SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT dated as of November 22, 2000 ("Agreement"), among
Magellan Filmed Entertainment, Inc., a Nevada corporation ("Magellan"), and True
Fiction, Inc., a Nevada corporation, ("True Fiction") and ▇▇▇▇ ▇▇▇▇▇▇, an
individual ("▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇, an individual ("▇▇▇▇▇").
BACKGROUND
The respective Boards of Directors of Magellan and True Fiction have each
approved, upon the terms and subject to the conditions set forth in this
Agreement, the share exchange between Magellan and True Fiction whereby each
issued and outstanding share of common stock of True Fiction will be exchanged
for shares of Common Stock to be issued by Magellan as set forth in Article 1
and by which True Fiction shall become a wholly-owned subsidiary of Magellan.
▇▇▇▇▇▇ and ▇▇▇▇▇ each owns 500 shares of Common Stock of True Fiction which
represents 100% of the total issued and outstanding shares of True Fiction. As
part of this Agreement, ▇▇▇▇▇▇ and ▇▇▇▇▇ have agreed to deliver to Magellan, all
of the True Fiction shares owned by them upon the terms and subject to the
conditions set forth in this Agreement.
In consideration of the respective representations, warranties, covenants and
agreements contained in this Agreement, Magellan and True Fiction and Magellan
and ▇▇▇▇▇▇ and ▇▇▇▇▇ hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 THE SHARE EXCHANGE. Upon the terms and subject to the conditions
hereof, True Fiction shall become a wholly-owned subsidiary of Magellan upon the
Effective Time of this Agreement subject to the conditions set forth in Article
VII.
1.02 EFFECTIVE TIME. This Agreement shall become effective at such
time ("Effective Time") as the conditions set forth in Article VII are satisfied
or waived, if permissible.
1.03 SHARES. At or prior to the Effective Time, by virtue of this
Agreement, the following events shall occur.
a) Each issued and outstanding share of common stock of True Fiction shall
be assigned, transferred and conveyed to Magellan.
b) In exchange thereof, Magellan shall issue from its treasury 6,000,000
shares of its common stock ("Common Stock") which shall be issued 3,000,000
shares to ▇▇▇▇▇▇, and 3,000,000 shares to ▇▇▇▇▇.
113
1.04 PRIVATE PLACEMENT.
a) The Common Stock issued to True Fiction's shareholders have not been and
will not be registered with the Securities and Exchange Commission ("SEC") or
the securities commission of any state, pursuant to an exemption from
registration by virtue of Magellan's intended compliance with the provisions of
Section 4(2) and 4(6) of the Securities Act of 1933, as amended ("Securities
Act"), and the Common Stock will be made available only to "accredited
investors" or True Fiction's shareholders who have used a "Purchaser
representative", as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. Such exemption limits the number and types of investors to
which the offering of Common Stock may be made and restricts subsequent
transfers of the Common Stock so offered which also may be restricted by state
securities laws. The Common Stock may not be resold or otherwise disposed of by
True Fiction's shareholders unless, in the opinion of counsel to Magellan,
registration under federal and applicable state securities laws is not required
or compliance is made with the registration requirements of such laws.
b) In the event Magellan files a registration statement under the Securities
Act of 1933 for the public offering of its securities within thirty-six (36)
months from the Effective Time of this Agreement, each of True Fiction's
shareholders shall be entitled to certain incidental or "piggyback"
registration rights for the shares of Common Stock held by them. At the
Effective Time, Magellan and the True Fiction shareholders shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit 1.04 (b).
