▇▇'▇ personal subordination of all existing debt
related to U.S. Bankcorp. In return for this subordination, U.S.
Bankcorp is willing to issue a total of $16 million in loans for
Promisor's operating needs. The $16 million is comprised of $12 million
in secured debt and $4 million in debt personally guaranteed by ▇▇▇▇▇.
5. Promisor desires to receive Loan under all the repayment terms and
conditions.
NOW, THEREFORE, in consideration of the Agreement, covenants, and
undertakings contained below, it is mutually agreed as follows:
1. Payee agrees to arrange for and provide to Promisor a $1.5 million loan
per the terms and conditions previously stated.
2. Promisor agrees to receive an additional $1.5 million in loans from
Payee and to repay all monies, stock options and shareholder
advances/loans due per the terms and conditions of this Agreement.
REPRESENTATIONS OF PAYEE
Payee represents, warrants and covenants as follows:
1. Payee is familiar with the business and affairs of Promisor and
realizes an investment in the shares involves a high degree of risk.
2. Payee has been advised that there will be no public market for the
shares; it may not be able to readily liquidate its investment; the shares have
not been registered or qualified under Federal or State laws governing the
issuance of securities; and Promisor has no current intention of registering the
shares or reporting under the Act or any comparable or related Federal or State
law.
3. Payee is an accredited investor and acknowledges that its overall
commitment to investments which are not readily marketable is not
disproportionate to its net worth; and its investment in the shares will not
cause such overall commitment to become excessive; that Payee has adequate means
of providing for its current needs and personal contingencies, and has no need
for liquidity of this investment; that Payee has evaluated the risk of investing
in Promisor; that Payee is aware of the financial risks and possible financial
hazards of purchasing the shares and it has carefully considered these risks of
the investment, including the possibility of a complete loss thereof.
4. Payee agrees the stock is subject to a Stock Restrictions and Sale
Agreement. The shares acquired under this Agreement shall be subject to that
Stock Restrictions and Sale Agreement, as it may be amended from time to time.
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SURVIVAL
The representations, warranties and covenants contained in the section
Representations of Payee shall survive the transfer of the shares.
ATTORNEYS' FEES
The prevailing party in any action to enforce the terms and conditions hereof
shall be entitled to recover its reasonable attorneys' fees and court costs.
CONSTRUCTION
Where the context of this Agreement requires, the singular shall be construed as
the plural, and neuter pronouns shall be construed as masculine and feminine
pronouns, and vice versa. This Agreement shall be construed according to its
fair meaning and neither for nor against any party hereto. This Agreement shall
be governed by and construed in accordance with Arizona law.
Futech Interactive Products, Inc. ("Promisor")
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman and CEO
=== This Agreement consists of a total of 3 pages ===
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