STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "Agreement"), entered into this 26 th
day of September 2000, by and among Magellan Filmed Entertainment, Inc., a
Nevada Corporation ("Magellan"), and all of the Shareholders of The Nickel
Palace, Inc., a Nevada corporation (the "Nickel Palace"), who are Michael
Garrity, Mike Gabrawy, and Marc Fusco (collectively referred to as the
"Shareholders").
W I T N E S S E T H :
WHEREAS, Magellan has an authorized capital of 200,000,000 shares of Common
Stock, $0.001 Par Value per share (the "Magellan Common Stock"), of which as at
July 17, 2000, 48,329,509 shares are issued and outstanding, together with
Warrants (the "Magellan Warrants", ) to purchase shares of the Magellan Common
Stock (which two securities shall be collectively referred to as the "Magellan
Securities"), as well as 50,000,000 shares of Preferred Stock, Par Value $0.001
per share, of which no shares are issued and outstanding;
WHEREAS, Nickel Palace has an authorized capital of 10,000,000 shares of
Common Stock, $0.001 Par Value per share (the "Nickel Palace Common Stock"), of
which 1,000,000 shares are issued and outstanding, together with Warrants (the
"Nickel Palace Warrants") to purchase shares of the Nickel Palace Common Stock
(which securities shall be collectively referred to as the "Nickel Palace
Securities");
WARRANTS
NO. OF SHS. TO PURCHASE SHS.
NAME OF OF NICKEL OF NICKEL
SHAREHOLDER BEFORE EXCHANGE BEFORE EXCHANGE
------------- --------------- ---------------
Michael Garrity 333,334 Shares 149,997 Shares
Mike Gabrawy 333,333 Shares 149,997 Shares
Marc Fusco 333,333 Shares 149,997 Shares
WHEREAS, Magellan desires to acquire the Nickel Palace Common Stock and the
Nickel Palace Warrants from the Shareholders, and, in exchange therefor, to
issue to the Shareholders Magellan Common Stock and Magellan Warrants;
WHEREAS, the Shareholders desire to acquire the Magellan Common Stock and
the Magellan Warrants from Magellan, and, in exchange therefor, to surrender to
Magellan their Nickel Palace Common Stock and their Nickel Palace Warrants;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
5
<PAGE>
ARTICLE I.
EXCHANGE OF STOCK; CLOSING
Section 1.1. Exchange of Securities.
At the Closing (as defined in Section 1.2) each of the Shareholders shall
transfer and assign to Magellan all of his Nickel Palace Securities, by
delivering to Magellan certificates representing their respective holdings of
the Nickel Palace Securities duly endorsed for transfer. In exchange therefor,
Magellan shall issue to the Shareholders the number of shares of Magellan Common
Stock and Magellan Warrants set forth below:
<TABLE>
<CAPTION>
Warrants Warrants
No. of Shs. No. of Shs To purchase Shs. To Purchase Shs.
NAME OF of Nickel of Magellan of Nickel of Magellan
SHAREHOLDER BEFORE EXCHANGE AFTER EXCHANGE BEFORE EXCHANGE AFTER EXCHANGE
------------- ----------------- --------------- ----------------- ----------------
<S><C> <C> <C> <C> <C>
Michael Garrity 333,334 Shares 1,000,000 Shares 149,997 Shares 500,000 Shares
Mike Gabrawy 333,333 Shares 1,000,000 Shares 149,997 Shares 500,000 Shares
Marc Fusco 333,333 Shares 1,000,000 Shares 149,997 Shares 500,000 Shares
</TABLE>
To effect such issue of its Nickel Palace Securities of capital stock,
Magellan shall prepare and issue an irrevocable letter of instructions, dated as
of the Closing Date, addressed to Magellan's Transfer Agent, directing and
authorizing said Transfer Agent to issue Certificates representing Magellan
Common Stock and Magellan Warrants to the Shareholders as set forth above.
Section 1.2. The Closing.
The exchange of the Magellan Securities for the Nickel Palace Securities,
as set forth in Section 1.1 hereof (the Closing), shall take place at the office
of Magellan Filmed Entertainment, Inc., 8756 122nd Avenue NE, Kirkland,
Washington 98033 or at such other location as the parties may determine, on
September 26, 2000 (Closing Date), or such other time or place as the Parties
hereto shall agree to in writing.
Section 1.3. Closing Information.