ARTICLE II
EXCHANGE OF SHARES
2.01 ISSUANCE OF CERTIFICATE. At the Effective Time, Magellan shall issue
to ▇▇▇▇▇▇ and ▇▇▇▇▇ certificates representing the Common Stock to be issued to
each. Simultaneously ▇▇▇▇▇▇ and ▇▇▇▇▇ shall exchange and surrender their
certificates representing all of their True Fiction shares in True Fiction
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
MAGELLAN
Magellan represents and warrants to True Fiction as of the date of this
Agreement and as of the Effective Time as follows:
3.01 EXISTENCE: GOOD STANDING. Magellan is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
3.02 CAPITALIZATION. The authorized capital stock of Magellan consists of
200,000,000 shares of Common Stock, par value $0.001 ("Shares") and 50,000,000
shares of Preferred Stock, par value $0.001. As of July 17, 2000, there were no
Preferred Shares issued and outstanding and 48,329,509 shares of Common Stock
issued and outstanding. All issued and outstanding shares of Common Stock are
duly authorized, validly issued, free of preemptive rights, non-assessable, and,
are fully paid. Options, warrants and other rights to acquire from Magellan or
any of its subsidiaries and obligations of Magellan or any of its subsidiaries
to issue, any capital stock, or securities convertible into or exchangeable for
capital stock or voting securities of Magellan as of June 30, 2000 are as set
forth in Magellan's unaudited financial statements as of and for the three and
six month periods ended June 30, 2000, a copy of which has been provided to True
Fiction and is annexed hereto as Exhibit 3.02.
3.03 AUTHORIZATION: VALIDITY AND EFFECT OF AGREEMENTS. Magellan has the
requisite corporate power and authority to execute and deliver this Agreement.
The consummation by Magellan of the transactions contemplated hereby has been
duly authorized by all requisite corporate action and the issuance of the Common
Stock to True Fiction's shareholders has been approved by the board of directors
of Magellan at a meeting held October 10, 2000. This Agreement constitutes the
valid and legally binding obligation of Magellan, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
3.04 NO VIOLATION. To the best of Magellan's knowledge neither the execution
and delivery by Magellan of this Agreement, nor the consummation by Magellan of
the transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the Articles of
Incorporation or Bylaws of Magellan (ii) violate, or conflict with, or result in
a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the triggering of any payment of
compensation under, or result in the creation of any lien, security interest,
charge or encumbrance ("Lien") upon any of the material properties of Magellan
or its subsidiaries under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise permit, lease, contract, agreement or other instrument, commitment or
114
obligation to which Magellan or any of Magellan's subsidiaries is a party, or by
which Magellan or any of Magellan's subsidiaries or any of their respective
properties is bound or affected, except for any of the foregoing matters which
would not have a material adverse effect on the business, results of operations,
financial condition or prospects of Magellan and its subsidiaries taken as a
whole ("Magellan Material Adverse Effect"); or (iii) other than the filings
required under the Securities Exchange Act of 1934, ("Exchange Act"), the
Securities Act or applicable state securities and "Blue Sky" laws or filings in
connection with the maintenance of its qualification to do business in other
jurisdictions, and the filings contemplated by Section 5.02 of this Agreement
(collectively, "Regulatory Filings"), require any material consent, approval or
authorization of, or declaration, filings or registration with, any domestic
governmental or regulatory authority, the failure to obtain or make which would
have a Magellan Material Adverse Effect.
3.05 DOCUMENTS. Magellan has delivered to True Fiction the following
documents:
- Audited financial statements for the year ended December 31, 1999;
- Form 10Q dated August 14, 2000 which included unaudited financial
statements for the three and six month periods ended June 30, 2000
- Form 8K dated April 4, 2000;
- Form 8K dated April 24, 2000 (Amended July 12, 2000).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF TRUE FICTION
True Fiction represents and warrants to Magellan as of the date of this
Agreement and as of the Effective Time as follows:
4.01 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH LAW.
True Fiction is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. True Fiction
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of its properties occupied,
owned or held under lease or the nature of its business makes such qualification
or licensing necessary. The copies of True Fiction's Articles of Incorporation
and Bylaws previously delivered to Magellan are true and correct and have not
since been amended, modified or rescinded except as may have occurred pursuant
to Section 6.01 (d) herein.
4.02 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. True Fiction has the
requisite corporate power and authority to execute and deliver this Agreement.
