Exhibit 10.35
SHARE ACQUISITION AND EXCHANGE AGREEMENT
dated October 7, 2005
between and among
Media Magic, Inc.,
Orangebox Entertainment, Inc.
and
Cirilium Holdings, Inc.
TABLE OF CONTENTS
Page
1. DEFINITIONS AND INTERPRETATION...........................................1
2. ACQUISITION OF OB BY CHI; CLOSING........................................6
2.1 Exchange of the OB Shares for the Shares........................6
2.2 Closing.........................................................6
2.3 MMI's Closing Obligations.......................................6
2.4 CHI's Closing Obligations.......................................6
3. REPRESENTATIONS AND WARRANTIES OF OB.....................................7
3.1 Power and Authority.............................................7
3.2 Consents and Approvals..........................................7
3.3 Authorized and Issued Capital Stock.............................7
3.4 Other Subsidiaries..............................................8
3.5 Undisclosed Liabilities.........................................8
3.6 Intellectual Property...........................................8
3.7 Personal Property...............................................8
3.8 Real Property...................................................9
3.9 Litigation and Complaints.......................................9
3.10 Employees; Benefits.............................................9
3.11 Tax Matters....................................................10
4. REPRESENTATIONS AND WARRANTIES OF MMI...................................11
4.1 Power and Authority............................................11
4.2 Consents and Approvals.........................................11
4.3 Tax Matters....................................................12
4.4 Investment Representations.....................................12
5. REPRESENTATIONS AND WARRANTIES OF CHI...................................13
5.1 Power and Authority of CHI.....................................13
5.2 Consents and Approvals.........................................14
5.3 Authorized and Issued Capital Stock............................14
5.4 Other Subsidiaries.............................................14
5.5 Undisclosed Liabilities........................................14
5.6 Real Property and Other Assets.................................15
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TABLE OF CONTENTS
(continued)
Page
5.7 Litigation and Complaints......................................15
5.8 Employees; Benefits............................................15
5.9 Tax Matters....................................................16
5.10 Exchange Act Reports...........................................17
6. CLOSING CONDITIONS......................................................17
6.1 Conditions to the Obligations of MMI to Close..................17
6.2 Conditions to CHI's Obligation to Close........................17
7. NOTICES.................................................................18
8. MISCELLANEOUS...........................................................19
8.1 Entire Agreement...............................................19
8.2 Waiver.........................................................19
8.3 Amendment......................................................19
8.4 Construction...................................................19
8.5 Assignment.....................................................19
8.6 Costs and Expenses.............................................19
8.7 Non-Impairment of Rights.......................................19
8.8 Counterparts...................................................19
8.9 Governing Law..................................................20
Schedules
3.5 OB Balance Sheet
3.6 Intellectual Property Rights
3.8 Real Property
3.10 Employee Benefits
3.11 OB Tax Matters
5.4 CHI Subsidiaries
5.5 CHI Liabilities
5.9 CHI Tax Matters
-ii-
Share Acquisition and Exchange Agreement dated October 7, 2005 between and
among Media Magic, Inc. ("MMI"), a corporation organized under the laws of the
state of Florida, having an office for the transaction of business at ▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇; its subsidiary, Orangebox
Entertainment, Inc. ("OB"), a corporation organized under the laws of the state
of Florida, having an office for the transaction of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and Cirilium Holdings, Inc. ("CHI"), a corporation
organized under the laws of the state of Delaware, having an office for the
transaction of business at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇.
WHEREAS, MMI owns all of the issued and outstanding OB Shares, free and
clear of all Liens other than the Lien held by Stillwater; and
WHEREAS, CHI and MMI, pursuant to the terms, and subject to the conditions
set forth in this Agreement, desire to undertake a tax-free acquisition of OB by
CHI in a reorganization transaction under Code ss.368(a)(1)(B), pursuant to
which MMI will receive shares of CHI Common Stock in exchange for the OB Shares,
NOW, THEREFORE, in consideration of the foregoing, and the mutual terms,
covenants and conditions hereinbelow set forth, the parties agree, as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:
"Affiliate" means, when referring to a Person, the Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first-mentioned person;
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses;
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504(a) or any similar group defined under a similar provision of
state, local, or foreign law;
"Balance Sheet Date" means September 30, 2005;
"Benefit Plan" and "Benefit Plans" have the meanings attributed to such
terms in Section 3.11.3;
"CHI Common Stock" means the common stock, $.0001 par value per share, of
CHI;
"CHI Reports" hase the meaning attributed to such term in Section 5.10.1;
"Claim" has the meaning attributed to such term in Section 8.10.1;
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"Claim Notice" has the meaning attributed to such term in Section 5.3;
"Closing" means closing of the exchange of the OB Shares for the Shares in
accordance with the terms, and subject to the conditions of this
Agreement;
"Closing Date" means October 3, 2005, or such other date as the Parties
shall mutually agree upon in writing;
"Code" means the Internal Revenue Code of 1986, as amended;
"Commission" means the United States Securities and Exchange Commission;
"Controlling Party" has the meaning attributed to such term in Section
5.4.1;
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended;
"Expenses" means any and all reasonable out-of-pocket expenses incurred in
connection with investigating, defending or asserting any Claim, action,
suit or proceeding (including court filing fees, court costs, arbitration
fees or costs, witness fees and reasonable fees and disbursements of legal
counsel, investigators, expert witnesses, accountants and other
professionals);
"Governmental Entity" has the meaning attributed to such term in Section
3.2;
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or
not;
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Income Tax,
including any schedule or attachment thereto, and including any amendment
thereof;
"Intellectual Property Right" means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade
dress, trade names, URL's, logos and corporate names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases and
documentation thereof, (vi) trade secrets and other confidential
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research
and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial and marketing
plans and customer and supplier lists and information), (vii) other
intellectual property rights and (viii) copies and tangible embodiments
thereof (in whatever form or medium);
"Liability" or "Liabilities" mean any and all debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or not accrued,
known or unknown, whenever or however arising (including whether arising