The parties hereto, at or prior to the Closing Date, shall deliver to each
other the schedules, documents, financial statements and other information
identified or described in this Agreement (the Closing Information). All
actions taken and Closing Information delivered at the Closing or prior thereto
shall be deemed taken or delivered simultaneously at the Closing and no action
shall be deemed taken, or any Closing Information deemed delivered, until all
actions have been taken and all Closing Information has been delivered.
6
<PAGE>
Section 1.4. Directors and Officers of Nickel Palace.
At the Closing, the directors and officers of Nickel Palace shall submit
their resignations and, at the same time, shall elect new directors designated
by Magellan.
ARTICLE II.
REPRESENTATION AND WARRANTIES OF THE PARTIES
Section 2.1. General Representations and Warranties.
Each party hereby warrants and represents to each other party that:
(a) If it is a corporation, it:
(i) is duly organized, validly existing and in good standing under the laws
of its state of incorporation and is duly authorized to conduct business,
(ii) is duly qualified or otherwise authorized as a foreign corporation to
transact business and is in good standing under the laws of each other
jurisdiction in which such qualification is required, and
(iii) has full power and authority to carry on its business as now
conducted and is entitled to own, lease or operate all of its properties and
assets wherever located.
b) It or he has full power and authority to enter into, deliver and perform
this Agreement.
(c) Neither the execution, delivery, consummation or performance of this
Agreement requires the approval or consent of, or notice to, any third party, or
violates any law, regulation or agreement to which it is subject and that it is
in compliance with all provisions of any material agreement to which it is a
party.
Section 2.2. Representations and Warranties of the Shareholders.
Each of the Shareholders warrants and represents to Magellan that:
(a) He is the owner, beneficially and of record, of the Nickel Palace
Securities set forth in the Preamble to this Agreement, free and clear of any
liens, mortgages, claims, charges, security interests, encumbrances or other
restrictions or limitations affecting its ability to transfer the same to
Magellan. By delivery of the Nickel Palace Securities to Magellan at the Closing
in exchange for Magellan Securities, Magellan will acquire good and marketable
title to such securities, free and clear of any liens, mortgages, claims,
charges, security interest or encumbrance. Other than Warrants to the
Shareholders, there is no right, subscription, warrant, call, unsatisfied
preemptive right, option or other agreement of any kind to purchase or otherwise
receive from each such person any Nickel Palace Securities of capital stock or
any other securities of the Nickel Palace, and he does not have any such right,
option or other agreement to acquire any such Nickel Palace Securities or other
securities of the Nickel Palace from Magellan or any other person.
7
<PAGE>
(b) Neither the execution and delivery of this Agreement nor the
consummation
of the transactions contemplated hereby will
(i) violate, conflict with or result in the breach or termination of, or
otherwise give any other contracting party the right to terminate, or constitute
a default (by way of substitution, novation or otherwise) under the terms of,
any mortgage, lease, bond, indenture, agreement, franchise or other instrument
or obligation to which the Nickel Palace or such Shareholder is a party or by
which either of them may be bound; or
(ii) violate any judgment, order, injunction, decree or award of any
court, arbitrator, administrative agency or governmental body against or binding
upon either Magellan or the Nickel Palace.
(c) the Nickel Palace has an authorized capitalization, and the number of
securities issued and outstanding, consisting of the Nickel Palace Securities,
all as set forth in the Preamble to this Agreement.
(d) All of the outstanding Nickel Palace Securities have been duly
authorized, validly issued and are fully paid and nonassessable. There are no
other classes of capital stock of Nickel Palace authorized or outstanding. Other
than in connection with the offering described in Section 1.5 hereof, there are
no rights, subscriptions, warrants, calls, unsatisfied preemptive rights,
options or other agreement of any kind to purchase or otherwise to receive from
Magellan any of the outstanding, authorized but unissued or treasury shares of
the capital stock or any other securities of Magellan and no securities or
obligations of any kind convertible into such capital stock exist in favor of
any person, firm or corporation.
(e) Except for its interest in Rennie's Landing, LLC, the Nickel Palace
does not directly or indirectly own nor has it made any investment in any of the
capital stock of, or any other proprietary interest in, any other person
including but not limited to joint ventures and partnerships.