The consummation by True Fiction of all transactions contemplated hereby has
been duly authorized by the approval of the Board of Directors and is required
to be approved by the shareholders of True Fiction and such approvals were
obtained by shareholder consent and meeting of the Board of Directors on October
10, 2000. This Agreement constitutes the valid and legally binding obligation
of True Fiction, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
4.03 CAPITALIZATION. The authorized capital stock of True Fiction consists
of 10,000,000shares of $0.001 par value common stock and no other classes of
stock, common or preferred, or other securities. There are 1,000 shares of
common stock issued and outstanding as of October 11, 2000. All issued and
outstanding shares of common stock are duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. True Fiction is not a party
to or bound by any written or oral contract or agreement which grants to any
person an option, warrant or right of first refusal or other right of any
character to acquire at any time, or upon the happening of any stated events,
any shares of or interest in True Fiction, whether or not presently authorized,
issued or outstanding. There are outstanding (i) no other shares of capital
stock or other voting securities of True Fiction, (ii) no securities of True
Fiction or any of its subsidiaries convertible into or exchangeable for shares
of capital stock or voting securities of True Fiction, (iii) except for Series A
Senior Subordinated Convertible Debentures ("True Fiction Debentures") no
options or other rights to acquire from True Fiction or any of its subsidiaries,
and no obligations of True Fiction or any of its subsidiaries to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of True Fiction, and (iv) no equity
equivalents, interest in the ownership or earnings of True Fiction or any of its
subsidiaries or other similar rights. There are no outstanding obligations of
True Fiction or any of its subsidiaries to repurchase, redeem or otherwise
acquire any securities of True Fiction.
4.04 NO VIOLATION. Neither the execution and delivery by True Fiction of
this Agreement nor the consummation by True Fiction of the transactions
contemplated hereby in accordance with the terms hereof will: (i) conflict with
or result in a breach of any provisions of the Articles of Incorporation or
Bylaws of True Fiction or its subsidiaries, (ii) violate, or conflict with, or
115
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the triggering of any
payment or compensation under, or result in the creation of any Lien upon any of
the properties of True Fiction or its subsidiaries under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation of which True Fiction or its subsidiaries
is a party, or by which True Fiction or its subsidiaries or any of their
respective properties or assets is bound or affected, except for any of the
foregoing matters which, singularly or in the aggregate, would not have an
adverse effect on the business of True Fiction ("True Fiction Material Adverse
Effect"); (iii) other than the Regulatory filings, require any material
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make which would have a True Fiction Material Adverse Effect, as defined in
Section 7.01(c) below, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to True Fiction, any of its subsidiaries
or any of their assets, except for violations which in the aggregate would not
have a True Fiction Material Adverse Effect or materially adversely affect the
ability of True Fiction to consummate the Merger.
4.05 DOCUMENTS. True Fiction has delivered to Magellan the following
documents:
1. Unaudited financial statements from inception through ______________,
2000.
2. Subscription Agreement, Debenture Agreement and other documentation
relating to the True Fiction Debentures issued to accredited investors in a
private placement offering of True Fiction's securities.
3. List of Assets
4.06 ASSETS AND LIABILITIES. True Fiction hereby represents and warrants
that it has no contingent or other liabilities other than those listed in
Exhibit 4.06 annexed hereto. The assets owned by True Fiction, as set forth in
Exhibit 4.06(a) annexed hereto, at the Effective Time shall be free and clear of
any and all liens, claims or other encumbrances.
4.07 MATERIAL CONTRACTS. True Fiction hereby represents and warrants that
all of the material contracts which are essential to its business ("Material
Contracts") are set forth in Exhibit 4.07. True Fiction further represents and
warrants that all the Material Contracts as set forth in Exhibit 4.07 are valid,
binding and enforceable according to their terms against each party to the
contracts.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ROMANO AND ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ represent and warrant to Magellan as of the date of this
Agreement and as of the Effective Time as follows:
5.01 OWNERSHIP. ▇▇▇▇▇▇ and ▇▇▇▇▇ own beneficially and of record the shares
of True Fiction free and clear of any liens and encumbrances.