out of any contract or tort based on negligence or strict liability) and
whether or not the same would be required by GAAP to be reflected in
financial statements or disclosed in the notes thereto;
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"Lien" means any right which (a) shall entitle any Person to terminate,
amend, accelerate or cancel any agreement, option, license or other
instrument to which MMI or OB is a party by reason of the occurrence of
(i) a violation, breach or default thereunder by MMI or OB, as the case
may be; or (ii) an event which with or without notice or lapse of time or
both would become a default thereunder; or (b) if exercised by the holder
thereof, will (i) entitle such Person to accelerate the performance of any
obligations or the payment of any sums owed by MMI or OB, as the case may
be, under any agreement, option, license or other instrument, or (ii)
result in any loss of any benefit under, or the creation of any pledges,
claims, equities, options, liens, charges, call rights, rights of first
refusal, "tag" or "drag" along rights, encumbrances and security interests
of any kind or nature whatsoever on any of the property or assets of MMI
or OB;
"Material Adverse Effect" means any effect or change that would be
materially adverse to the business, assets, condition (financial or
otherwise), operating results, operations, or business prospects of CHI,
MMI or OB, as the case may be, taken as a whole, or on the ability of any
Party to consummate timely the transactions contemplated hereby;
"MMI-Stillwater Pledge Agreement and Guaranty"has the meaning attributed
thereto in Section 4.1 of this Agreement;
"OB Balance Sheet" means the unaudited balance sheet of OB as at the
Balance Shhet Date;
"OB Shares" has the meaning attributed thereto in Section 3.3 of this
Agreement;
"Parties" means collectively, CHI and MMI;
"Party" means CHI or MMI, individually;
"Person" means a natural person, company, corporation, partnership,
association, trust or any unincorporated organization;
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated the Closing Date, by and between MMI and CHI,
providing for the registration of the Shares under the Securities Act for
distribution by MMI to its shareholders and for resale by such
shareholders, as the same may be amended from time to time;
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act;
"Securities Act" means the United States Securities Act of 1933, as
amended;
"Shares" has the meaning attributed thereto in Section 2.1 of this
Agreement;
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"Stillwater" means The Stillwater Asset-Backed Fund LP;
"Stillwater Loan" means the Credit Agreement and collateral agreements
between OB, as borrower, and Stillwater, as Lender dated August 5, 2005;
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of
which (i) if a corporation, a majority of the total voting power of shares
of stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof or
(ii) if a limited liability company, partnership, association, or other
business entity (other than a corporation), a majority of partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof and for this purpose,
a Person or Persons own a majority ownership interest in such a business
entity (other than a corporation) if such Person or Persons shall be
allocated a majority of such business entity's gains or losses or shall be
or control any managing director or general partner of such business
entity (other than a corporation). The term "Subsidiary" shall include all
Subsidiaries of such Subsidiary;
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code ss.59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not;
"Taxation Authority" means any federal, state, local or foreign
governmental agency, department or other entity which is authorized by
applicable law to assess and collect Taxes;
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof; and
"Treas. Reg." means the regulations promulgated by the United States
Department of the Treasury under the Code, as amended.
1.2 Interpretation.
1.2.1 As used in this Agreement, unless the context clearly indicates
otherwise:
(a) words used in the singular include the plural and words in the
plural include the singular;
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(b) reference to any Person includes such person's successors and
assigns, but only if such successors and assigns are permitted by
this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
(c) reference to any gender includes the other gender;
(d) whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words
"without limitation" or "but not limited to" or words of similar
import;
(e) reference to any Section means such Section of this Agreement,
and references in any Section or definition to any clause means such
clause of such Section or definition;
(f) the words "herein," "hereunder," "hereof," "hereto" and words of
similar import shall be deemed references to this Agreement as a
whole and not to any particular Section or other provision hereof;
(g) reference to any agreement, instrument or other document means
such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted
by the provisions thereof and by this Agreement;
(h) reference to any law (including statutes and ordinances) means
such law (including all rules and regulations promulgated
thereunder) as amended, modified, codified or reenacted, in whole or
in part, and in effect at the time of determining compliance or
applicability, and reference to any particular provision of any law
shall be interpreted to include any revision of or successor to that
provision regardless of how numbered or classified;
(i) relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding" and
"through" means "through and including"; and
(j) the titles and headings of Sections contained in this Agreement
have been inserted for convenience of reference only and shall not
be deemed to be a part of or to affect the meaning or interpretation
of this Agreement.
1.2.2 This Agreement was negotiated by the parties with the benefit of
legal representation, and no rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against
any party shall apply to any construction or interpretation hereof. This
Agreement shall be interpreted and construed to the maximum extent
possible so as to uphold the enforceability of each of the terms and
provisions hereof, it being understood and acknowledged that this
Agreement was entered into by the parties after substantial negotiations
and with full awareness by the parties of the terms and provisions hereof
and the consequences thereof.
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1.2.3 Where a statement in this Agreement is qualified by the expression
"to the best of MMI's knowledge," "to the best of OB's knowledge," "so far
as MMI is aware" or "so far as OB is aware" or any similar expression
shall be deemed to include MMI's or OB's actual knowledge and what MMI or
OB should have known after due and careful inquiry of the President, the
members of the Board of Directors and any relevant person(s) involved in
the management of the business of MMI or OB. Except for statements
qualified by MMI or OB after due and careful inquiry, in the manner set
forth in the first sentence of this subsection, MMI and OB shall be
liable, respectively, for any erroneous or untrue statement, warranty or
representation that MMI or OB, as the case may be, may make in this
Agreement, irrespective of whether the error contained therein or the
untruth thereof shall have resulted from negligence or intent on the part
of MMI or OB.
2. ACQUISITION OF OB BY CHI; CLOSING
2.1 Exchange of the OB Shares for the Shares. MMI shall exchange, transfer and
assign all of the OB Shares to CHI, and CHI shall issue and deliver an
aggregate of 158,191,589 shares of restricted, unregistered CHI Common
Stock (the "Shares") to MMI pursuant to the terms, and subject to the
conditions of, this Agreement.