(f) Prior to Closing, the Shareholders shall deliver to Magellan a true and
complete copy of the Articles of Incorporation of Industries, certified by the
Secretary of State of Nevada, Bylaws certified by the Secretary of the Nickel
Palace as in effect on the date hereof and the stock records of the Nickel
Palace which will be true and complete.
(g) (i) The financial statements of the Nickel Palace, including the
footnotes thereto, to be delivered to Magellan as part of the Closing
Information will be true and complete.
(ii) Since the date of the Balance Sheet of the Nickel Palace included in
such financial statements, there has been no material adverse change in the
assets, properties, business operations or financial condition of the Nickel
Palace.
8
<PAGE>
(h) the Nickel Palace has recorded no income tax liability on the Balance
Sheet included in the financial statements of the Nickel Palace.
(i) Schedule 2.2(h) sets forth as of the date hereof all of the following
contracts and other agreements to which the Nickel Palace is a party or by which
its assets or properties are bound or subject:
(i) contracts and other agreements with any current or former officer,
director, employee, consultant, agent or other representative,
(ii) contracts or agreements with suppliers, whether written or oral, for
the purchase of equipment or services;
(iii) contracts and other agreements for the sale of any of its assets or
properties, tangible or intangible, other than in the ordinary course of
business or for the grant to any person of any preferential rights to purchase
any of their assets or properties;
(iv) joint venture agreements;
(v) contracts or other agreements under which the Nickel Palace agrees to
indemnify any party, other than through performance bonds, or to share tax
liability of any party;
(vi) contracts and other agreements relating to the purchase by the Nickel
Palace of any operating business or the capital stock of any other person, under
which the Nickel Palace has any ongoing or unsatisfied liability or obligation;
(vii) options for the purchase of any asset, tangible or intangible, for an
aggregate purchase price of more than $1,000;
(viii) contracts and other agreements and instruments relating to the
borrowing or lending of money;
(ix) contracts and other agreements pursuant to which the Nickel Palace has
been granted a license to use the technology of a third party, whether a subject
of a patent, patent application, or otherwise, to produce and sell its products
or systems.
There have been delivered or made available to Magellan true and complete copies
of all of the contracts and other agreements set forth on Schedule 2.2 (h) or on
any other Schedule. All of such contracts and other agreements are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and the Nickel Palace has paid in full or accrued
all amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, and is not in default under any of them,
nor, to the best knowledge of the Shareholders is any other party to any such
contract or other agreement in default thereunder, nor does any condition exist
that with notice or lapse of time or both would constitute a default thereunder.
9
<PAGE>
(j) The information furnished by or on behalf of the Nickel Palace in
connection with this Agreement and the transactions contemplated hereby does not
to the best of their knowledge contain any untrue statement of a material fact
and does not omit to state any material fact required to be stated therein or
necessary to make the statements therein not false or misleading. Other than
economic conditions effecting the industry in which the Nickel Palace operates,
there is no fact known to the Shareholders which has not been disclosed to
Magellan in writing which materially adversely affects or, insofar as the
Shareholders can now foresee will materially adversely affect the Nickel Palace
assets and the operations or financial condition of the Nickel Palace.
Section 2.3. Representations and Warranties Magellan.
Magellan warrants and represents to the Shareholders that:
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate, conflict
with or result in the breach or termination of, or otherwise give any other
contracting party the right to terminate, or constitute a default (by way of
substitution, novation or otherwise) under the terms of, any mortgage, lease,
bond, indenture, agreement, franchise or other instrument or obligation to which
Magellan is a party or by which it may be bound or (ii) violate any judgment,
order, injunction, decree or award of any court, arbitrator, administrative
agency or governmental body against or binding upon Magellan.
(b) Magellan has the authorized capitalization, and the number of
securities issued and outstanding, consisting of the Magellan Securities and the
Magellan Preferred Stock, all as set forth in the Preamble to this Agreement.
All of the outstanding Magellan Securities have been duly authorized, validly
issued and are fully paid and nonassessable. There are no other classes of
capital stock of Magellan authorized or outstanding. Except as disclosed in
Magellan's Financial Statements as of June 30, 2000, there are no rights,
subscriptions, warrants, calls, unsatisfied preemptive rights, options or other
agreement of any kind to purchase or otherwise to receive from Magellan any of
the authorized but unissued Nickel Palace Securities of the capital stock or any
other securities of Magellan and no securities or obligations of any kind
convertible into such capital stock exist in favor of any person, firm or
corporation.