5.02 ENFORCEABILITY. ▇▇▇▇▇▇ and ▇▇▇▇▇ have full power, capacity and
authority to execute this Agreement and such other agreements, documents and
instruments called for by this Agreement, to make the representations,
warranties and covenants herein and to perform his obligations hereunder. This
Agreement is duly executed and is a legal and binding obligation of ▇▇▇▇▇▇ and
▇▇▇▇▇, enforceable according to its terms, except as to the effect, if any, of
applicable bankruptcy insolvency, moratorium or other similar laws relating to
creditors rights and general principles of equity. Neither the execution and
delivery by Romano and ▇▇▇▇▇ of this Agreement or the consummation by ▇▇▇▇▇▇ and
▇▇▇▇▇ of the transactions contemplated by this Agreement will (i) violate,
conflict with or result in the breach of any provision of, or constitute a
default under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by ▇▇▇▇▇▇ or ▇▇▇▇▇ under
any material agreement, lease, note or other restriction, encumbrance,
obligation or liability to which ▇▇▇▇▇▇ or ▇▇▇▇▇ is a party or by which either
is bound; or (ii) result in the creation or imposition of any lien or
encumbrance on any of ▇▇▇▇▇▇ or Shane's shares of True Fiction.
ARTICLE VI
COVENANTS
6.01 CONDUCT OF BUSINESS. From and after the date of this Agreement until
the Effective Time or this Agreement is terminated, unless Magellan has
consented in writing thereto, True Fiction, and, with respect to (e) and (f)
below, Magellan and True Fiction:
a) Shall, and shall cause its subsidiaries to, conduct its operations
according to its usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
116
b) Shall use reasonable efforts, and shall cause its subsidiaries to use
reasonable efforts, to preserve intact its business organization and goodwill,
keep available the services of its officers and employees and maintain
satisfactory relationships with those persons having business relationships with
it;
c) Shall confer on a regular basis with one or more representatives of
Magellan to report operational matters of materiality and any proposals to
engage in material transactions;
d) Shall not amend its Articles of Incorporation or By Laws.
e) Shall promptly notify the other parties hereto of any material emergency
or other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, any material litigation or
material governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in any material
respect of any representation or warranty contained herein;
f) Shall promptly deliver to the other parties hereto true and correct
copies of any report, statement or schedule filed with or delivered to the SEC,
any other Governmental entity (other than routine corporate tax and other
filings in the ordinary course of business) or any shareholder of True Fiction
or Magellan, as the case may be, subsequent to the date of this Agreement;
g) Shall not (i) issue, sell or pledge, or agree to issue, sell or pledge,
any shares of its capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof, (ii) grant, confer or award any
option, warrant, conversion right or other right to acquire any shares of its
capital stock or grant any right to convert or exchange any securities of True
Fiction for Common Stock, (iii) increase any compensation or enter into or amend
any employment agreement with any of its present or future officers or
directors, other than in the ordinary course of True Fiction's business, (iv)
adopt any new employee benefit plan, other than in the ordinary course of True
Fiction's business (including any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material respect, other
than in the ordinary course of business, except, in each case, for changes which
are less favorable to participants in such plans or as may be required by
applicable law, or (v) amend any Officer Employment Agreement or increase any
compensation payable pursuant to such Officer Employment Agreements;
h) Shall not (i) except in the normal course of business as consistent with
prior practice, declare, set aside or pay any dividend (whether in cash, stock
or property) or make any other distribution or payment with respect to any
shares of its capital stock or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or make any commitment for any
such action;
i) Shall not, and shall not permit its subsidiaries to, agree in writing to
take or otherwise take (i) any of the foregoing actions or (ii) any action which
would make any representation or warranty of True Fiction herein untrue or
incorrect.
6.02 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, True Fiction and Magellan shall: (i) use all reasonable efforts to
cooperate with one another in (a) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states,
and other jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (b)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (ii) use best efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Magellan and True Fiction shall
use best efforts to take all such necessary action.