2.2 Closing. Closing shall take place at the offices of MMI. All actions taken
at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed. The Closing shall
occur at 9:00 AM Eastern Standard Time on the Closing Date, or at such
other place and time, and on such other date, as the Parties may agree in
writing.
2.3 MMI's Closing Obligations. At the Closing, MMI shall deliver to CHI:
2.3.1 all stock certificates evidencing the ownership of the OB Shares,
each of which shall have attached thereto blank stock powers dated the
Closing Date and signed by an authorized representative of MMI; and
2.3.2 one or more agreements and/or other instruments executed by
Stillwater canceling, or modifying in a manner satisfactory to CHI, the
MMI-Stillwater Pledge Agreement and Guaranty.
2.4 CHI's Closing Obligations. At the Closing, CHI shall deliver to MMI:
2.4.1 the written resignations of all of the officers and directors of
CHI, effective as of the Closing Date;
2.4.2 stock certificates evidencing the ownership of the Shares by MMI;
2.4.3 a Registration Rights Agreement executed by CHI; and
2.4.4 one or more agreements and/or other instruments executed by CHI
pursuant to which CHI shall guaranty OB's payment and performance
obligations under the Stillwater Loan, and pledge the OB Shares to
Stillwater as collateral security for its obligations under such guaranty.
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3. REPRESENTATIONS AND WARRANTIES OF OB
OB hereby warrants and represents to CHI, as of the date of this Agreement
and with the same force and effect on the Closing Date as if then made, as
follows:
3.1 Power and Authority. OB is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida, and has the
corporate power and authority to carry on its business as now conducted
and to own, lease and operate its properties and assets. OB is duly
qualified or licensed to transact business as a foreign corporation in
good standing in the states of the United States and foreign jurisdictions
where the character of its assets or the nature or conduct of its business
requires it to be so qualified or licensed. OB has all requisite corporate
power and authority to execute and deliver this Agreement and each
instrument to be executed and delivered by OB in connection with the
Closing, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and each instrument required hereby to be
executed and delivered by OB prior to or at the Closing, the performance
of its obligations hereunder and thereunder and the consummation by OB of
the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of OB, and no other
corporate proceedings on the part of OB are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed by OB, and, assuming this
Agreement has been duly executed by MMI and CHI, this Agreement
constitutes a valid and binding agreement of OB, enforceable against OB in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
3.2 Consents and Approvals. The execution and performance of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions of this Agreement will not (a) conflict
with or violate the Articles of Incorporation or Bylaws of OB, (b)
conflict with or violate any statute, ordinance, rule, regulation,
judgment, order, writ, injunction, decree or law applicable to OB, or by
which either OB or its properties or assets may be bound or affected, or
(c) result in a violation or breach of or constitute a default (or an
event which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any benefit
under, any contract, agreement or arrangement to which OB is a party, or
the creation of Liens on any of the property or assets of OB. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is
required by OB in connection with the execution of this Agreement by MMI
or the consummation by it of the transactions contemplated hereby, except
for such other consents, approvals, orders, authorizations, registrations,
declarations or filings, the failure of which to obtain would not
individually or in the aggregate have a Material Adverse Effect.
3.3 Authorized and Issued Capital Stock. OB is authorized, pursuant to its
Articles of Incorporation, to issue 25,000,000 shares, par value $.001. As
of the date hereof 100 shares of OB's common stock are issued and
outstanding (the "OB Shares").
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3.4 Other Subsidiaries. OB owns no subsidiaries, and on the Closing Date, OB
shall not own, or be a party to any agreement to own, any securities of
any other corporation, or any other entity or business association of
whatever kind.
3.5 Undisclosed Liabilities As of the Closing Date, OB has no debts,
liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, unliquidated or otherwise and whether due or
to become due) arising out of transactions entered into on or prior to the
Closing Date, or any transaction, series of transactions, action or
inaction occurring on or prior to the Closing Date, or any state of facts
or condition existing on or prior to the Closing Date (regardless of when
such liability or obligation is asserted) except such debts, liabilities
or obligations that have been disclosed to CHI in this Agreement or in the
OB Balance Sheet annexed hereto as Schedule 3.5.
3.6 Intellectual Property.
3.6.1 The activities of OB (or of any licensee under any license granted
by OB) do not infringe or are not likely to infringe on any Intellectual
Property Rights of any third party and no claim has been made, has been
threatened, or is likely to be made or threatened, against OB or any such
licensee in respect of such infringement.
3.6.2 Details of all registered Intellectual Property Rights (including
applications to register the same) and all commercially significant
unregistered Intellectual Property Rights owned or used by OB are set out
in Schedule 3.6.
3.6.3 Except for Intellectual Property Rights granted pursuant to
shrinkwrap and similar licenses, OB does not, as of the date hereof, use
in its business any Intellectual Property Rights, other than the
Intellectual Property Rights identified on Schedule 3.6, and is under no
obligation to pay license fees or royalties for any Intellectual Property
Rights other than those identified on said Schedule.
3.7 Personal Property. OB has good and marketable title to, or in the case of
leased or licensed personal property, it has valid leasehold or license
interests in, all Personal Property, except for properties and assets sold
since the Balance Sheet Date in the ordinary course of business consistent
with past practices. None of such Personal Property is subject to any
Liens, other than:
3.7.1 Liens securing the Stillwater Loan;
3.7.2 Liens for ad valorem Taxes which shall have accrued prior to the
Closing Date, but which shall not be due and payable until after the
Closing Date (and for which adequate accruals or reserves have been
established on the Closing Balance Sheet);
3.7.3 Liens that do not materially detract from the value of the Personal
Property as now used, or materially interfere with any present or intended
use of the Personal Property; or
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3.7.4 Liens reflected on the OB Balance Sheet.
3.7.5 Each item of Personal Property has no material defects, is in good
operating condition and repair (ordinary wear and tear excepted), and is
generally adequate for the uses to which it is being put.
3.8 Real Property.
3.8.1 None of the Real Property is owned by OB. All of the Real Property
is leased by OB as lessee or sublessee. Schedule 3.8 sets forth all leases
and subleases of the Real Property leased by OB (the "Leases"), true and
correct copies of which have been previously provided to CHI.