(c) Prior to Closing, Magellan shall deliver to the Shareholders a true and
complete copy of the Certificate of Incorporation of Magellan, certified by the
Secretary of State of Nevada, and Bylaws certified by the Secretary of Magellan
as in effect on the date hereof.
(d) (i) The financial statements of Magellan, including the footnotes
thereto, to be delivered to Magellan as part of the Closing Information have
been prepared in conformity with generally accepted accounting principles and
fairly present the financial condition and results of operations of Magellan as
of June 30, 2000.
(ii) Since June 30, 2000 there has been no material adverse change in the
assets, properties or financial condition of Magellan.
10
<PAGE>
(e) Schedule 2.3 (e) sets forth as of the date hereof all of the following
contracts and other agreements to which Magellan is a party or by which its
assets or properties are bound or subject:
(i) contracts and other agreements with any current or former officer,
director, employee, consultant, agent or other representative,
(ii) contracts or agreements with suppliers, whether written or oral, for
the purchase of equipment or services;
(iii) contracts and other agreements for the sale of any of its assets or
properties, tangible or intangible, other than in the ordinary course of
business or for the grant to any person of any preferential rights to purchase
any of their assets or properties;
(iv) joint venture agreements;
(v) contracts or other agreements under which Magellan agrees to indemnify
any party, other than through performance bonds, or to share tax liability of
any party;
(vi) contracts and other agreements relating to the purchase by Magellan of
any operating business or the capital stock of any other person, under which
Magellan has any ongoing or unsatisfied liability or obligation;
(vii) options for the purchase of any asset, tangible or intangible, for an
aggregate purchase price of more than $1,000;
(viii) contracts and other agreements and instruments relating to the
borrowing or lending of money; and
(ix) contracts and other agreements pursuant to which Magellan has been
granted a license to use the technology of a third party, whether a subject of a
patent or otherwise, to produce and sell its products.
There have been delivered or made available to the Shareholder true and
complete copies of all of the contracts and other agreements set forth on
Schedule 2.3(e) or on any other Schedule.
All of such contracts and other agreements are valid, subsisting, in full
force and effect and binding upon the parties thereto in accordance with their
terms, and Magellan has paid in full or accrued all amounts due thereunder and
has satisfied in full or provided for all of its liabilities and obligations
thereunder, and is not in default under any of them, nor, to the best knowledge
of Magellan is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute a default thereunder.
11
<PAGE>
(f) Except as set forth on Schedule 2.3(f) or as reflected in the notes to
the Financial Statements, Magellan owns outright and has good and marketable
title to all of Magellan's assets, including, without limitation, all of the
assets, receivables and properties reflected on the Financial Statements, in
each case free and clear of any lien, security interest or other encumbrance,
except for
(i) immaterial assets and properties;
(ii) assets and properties disposed of, or subject to purchase or sales
orders, in the ordinary course of business since June 30, 2000.
(iii) liens or other encumbrances securing taxes, assessments, governmental
charges or levies, or the claims of material men, carriers, landlords and like
persons, all of which are not yet due and payable; or
(iv) minor liens or other encumbrances of a character that do not
substantially impair the assets or properties of Magellan or detract materially
from its business.
(g) All documents, Schedules, Exhibits and other materials delivered or to
be delivered by or on behalf of Magellan to the Shareholders in connection with
this Agreement and the transactions contemplated hereby are, to the best of
Magellan's knowledge, true and complete. The information furnished by or on
behalf of Magellan in connection with this Agreement and the transactions
contemplated hereby does not, to the best of Magellan's knowledge, contain any
untrue statement of a material fact and does not omit to state any material fact
required to be stated therein or necessary to make the statements therein not
false or misleading.
ARTICLE III.
ADDITIONAL INFORMATION
Section 3.1. Additional Information.
Prior to the Closing each party hereto will supply to the other all
information reasonably required to enable the other party to make such due
diligence investigation as the requesting party deems necessary and shall make
available such persons as needed to verify or substantiate any information
supplied.
Section 3.2. Confidentiality.
Each party hereto will treat confidentially all confidential information
supplied and will use same solely to evaluate the contemplated transaction. No
confidential information transmitted hereunder shall be disclosed to any third
party, other than the party's directors, officers and legal and accounting
advisors. They will not disclose information concerning this Agreement, to the
public or the press, except as deemed necessary by Magellan with respect to
disclosures it believes are required pursuant to federal securities laws and
regulations.