6.03 DUE DILIGENCE REVIEW. From the date hereof to the Effective Time, each
of Magellan and True Fiction shall allow all designated officers, attorneys,
accountants and other representatives of Magellan and True Fiction, as the case
may be, access at all reasonable times to the records and files, correspondence,
audits and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs of Magellan, True Fiction and their subsidiaries.
For the purpose of conducting their respective due diligence investigations,
each party will make available to the other for examination and reproduction all
documents and data of every kind and character relating to this Agreement and
the transactions contemplated hereby, in possession or control of, or subject to
reasonable access by either party. All such due diligence investigation shall
be completed and each party shall notify the other in writing of the
satisfaction or removal of this due diligence review condition on or prior to
the Effective Time.
117
Upon mutual agreement of the parties, additional time may be allowed to complete
such due diligence investigation. Should a party ("Reviewing Party") become
aware of any information during its due diligence investigation which, in the
opinion of the Reviewing Party, could have material adverse impact on this
Agreement and/or the transactions contemplated hereby, the Reviewing Party shall
immediately notify the other party ("Receiving Party") in writing of such
information and the concerns which such information has caused. The Receiving
Party shall have a reasonable time to respond to those concerns. In the event
that the concerns cannot be resolved to the satisfaction of the Reviewing Party,
the Reviewing Party shall have the right to terminate this Agreement without
further liability hereunder. Each party shall bear the costs and expenses of its
own due diligence investigation hereunder, including the fees and expenses of
professional advisors
6.04 INDEMNIFICATION.
a) (i) After the Effective Time, Magellan shall, to the fullest extent
permitted, indemnify, defend and hold harmless the present and former directors
and officers of Magellan and True Fiction and any subsidiaries and their
respective heirs, executors, administrators and legal representatives
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") against all losses, expenses, claims, damages or liabilities arising
out of actions or omissions occurring on or prior to the Effective Time
(including, without limitation, acts or omissions relating to the transactions
contemplated by this Agreement (collectively "Losses")). In connection with the
foregoing obligations from and after the Effective Time, Magellan shall bear the
cost of expenses incurred in defending against any claim, action, suit,
proceeding or investigation arising out of any alleged acts or omissions
occurring on or prior to the Effective Time (including, without limitation, acts
or omissions relating to the transactions contemplated by this Agreement), as
incurred to the fullest extent permitted under applicable law. All rights to
indemnification, including provisions relating to advances, expenses and
exculpation of director liability, existing in favor of the Indemnified Parties
as provided in Magellan's or True Fiction's Articles of Incorporation and
Bylaws, as in effect as of the date of this Agreement, with respect to matters
occurring through the Effective Time, will survive the Effective Time and will
continue in full force and effect.
(ii) Any Indemnified Party will promptly notify Magellan of any claim,
action, suit, proceeding or investigation for which such party may seek
indemnification under this Section (a "Third Party Claim"). In the event of any
such Third Party Claim, (x) within twenty (20) days of receipt of such notice,
Magellan will have the right to assume the defense thereof, and Magellan will
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred thereafter by such
Indemnified Parties in connection with the defense thereof, except that all
Indemnified Parties (as a group) will have the right to retain one separate
counsel, acceptable to such Indemnified Parties, as the expense of the
Indemnifying Party if the named parties to any such proceeding include both the
Indemnified Party and Magellan and the representation of such parties by the
same counsel would be inappropriate due to a conflict of interest between them,
and each Indemnified Party will have the right to retain a separate counsel,
acceptable to such Indemnified Party, at the expense of the Indemnifying Party,
if representation of such Indemnified Party and the other Indemnified Parties
as a group would be inappropriate due to a conflict of interest between them and
(y) the Indemnified Parties will cooperate in the defense of any such matter.