3.8.2 The Leases are valid, binding and enforceable in accordance with
their respective terms, and there does not exist under any such Lease any
default by OB or, to OB's knowledge, by any other Person, or any event
that, with notice or lapse of time or both, would constitute a default by
OB or, to OB's knowledge, by any other Person. OB has delivered to CHI
complete and accurate copies of all Leases, including all amendments and
agreements related thereto. All rent and other charges currently due and
payable under the Leases have been paid.
3.9 Litigation and Complaints.
3.9.1 OB is not engaged in any litigation or arbitration proceedings, and
there are no such proceedings pending or threatened against or by OB. To
the best of OB's knowledge, there are no matters or circumstances which
are likely to give rise to any litigation or arbitration proceedings by or
against OB.
3.9.2 OB is not subject to any investigation, inquiry or enforcement
proceedings or processes by any Governmental Entity, and to the best of
OB's knowledge, there are no matters or circumstances which are likely to
give rise to any such investigation, inquiry, proceedings or process.
3.10 Employees; Benefits.
3.10.1 OB has 11 employees. There are no outstanding offers (whether
accepted or not) of employment made to any Person by OB.
3.10.2 OB is a not party to or bound by any collective bargaining, shop or
similar agreements.
3.10.3 OB does not have any "employee benefit plans" including, but not
limited to, bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, stock, stock option, severance,
termination pay, change in control or other employee benefit plans,
programs or arrangements, whether written or unwritten, qualified or
unqualified, funded or unfunded, currently maintained, or contributed to,
or required to be maintained or contributed to, by OB (each of which is
referred to as a "Benefit Plan" and all of which are collectively referred
to as the "Benefit Plans"), other than the employment contracts, medical,
dental, vision, disability, life insurance and vacation benefits, and
options to purchase an aggregate of 1,750,000 share of MMI common stock
issued to certain OB employees as identified in Schedule 3.10 hereof.
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3.11 Tax Matters.
3.11.1 OB has filed, all federal Income Tax Returns and all other material
Tax Returns that it was required to file since the date of its
organization.
3.11.2 To the best of OB's knowledge, OB has paid all Taxes that it was
required to pay since the date of its organization, except for those
identified in Schedule 3.11 hereof.
3.11.3 OB is not currently the beneficiary of any extension of time within
which to file any Tax Return.
3.11.4 To the best of OB's knowledge, there are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of OB.
3.11.5 There is no material dispute or claim concerning any Tax liability
of OB either (i) claimed or raised by any Taxation Authority in writing or
(ii) as to which OB has knowledge, except for those reflected on the OB
Balance Sheet or identified in Schedule 3.11 hereof.
3.11.6 OB:
(a) has not filed a consent under Code ss.341(f) concerning
collapsible corporations;
(b) is not a party to any agreement, contract, arrangement, or plan
that has resulted or would result, separately or in the aggregate,
in the payment of any "excess parachute payment" within the meaning
of Code ss.280G (or any corresponding provision of state, local, or
foreign Tax law);
(c) will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date; (ii) "closing
agreement" as described in Code ss.7121 (or any corresponding or
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) intercompany
transactions or any excess loss account described in Treasury
Regulations under Code ss.1502 (or any corresponding or similar
provision of state, local or foreign income Tax law); (iv)
installment sale or open transaction disposition made on or prior to
the Closing Date; or (v) prepaid amount received on or prior to the
Closing Date; or
(d) has not been a United States real property holding corporation
within the meaning of Code ss.897(c)(2) during the applicable period
specified in Code ss.897(c)(1)(A)(ii).
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3.11.7 OB is not a party to or bound by any Tax allocation or sharing
agreement. OB has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was MMI). OB does not have any Liability for the Taxes of
any Person (other than any of MMI and any other Subsidiary of MMI) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
4. REPRESENTATIONS AND WARRANTIES OF MMI
MMI hereby warrants and represents to CHI, as of the date of this
Agreement and with the same force and effect on the Closing Date as if
then made, as follows:
4.1 Power and Authority. MMI is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida, and
has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its properties and assets. MMI is
duly qualified or licensed to transact business as a foreign corporation
in good standing in the states of the United States and foreign
jurisdictions where the character of its assets or the nature or conduct
of its business requires it to be so qualified or licensed. MMI has all
requisite corporate power and authority to execute and deliver this
Agreement and each instrument to be executed and delivered by MMI in
connection with the Closing, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and each instrument required
hereby to be executed and delivered by MMI prior to or at the Closing, the
performance of its obligations hereunder and thereunder and the
consummation by MMI of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of
MMI, and, except for the requirement to obtain the consent of MMI's
shareholders to the consummation of the transfer of the OB Shares to CHI
pursuant to, and in accordance with, the provisions of this Agreement, no
other corporate proceedings on the part of MMI are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed by MMI, and, assuming this
Agreement has been duly executed by OB and CHI, this Agreement constitutes
a valid and binding agreement of MMI, enforceable against MMI in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. MMI has good and marketable title to the OB Shares free
and clear of all Liens except as otherwise disclosed in this Agreement,
and has full power and authority to exchange, transfer and deliver to CHI
the OB Shares. Except for a pledge agreement and guaranty dated August 5,
2005 between MMI and Stillwater (the "MMI-Stillwater Pledge Agreement and
Guaranty"), MMI is not a party to any voting agreement or other
shareholder agreement with respect to the OB Shares or ownership of OB.
4.2 Consents and Approvals. The execution and performance of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions of this Agreement will not (a) conflict
with or violate the Articles of Incorporation or Bylaws of MMI, (b)
conflict with or violate any statute, ordinance, rule, regulation,
judgment, order, writ, injunction, decree or law applicable to MMI, or by
which either MMI or its properties or assets may be bound or affected, or
(c) result in a violation or breach of or constitute a default (or an
event which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any benefit
under, any contract, agreement or arrangement to which MMI is a party, or
the creation of Liens on any of the property or assets of MMI. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by MMI in connection
with the execution of this Agreement by MMI or the consummation by it of
the transactions contemplated hereby, except for such other consents,
approvals, orders, authorizations, registrations, declarations or filings,
the failure of which to obtain would not individually or in the aggregate
have a Material Adverse Effect.
11
4.3 Tax Matters.
4.3.1 MMI is not a party to or bound by any Tax allocation or sharing
agreement. MMI has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group of which MMI is
the common parent). MMI does not have any Liability for the Taxes of any
Person (other than any of its Subsidiaries, including, but not limited to,
OB) under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
4.3.2 MMI agrees to indemnify CHI from and against its any Adverse
Consequences CHI may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any Liability of MMI and/or any of its
Subsidiaries (including the Liability of OB) for Taxes arising with
respect to business operations conducted by OB on or prior to the Closing
Date) for Taxes under Treas. Reg. ss.1.1502-6 (or any similar provision of
state, local or foreign law).
4.3.3 MMI shall include the income of OB (including any deferred items
triggered into income by Treas. Reg. ss.1.1502-13 and any excess loss
account taken into income under Treas. Reg. ss.1.1502-19) on MMI's
consolidated federal Income Tax Returns for all periods through the end of
the Closing Date and pay any federal Income Taxes attributable to such
income. OB shall furnish Tax information to MMI for inclusion in MMI's
federal consolidated Income Tax Return for the period which includes the
Closing Date in accordance with OB's past custom and practice. The income
of OB shall be apportioned to the period up to and including the Closing
Date and the period after the Closing Date by closing the books of OB as
of the end of the Closing Date.
4.4 Investment Representations.
4.4.1 MMI is acquiring the Shares to be delivered hereunder for its own
account with the present intention of holding such securities for purposes
of investment, and that it has no intention of distributing such Shares to
the shareholders of MMI or selling, transferring or otherwise disposing of
such securities in a public distribution, in any of such instances, in
violation of the federal securities laws of the United States of America.
12
4.4.2 MMI understands that (a) the Shares that it shall acquire hereunder
are "Restricted Securities," as defined in Rule 144; (b) such securities
have not been registered under the Securities Act, and are being issued in
reliance on exemptions for private offerings contained in Section 4(2) of
the Securities Act; (c) the Shares may not be distributed, re-offered or
resold except through a valid and effective registration statement or
pursuant to a valid exemption from the registration requirements under the
Securities Act; and (d) until such time as the Shares become eligible for
sale by it, either pursuant to the registration of such Shares under the
Securities Act, or pursuant to a valid exemption from such registration,
the certificates evidencing MMI's ownership of the Shares shall contain
the following legend:
"The shares of common stock evidenced by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"). Such shares may not be sold, transferred, pledged,
hypothecated or otherwise disposed of unless they have been so
registered or the issuer of such shares shall have received an
opinion of counsel satisfactory to it to the effect that
registration thereof for purposes of transfer is not required under
the Act or the securities laws of any state."
4.4.3 MMI is fully aware of the restrictions on sale, transferability and
assignment of the Shares, and that it must bear the economic risk of
retaining ownership of such securities for an indefinite period of time.
MMI is aware that (a) the Shares will not be registered under the
Securities Act; and (b) because the issuance of the Shares has not been
registered under the Securities Act, an investment in the Shares cannot be
readily liquidated if MMI desires to do so, but rather may be required to
be held indefinitely.
4.4.4 In the event that MMI decides to distribute any of the Shares to its
shareholders, it shall not do so unless and until a registration statement
has been duly filed by CHI under the Securities Act, and such registration
statement has been declared effective by the Commission.
5. REPRESENTATIONS AND WARRANTIES OF CHI
CHI hereby warrants and represents to MMI, as of the date of this
Agreement and with the same force and effect on the Closing Date as if
then made, as follows:
5.1 Power and Authority of CHI. CHI is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its properties and assets. CHI is
duly qualified or licensed to transact business as a foreign corporation
in good standing in the states of the United States and foreign
jurisdictions where the character of its assets or the nature or conduct
of its business requires it to be so qualified or licensed. CHI has all
requisite corporate power and authority to execute and deliver this
Agreement and each instrument to be executed and delivered by CHI in
connection with the Closing, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and each instrument required
hereby to be executed and delivered by CHI prior to or at the Closing, the
performance of its obligations hereunder and thereunder and the
consummation by CHI of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of
CHI, and no other corporate proceedings on the part of CHI are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed by CHI, and,
assuming this Agreement is duly executed by MMI and OB, this Agreement
constitutes a valid and binding agreement of CHI, enforceable against CHI
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
13
5.2 Consents and Approvals. The execution and performance of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions of this Agreement will not (a) conflict
with or violate the Certificate of Incorporation or Bylaws of CHI, (b)
conflict with or violate any statute, ordinance, rule, regulation,
judgment, order, writ, injunction, decree or law applicable to CHI, or by
which CHI or its properties or assets may be bound or affected, or (c)
result in a violation or breach of or constitute a default (or an event
which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any benefit
under, any contract, agreement or arrangement to which CHI is a party, or
the creation of Liens on any of the property or assets of CHI, other than
the outstanding warrants and options previously disclosed in the CHI
Reports. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by CHI in
connection with the execution of this Agreement by CHI or the consummation
by it of the transactions contemplated hereby, except for consents,
approvals, orders, authorizations, registrations, declarations or filings,
the failure of which to obtain would not individually or in the aggregate
have a Material Adverse Effect.
5.3 Authorized and Issued Capital Stock. On the Closing Date:
5.3.1 CHI shall be authorized, pursuant to its Certificate of
Incorporation, to issue 225,000,000 shares, 200,000,000 of which shall be
common stock, $.0001 par value per share, and 25,000,000 of which shall be
preferred stock, $.0001 par value per share, issuable in one or more
series; and
5.3.2 38,982,482 shares of CHI's common stock shall be issued and
outstanding.
5.3.3 CHI shall not have any outstanding options or warrants other than
those previously disclosed in the CHI Reports or otherwise identified in
Schedule 5.3.3.