If Magellan fails to take action within twenty (20) days as set forth in (x)
above, then the Indemnified Party shall have the right to pay, compromise or
defend any Third Party Claim and to assert the amount of any payment on the
Third Party Claim plus the expense of defense or settlement as a Loss. Magellan
will not be liable for any settlement affected without its prior written
consent, unless it has failed to take action within the twenty (20) day period
after receipt of notice as set forth above. Notwithstanding the foregoing,
Magellan will not have any obligation under this Section 5.04 to indemnify an
Indemnified Party when and if a court of competent jurisdiction ultimately
determines and such determination becomes final, that the indemnification of
such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law.
b) Magellan shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for in this Section 6.04.
c) The rights of each Indemnified Party hereunder shall be in addition to
any other rights such Indemnified Party may have under the Articles of
Incorporation or by laws of Magellan, under the Nevada Statute or otherwise.
The provisions of this Section shall survive the consummation of the Effective
Time and expressly are intended to benefit each of the Indemnified Parties and
will be binding on all successors and assigns of Magellan.
6.05 FURTHER ACTION. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Effective Time.
118
6.06 EXPENSES. Whether or not the Effective Time is consummated, except as
provided in Section 8.02 hereof or as provided otherwise herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
6.07 PUBLICITY. The initial press release relating to this Agreement shall
be a joint press release and thereafter True Fiction and Magellan shall, subject
to their respective legal obligations (including requirements of the OTC
Bulletin Board stock exchanges and other similar regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency or with
OTC Bulletin Board, or any national securities exchange with respect thereto.
6.08 BEST EFFORTS TO EXECUTE AGREEMENT. The parties hereto agree to use
their best efforts to execute this Agreement on or before November 20, 2000.
ARTICLE VII
CONDITIONS TO CONSUMMATION
OF THE SHARE EXCHANGE
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE SHARE EXCHANGE.
The respective obligations of each party to effect the Share Exchange are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
a) This Agreement shall have been approved by the Board of Directors of True
Fiction and the affirmative vote of the shareholders of True Fiction by the
requisite vote in accordance with applicable law, if required, and by the Board
of Directors of Magellan by resolution in accordance with applicable law. Each
of the consents and resolutions set forth on Schedule 7.01(a), 7.01 (a) (1) and
7.01 (a) (2) hereto shall have been obtained.
b) No statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent), shall have been
enacted, entered, promulgated or enforced by any court or governmental authority
which is in effect and has the effect of prohibiting the consummation of the
Effective Time; provided, however, that each of the parties shall have used its
best efforts to prevent the entry of any injunction or other order and to appeal
as promptly as possible any injunction or other order that may be entered;
c) True Fiction, on or before the Effective Time shall have completed the
issuance of the True Fiction Debentures in the face amount of $1,000,000 to
, a Colorado limited liability company, upon the terms and conditions set forth
in the Subscription Agreement and other documentation relating to the issuance
of the True Fiction Debentures. Subject to and upon the Effective Time of this
Agreement, Magellan agrees to assume the liabilities and obligations of True
Fiction under the True Fiction Debentures including the obligation to pay
principal and interest on the Debentures. On or prior to the Effective Time,
True Fiction shall secure, in writing, from all of the holders of the True
Fiction Debentures, their consent to Magellan's assumption of True Fiction's
liability and obligations under the terms and conditions of the True Fiction
Debentures.
d) True Fiction shall deliver the legal opinion of its counsel,
substantially in the form annexed hereto as Exhibit 7.01 (d) and Magellan shall
deliver the legal opinion of its counsel, substantially in the form annexed
hereto as Exhibit 7.01(d)(1).
e) At the Effective Time, True Fiction shall have executed all agreements,
documents and instruments necessary to effectuate the issuance of the True
Fiction Debentures.
f) An Employment Agreement between Magellan or its affiliates and ▇▇▇▇▇▇ and
Magellan or its affiliates and ▇▇▇▇▇ shall have been executed in the form
attached hereto as Exhibit 7.01 (f) and Exhibit 7.01 (f) (1).