5.4 Other Subsidiaries. CHI does not own, and has not agreed to acquire, any
securities of any other corporation, or any other entity or business
association of whatever kind other than those disclosed in Schedule 5.4
hereof.
5.5 Undisclosed Liabilities As of the Closing Date, except for those
Liabilities identified either in the CHI Reports or on Schedule 5.5, CHI
shall not have any debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent, direct, indirect, unliquidated or
otherwise and whether due or to become due) arising out of transactions
entered into on or prior to the Closing Date, or any transaction, series
of transactions, action or inaction occurring on or prior to the Closing
Date, or any state of facts or condition existing on or prior to the
Closing Date (regardless of when such liability or obligation is asserted)
except such debts, liabilities or obligations that have been disclosed to
MMI in this Agreement or in the consolidated financial statements CHI
heretofore delivered to MMI or which taken in the aggregate would not have
a Material Adverse Effect on CHI.
14
5.6 Real Property and Other Assets. CHI does not own or lease any real
property, and does not own, lease or license the use of any other assets
other than those previously disclosed in the CHI Reports.
5.7 Litigation and Complaints.
5.7.1 CHI is not engaged in any litigation or arbitration proceedings, and
there are no such proceedings pending or threatened against or by CHI. To
the best of CHI's knowledge, there are no matters or circumstances which
are likely to give rise to any litigation or arbitration proceedings by or
against CHI.
5.7.2 CHI is not subject to any investigation, inquiry or enforcement
proceedings or processes by any Governmental Entity, and to the best of
CHI's knowledge, there are no matters or circumstances which are likely to
give rise to any such investigation, inquiry, proceedings or process.
5.8 Employees; Benefits.
5.8.1 CHI has no employees. There are no outstanding offers (whether
accepted or not) of employment made to any Person by CHI.
5.8.2 CHI is a not party to or bound by any collective bargaining, shop or
similar agreements.
5.8.3 Except for CHI's 2004 Stock Incentive Plan, CHI does not have any
"employee benefit plans" including, but not limited to, employment
contracts, bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, stock, stock option, severance,
termination pay, change in control or other employee benefit plans,
programs or arrangements, including those providing medical, dental,
vision, disability, life insurance and vacation benefits, whether written
or unwritten, qualified or unqualified, funded or unfunded, currently
maintained, or contributed to, or required to be maintained or contributed
to, by CHI (each of which is referred to as a "Benefit Plan" and all of
which are collectively referred to as the "Benefit Plans").
15
5.9 Tax Matters.
5.9.1 CHI has filed, all federal Income Tax Returns and all other material
Tax Returns that it was required to file since the date of its
organization.
5.9.2 To the best of CHI's knowledge, CHI has paid all Taxes that it was
required to pay since the date of its organization, except for those
identified in Schedule 5.9 hereof.
5.9.3 CHI is not currently the beneficiary of any extension of time within
which to file any Tax Return.
5.9.4 To the best of CHI's knowledge, there are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of CHI.
5.9.5 There is no material dispute or claim concerning any Tax liability
of CHI either (i) claimed or raised by any Taxation Authority in writing
or (ii) as to which CHI has knowledge. CHI:
(a) has not filed a consent under Code ss.341(f) concerning
collapsible corporations;
(b) is not a party to any agreement, contract, arrangement, or plan
that has resulted or would result, separately or in the aggregate,
in the payment of any "excess parachute payment" within the meaning
of Code ss.280G (or any corresponding provision of state, local, or
foreign Tax law);
(c) will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date; (ii) "closing
agreement" as described in Code ss.7121 (or any corresponding or
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) intercompany
transactions or any excess loss account described in Treasury
Regulations under Code ss.1502 (or any corresponding or similar
provision of state, local or foreign income Tax law); (iv)
installment sale or open transaction disposition made on or prior to
the Closing Date; or (v) prepaid amount received on or prior to the
Closing Date; or
(d) has not been a United States real property holding corporation
within the meaning of Code ss.897(c)(2) during the applicable period
specified in Code ss.897(c)(1)(A)(ii).
5.9.6 CHI is not a party to or bound by any Tax allocation or sharing
agreement. CHI has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group of which CHI is
the common parent). CHI does not have any Liability for the Taxes of any
Person (other than any of its Subsidiaries) under Treas. Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
16
5.9.7 CHI agrees to indemnify MMI from and against its any Adverse
Consequences MMI may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any Liability of CHI and/or any of its
Subsidiaries for Taxes arising with respect to business operations
conducted by CHI or any of its Subsidiaries on or prior to the Closing
Date) for Taxes under Treas. Reg. ss.1.1502-6 (or any similar provision of
state, local or foreign law).
5.10 Exchange Act Reports.
5.10.1 CHI has filed with the Commission all forms, reports, schedules,
statements and other documents required to be filed by it pursuant to
Section 13 or 15 of the Exchange Act through August 1, 2005 (as such
documents have been amended since the time of their filing, collectively,
the "CHI Reports"), other than its annual report on Form 10-KSB for the
fiscal year ended April 30, 2005 and its quarterly report on Form 10-QSB
for the quarter ended July 31, 2005. As of their respective dates or, if
amended, as of the date of the last such amendment, the CHI Reports,
including, without limitation, any financial statements or schedules
included therein, to the best of CHI's knowledge, complied in all material
respects with the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the Commission promulgated thereunder
applicable to such CHI Reports, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No
Subsidiary of CHI is required to file any forms, reports or other
documents with the Commission pursuant to Sections 13 or 15 of the
Exchange Act.
5.10.2 CHI keeps books, records and accounts which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of CHI and its Subsidiaries.
6. CLOSING CONDITIONS
6.1 Conditions to the Obligations of MMI to Close. The obligation of MMI to
consummate the transactions contemplated hereby at the Closing is subject
to the fulfillment to the satisfaction of MMI, or the waiver by MMI, at or
prior to the Closing of each of the following conditions:
6.1.1 Each of the representations and warranties of CHI contained in
Article 5 shall be true, correct and complete on and as of the Closing
Date as though then made.
6.1.2 CHI shall execute and deliver to Stillwater one or more agreements
and/or instruments, in form satisfactory to Stillwater and its counsel, a
guaranty of payment and performance of the Stillwater Loan and a pledge of
the OB Shares to Stillwater as collateral security of the performance by
CHI of its obligations under such guaranty.
6.1.3 CHI shall execute and deliver the Regsitration Rights Agreement to
MMI.
6.2 Conditions to CHI's Obligation to Close. The obligation of CHI to
consummate the transactions contemplated hereby at the Closing is subject
to the fulfillment to the satisfaction of CHI, or the waiver by CHI, at or
prior to the Closing, of each of the following conditions:
17
6.2.1 On or before the Closing Date, the shareholders of MMI shall have
authorized MMI to consummate the transactions contemplated herein and
hereby.
6.2.2 On or before the Closing Date, the MMI-Stillwater Pledge Agreement
and Guaranty shall be canceled or modified in a manner satisfactory to
CHI, and the OB Shares shall be delivered to CHI free and clear of all
Liens.
6.2.3 Each of the representations and warranties of OB contained in
Article 3, and each of the representations and warranties of MMI contained
in Article 4 shall be true, correct and complete on and as of the Closing
Date as though then made.
7. NOTICES
7.1 All notices and other communications hereunder shall be in writing and
shall be deemed given if sent by e-mail transmission (if receipt is
electronically confirmed), or by a prepaid overnight courier service (if
receipt is confirmed in writing) addressed to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
7.1.1 In the case of MMI or OB:
Media Magic, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: CEO
with a copy to
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Arent Fox PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
E-Mail: ▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
7.1.2 In the case of CHI:
Cirilium Holdings, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
18
8. MISCELLANEOUS
8.1 Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter contained herein. All
prior negotiations and agreements between the parties hereto with respect
to the transactions provided for herein are superseded by this Agreement.
8.2 Waiver. No waiver of any of the provisions of this Agreement shall be
effective against any party to this Agreement unless reduced in writing
and duly signed by such party. The waiver by any party of any right
hereunder or of any breach of any of the terms hereof or defaults
hereunder shall not be deemed a waiver of any other rights or any
subsequent breach or default, whether of the same or of a similar nature,
and shall not in any way affect the terms hereof except to the extent of
such waiver.
8.3 Amendment. This Agreement can not be amended or modified unless made in
writing and duly signed by or on behalf of MMI, OB and CHI.
8.4 Construction. Wherever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable
law and in such a way as to, as closely as possible, achieve the intended
economic effect of such provision and this Agreement as a whole, but if
any provision contained herein is, for any reason, held to be invalid,
illegal or unenforceable in any respect, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality or unenforceability without invalidating the remainder of such
provision or any other provisions hereof, unless such a construction would
be unreasonable.
8.5 Assignment. This Agreement may not be transferred, assigned, pledged or
hypothecated by any party hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assignees.
8.6 Costs and Expenses. Each party shall pay its own and its advisers' fees
and expenses (including financial and legal advisors) incurred in
connection with the negotiation, execution and closing of this Agreement
and the transactions contemplated herein.
8.7 Non-Impairment of Rights. No failure or delay on the part of any party
hereto in the exercise of any right hereunder shall impair such right or
be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise
thereof or of any other right.
8.8 Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have
received a counterpart, or facsimile of a counterpart, of the Agreement
signed by the other party or parties hereto. Delivery of an executed copy
of this Agreement by facsimile transmission shall have the same effect as
delivery of an originally executed copy of this Agreement, whether an
originally executed copy shall be delivered subsequent thereto.
19
8.9 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Florida excluding the conflicts of
laws provisions thereof. The parties agree that the exclusive jurisdiction
and venue of any action with respect to this Agreement shall be in the
courts of Palm Beach County, Florida, and each of the parties hereby
submits to the exclusive jurisdiction and venue of such courts for the
purpose of such action.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
Cirilium Holdings, Inc.
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
Media Magic, Inc.
By:
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CEO
Orangebox Entertainment, Inc.
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
20
Schedule 3.5
OB Balance Sheet
Orangebox Entertainment, Inc.
Sep 30, 05
------------
ASSETS (Unauditied)
Current Assets
Checking/Savings
City National Bank -446.59
▇▇▇▇▇ Cash 15,950.00
Regent ***8406 -37,305.06
Regent Escrow Acct 16,670.00
------------
Total Checking/Savings -5,131.65
Accounts Receivable
Accounts Receivable 13,100.00
------------
Total Accounts Receivable 13,100.00
Other Current Assets
Departure 148,182.25
Employee Advances 1,000.00
Prepaid Expenses 16,937.00
------------
Total Other Current Assets 166,119.25
------------
Total Current Assets 174,087.60
Fixed Assets
Equipment 484,327.46
Equipment Lease 86,146.25
Furniture 9,902.06
Leasehold Improvements 76,873.99
------------
Total Fixed Assets 657,249.76
Other Assets
Prepaid Loan Fees 47,409.00
------------
Total Other Assets 47,409.00
------------
TOTAL ASSETS 878,746.36
============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 282,614.91
------------
Total Accounts Payable 282,614.91
Other Current Liabilities
Due to DigiKidz, Inc. 35,540.17
Due to Media Magic 180,188.41
Due to Royal Palm 33,307.29
------------
Total Other Current Liabilities 249,035.87
------------
Total Current Liabilities 531,650.78
Long Term Liabilities
Long Term Note 500,000.00
------------
Total Long Term Liabilities 500,000.00
------------
Total Liabilities 1,031,650.78
Shareholders' Equity
Add'l Cap. Cont. (Wire Transfer 1,028,666.83
Opening Bal Equity 169,000.00
Retained Earnings -733,478.58
Net Income -617,092.67
------------
Total Shareholders' Equity -152,904.42
------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 878,746.36
============
Schedule 3.6
Intellectual Property Rights
None.