g) Each party shall have completed its due diligence review and notified the
other in writing of the satisfaction or removal of the due diligence review
condition in accordance with Article 6.03 of this Agreement.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.01 EFFECTIVE TIME AND TERMINATION. Except as otherwise set forth in this
Section 8.01, this Agreement shall close by no later than 11:59 p.m. Seattle,
Washington, October 22, 2000, provided that either party may extend this
Agreement for an additional seven (7) day period by written notice to the other
party prior to the Effective Time. This Agreement shall terminate if not closed
119
by 11:59 p.m., Seattle, Washington, October 22, 2000 or October 29, 2000 if
extended by either party. Notwithstanding the foregoing and/or the approval of
this Agreement by the shareholders of True Fiction and the Board of Directors of
Magellan, this Agreement may be terminated and the Effective Time contemplated
hereby may be abandoned at any time prior to the Effective Time:
a) By mutual written consent, duly authorized by their respective Boards of
Directors, by Magellan and True Fiction;
b) By either Magellan or True Fiction:
(i) if any court of competent jurisdiction or any other governmental body
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise permanently prohibiting the
Effective Time and such order, decree, ruling or other action shall have become
final and non-appealable;
(ii) if, upon a vote at a duly held meeting or upon any adjournment thereof,
the shareholders of True Fiction and the Board of Directors of Magellan shall
have failed to give any required approvals; or
c) By Magellan if True Fiction shall have breached any of its
representations and warranties or covenants contained herein and if such breach
or breaches, either individually or in the aggregate, will have, or are
reasonably likely to have, a material adverse effect on the business, results of
operations, financial condition or prospects of True Fiction (a "True Fiction
Material Adverse Effect"), unless, in the case of a breach of covenant, such
failure to perform has been caused by a breach of this Agreement by Magellan.
d) By True Fiction if Magellan shall have breached any of its
representations and warranties and such breach or breaches, either individually
or in the aggregate, will have, or are reasonably likely to have, a Magellan
Material Adverse Effect, or if Magellan shall have breached in any material
respect any of its covenants contained herein, unless, in the case of a breach
of any covenant, such failure to perform has been caused by a breach of this
Agreement by True Fiction;
8.02 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Agreement pursuant to Section 8.01, this Agreement, except for the
obligations of the parties pursuant to this Section 8.02 and the provisions of
Section 6.06, shall forthwith become void and have no effect, without any
liability on the part of any party or its directors, officers or shareholders;
provided that nothing in this Section 8.02 shall relieve any party to this
Agreement of liability for breach of this Agreement.
8.03 AMENDMENT. To the extent permitted by applicable law, this Agreement
may be amended by the parties, at any time before or after approval of this
Agreement and the share exchange by the shareholders of True Fiction but, after
any such shareholder approval, no amendment shall be made that by law requires
further approval of such shareholders without the approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
8.04 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any other
applicable party or in any document, certificate or writing delivered pursuant
hereto by any other applicable party, or (iii) subject to the terms hereof,
waive compliance with any of the agreements or conditions of the other parties
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of a party to this Agreement to assert any of
its rights under this Agreement shall not constitute a waiver of those rights.
8.05 PROCEDURE FOR CLOSING, TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require (a) in the case of Magellan,
action by its Board of Directors or the duly authorized designee of its Board of
Directors and (b) in the case of True Fiction, action by its Board of Directors.
ARTICLE IX
MISCELLANEOUS
9.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be only
conditions to the Effective Time and shall not survive the Effective Time,
provided, however, that the representations and warranties contained in Section
1.04, and in this Article IX shall survive the Effective Time.
9.02 ASSIGNMENT, BINDING EFFECT; BENEFIT; ENTIRE AGREEMENT. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties except that Magellan
shall have the right, at its sole discretion, to assign and transfer this
Agreement to a subsidiary company wholly owned by Magellan. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
120
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, successors, executors,
administrators and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement. This Agreement and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings (oral and written) among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
9.03 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or otherwise affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision, clause, section or part of this Agreement is so broad as to be
unenforceable, the provision, clause, section or part shall be interpreted to be
only so broad as is enforceable, and all other provisions, clauses, sections or
parts of this Agreement which can be effective without such unenforceable
provision, clause, section or part shall, nevertheless, remain in full force and
effect.