Schedule 3.8
Real Poperty
Landlord: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Family Limited Partnership
------------------------------------------------------------------------------
Square Term Expiration Option Notice Renewal
Feet Date Date Term
------------------------------------------------------------------------------
9,678 5 years 10/31/2010 yes 4/30/2010 1-3 years
------------------------------------------------------------------------------
------------------------------------------------------------------------
Base Sales Total Annual Total Monthly
Rent Taxes Expenditure Expenditure
------------------------------------------------------------------------
$203,244.00 $13,245.96 $226,464.00 $18,872.00
------------------------------------------------------------------------
Landlord: The Cannery
----------------------------------------------------------------------------
Square Term Expiration Option Notice Renewal
Feet Date Date Term
----------------------------------------------------------------------------
2,200 month to N/A N/A N/A N/A
month
----------------------------------------------------------------------------
------------------------------------------------------------------------
Base Sales Total Annual Total Monthly
Rent Taxes Expenditure Expenditure
------------------------------------------------------------------------
$84,000.00 $6,930.00 $90,930.00 $7,577.50
------------------------------------------------------------------------
Schedule 3.10
Employee Benefits
Incentive Stock Options:
--------------------------------------------------------------------------------------------------------------------
Number of
Name Shares Exercise Price Term Relationship Details
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 300,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ 100,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ 100,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 100,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
Engineer 50,000 TBD 3 years Employee TBD
--------------------------------------------------------------------------------------------------------------------
Total 750,000
=======
Performance-based Stock Options:
--------------------------------------------------------------------------------------------------------------------
Number Exercise
Name of Shares Price Term Relationship Details
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 300,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ 200,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ 200,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 200,000 $0.50 3 years Employee Granted in Exec. E'ment Agmnt
--------------------------------------------------------------------------------------------------------------------
Engineer ▇▇▇ ▇▇▇ 3 years Employee TBD
--------------------------------------------------------------------------------------------------------------------
Total 1,000,000
=========
Copies of the employment agreements between OB and the following employees are
annexed to this Schedule:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
Schedule 3.10 - continued
Insurance Benefits:
1. Name of Carrier - CaliforniaChoice
2. Policy Number - 22197
3. Term - month-to-month
4. Current Monthly Premium - $3,552.37
5. Current Number of Participants - 10
6. Benefits Offered -
Medical - Orangebox pays 100% of the lowest cost HMO Plan 10
Dental - FDH Access 100 includede at no charge to Orangebox; Voluntary
3000 Plan available at extra cost to participant
Life - $10,000 coverage per participant
Vision - Voluntary plan
COBRA Status - Cal COBRA
7. Open Enrollment Date - 5/1/2006
8. Minimum Hours Eligibility - 30+
9. New Hire Waiting Period - 90 days
Schedule 3.11
OB Tax Matters
3.11.2 - Unpaid Taxes
Orangebox Entertainment, Inc. Tax Withholdings
-------------------------------------------------------------------------------
Total Withholdings 06-15-05 through 08-15-05 $37,459.63
Total Withholdings 09-01-05 through 10-01-05 $24,501.04
===============================================================================
TOTAL TO BE PAID $61,960.67
==========
3.11.5 - Tax Liability Claimed or Raised by any Taxation Authority
Orangebox Entertainment, Inc. received a Notice of Non-Compliance from the City
of Los Angeles Office of Finance Tax and Permit Division dated September 21,
2005, indicating that there was a deficiency in tax registration certificate for
Orangebox Entertainment, Inc. A copy of said Notice has been previously provided
to Cirilium Holdings, Inc.
Schedule 5.3.3
Outstanding Warrants and Options
New Warrants Issued June 1, 2005
Exercise Price: $0.30
Expiration Date: March 31, 2009
New warrants
issued after
Name Old Warrants repricing
--------------------------------------------------------------------------------
Alpenschlossl KG des ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 235,733 1,178,665
--------------------------------------------------------------------------------
Capital Bank - ▇▇▇▇▇ Gruppe AG 703,500 3,517,500
--------------------------------------------------------------------------------
Class Financial 125,000 625,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ Diethardt 50,000 250,000
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 166,667 833,335
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 40,000 200,000
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 67,500 337,500
--------------------------------------------------------------------------------
▇▇▇▇▇ Kniepeiss 25,000 125,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ 50,000 250,000
--------------------------------------------------------------------------------
Restinga Capital Ltd. 488,800 2,444,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ 35,000 175,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 200,000 1,000,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 97,600 488,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 50,000 250,000
--------------------------------------------------------------------------------
Total: 2,334,800 11,674,000
========= ==========
Employee Stock Options Exercised but not Issued - 485,833
Employee Stock Options Vested but not Exercised - 444,167
Other Shares to be Issued - 1,350,000
Schedule 5.4
CHI Subsidiaries
Cirilium Holdings II, Inc. - Delaware corporation and wholly-owned subsidiary of
Cirilium Holdings, Inc.
Cirilium, Inc. - a Florida corporation and wholly-owned subsidiary of Cirilium
Holdings II, Inc.
Stitel Systems, Inc. - an Arizona corporation and wholly-owned subsidiary of
Cirilium Holdings II, Inc.
Schedule 5.5
CHI Liabilities
Cirilium Holdings, Inc. Accounts Payable
----------------------------------------
Current as of September 30, 2005
Account Amount Owed
------- -----------
1 West Asset Mgmt - Qwest - Phone Local $249.74
2 AT&T - Phone LD & Internet $361.63
3 Staples - Office Supplies $490.15
4 FedEx - Shipping $8,996.45
5 DHL - Shipping $108.40
6 SRP - Utilities $219.88
7 CMS - SW Support $1,500.00
8 Premiere - Phone Conferencing $31.80
9 Prepaid Press - Advertising $4,750.00
10 RReef - Calwest - Rent $15,328.68
11 SOS Exterminating - Maintenance $45.00
12 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - Legal $146.25
13 Digium - Hardware $1,495.00
14 American Express - Credit Card $3,269.31
15 Contact - Website hosting $25.00
16 Virgo & Taurus Publishing $9,500.00
17 Sales Commissions $25,125.00
18 JMG Properties $22,032.00
-------------------
TOTAL $93,674.29
==========
Schedule 5.9
CHI Tax Matters
5.9.2 - Unpaid Taxes
1. 2003 Delaware Franchise Tax
2. 2004 Delaware Franchise Tax