9.04 NOTICES. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to True Fiction, to
True Fiction, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇
Fax # ▇▇▇-▇▇▇-▇▇▇▇
If to ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax # ▇▇▇-▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax # ▇▇▇-▇▇▇-▇▇▇▇
If to Magellan, to
Magellan Filmed Entertainment, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇, President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney At Law
S.W. Fifth Avenue, Suite 1300
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date it is
telecommunicated, personally delivered or mailed.
9.05 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to its rules of
conflict of laws.
9.06 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled under the with rules of
the American Arbitration Association with venue in King County Washington.
9.07 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.08 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
121
number of copies of this Agreement each of which may be signed by less than all
of the parties hereto, but together all such copies shall constitute one and the
same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing the facsimile signature of a party hereto shall
constitute a valid and binding execution and delivery of this Agreement by such
party. Such facsimile copies shall constitute enforceable original documents.
9.09 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings ascribed to them below:
a) "Affiliate" of a person means a person that directly or indirectly,
---------
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first-mentioned person.
b) "Control" (including the terms "controlling", "controlled by" and "under
-------
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contract, or otherwise.
c) "Person" means a natural person, company, corporation, partnership,
------
joint venture, association, trust, unincorporated organization or other entity.
d) "Subsidiary" of any person means a person in which such first referenced
----------
person owns directly or indirectly an amount of the voting securities, other
voting ownership or voting partnership interest which is sufficient to elect at
least a majority of its Board of directors or other governing body (or, if there
are no such voting interest, owns directly or indirectly 50% or more of the
equity interest).
9.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in the Agreement. The waiver by any party hereto to a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.11 U.S. FUNDS. All monetary amounts set forth herein are stated in
currency of the Untied States of America unless otherwise specifically stated.
9.12 INCORPORATION OF EXHIBITS. All Exhibits and annexes attached hereto
and referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
9.13 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, words denoting any gender shall include all genders and words denoting
natural persons shall include corporations and partnerships and vice versa.
122
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its respective officers thereunto duly authorized, all as of
the day and year first above written.
THIS SPACE LEFT BLANK INTENTIONALLY - SIGNATURE PAGES FOLLOW
MAGELLAN FILMED ENTERTAINMENT, INC.
By: s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
TRUE FICTION, INC.
By: s/▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇▇
By: s/▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇▇▇, Individually
▇▇▇▇▇▇ ▇▇▇▇▇
By: s/▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Individually
123
EXHIBITS TO SHARE EXCHANGE AGREEMENT
BETWEEN
MAGELLAN FILMED ENTERTAINMENT, INC.
AND
TRUE FICTION INC.
Exhibit 1.04 (b) Registration Rights Agreement
Exhibit 3.02 -1 Audited Financial Statements of Magellan Filmed
Entertainment, Inc. as of and for the year ended December 31, 1999
Exhibit 3.02 -2 Unaudited Financial Statements of Magellan Filmed
Entertainment, Inc. as of and for the three and six month periods ended June 30,
2000
Exhibit 4.06 List of True Fiction' Liabilities
Exhibit 4.06 (a) List of True Fiction' Assets
Exhibit 4.07 True Fiction Material Contracts
Exhibit 7.01 (a) Consent of True Fiction's Directors
Exhibit 7.01 (a) (2) Consent of True Fiction's Shareholders
Exhibit 7.01 (a) (3) Resolution of the Board of Directors of Magellan Filmed
Entertainment, Inc.
Exhibit 7.01 (d) Legal Opinion of True Fiction' General Counsel
Exhibit 7.01 (d) (1) Legal Opinion of Magellan's General Counsel
Exhibit 7.01 (f) (1) Employment Agreement with ▇▇▇▇ ▇▇▇▇▇▇
Exhibit 7.01(f) Employment Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇
124