12
<PAGE>
Section 3.3. Expenses.
Each party will pay its own expenses with respect to preparation of this
Agreement and documents attendant thereto.
ARTICLE IV.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES; TERMINATION
Section 4.1. Conditions Precedent to Obligations of Magellan.
The obligations of Magellan under this Agreement are, at its option,
subject to the satisfaction at the Closing on the Closing Date of the following
conditions precedent:
(a) The representations and warranties of the Shareholders contained in
this Agreement were true when made and shall continue to be true at all times
after the date hereof an as of the Closing on the Closing Date with the same
force and effect as though such representations and warranties had been made at
and as of the Closing on the Closing Date, subject to changes permitted by the
provisions of this Agreement or in the ordinary course of the Nickel Palace
business to the extent contemplated with in such representations and warranties
so long as such changes are not prohibited by the provisions of this Agreement
and will not, together with all other events prior to Closing, result in there
being a material adverse change in the condition, financial or otherwise, and
results of operations of the Nickel Palace. The Shareholders shall deliver at
the Closing a certificate to the foregoing effect.
(b) Other than as set forth in the Schedules to this Agreement, there has
been no materially adverse change in the financial condition, business or
operations since the date of Balance Sheet of the Nickel Palace, other than
changes in the ordinary course of business which have not been materially
adverse.
(c) Each of the Shareholders shall have satisfied all the conditions and
performed all the covenants and agreements on their part required by this
Agreement to be satisfied and performed and shall not be in default under any of
the provisions of this Agreement.
(d) No litigation, proceeding, investigation or inquiry shall be pending
or threatened to set aside the authorization of this Agreement, or to enjoin or
prevent the consummation of the transactions contemplated hereby, or to enjoin
or prevent the consummation of the transactions contemplated hereby, or
involving any of the assets of the Nickel Palace, which might materially and
adversely affect the business or prospects of the Nickel Palace.
(e) All consents of third parties necessary to prevent (i) any material
agreement of the Nickel Palace from terminating or (ii) any indebtedness of the
Nickel Palace from becoming due or being subject to becoming due, in each case
as a result of the transactions contemplated by this Agreement, shall be
delivered to Magellan.
(f) The Shareholders shall have delivered to Magellan the stock
certificates evidencing the Nickel Palace Common Stock and the Nickel Palace
Warrants owned by each, each duly endorsed in blank.
13
<PAGE>
(g) Each of the Shareholders shall have executed and delivered to Magellan
a letter in the form of Schedule 4.1(g) concerning their investment intent with
respect to the Nickel Palace Securities to be received by each hereunder.
(h) The information required under Section 1.5 hereof with respect to the
designees of the Shareholders to be the officers and directors of Magellan shall
have been delivered to Magellan.
(i) Such certified resolutions, certificates, telephone confirmations,
documents or instruments with respect to each of the Shareholders and the Nickel
Palace as Magellan may reasonably have requested prior to the Closing Date to
carry out the intent and purpose of this Agreement shall have been delivered to
Magellan.
Section 4.2. Conditions Precedent to the Obligations of the Shareholders.
The obligations of the Shareholders under this Agreement are, at their
option, subject to the satisfaction at the Closing on the Closing Date of the
following conditions precedent:
(a) The representation and warranties of Magellan contained in this
Agreement were true when made and shall be true at and as of the closing on the
Closing Date as though such representations and warranties had been made at and
as of the Closing on the Closing Date, subject, in each case, to changes in the
ordinary course or as permitted by the provisions of this Agreement, and
Magellan shall deliver a certificate to this effect from its President.
(b) The irrevocable letter of instructions to the Transfer Agent of
Magellan authorizing the issue of the Magellan Common Stock and Magellan
Warrants as set forth in Section 1.1 of this Agreement shall have been delivered
by Magellan to the Shareholders.
(c) Magellan shall have satisfied all the conditions and performed all the
covenants and agreements on its part required by this Agreement to be satisfied
and performed and shall not be in default under any of the provisions of this
Agreement.
(d) No litigation, proceeding, investigation or inquiry shall be pending
or threatened to set aside the authorization of this Agreement or to enjoin or
prevent the consummation of the transactions contemplated hereby.
(e) Such certified resolutions, certificates, documents or instruments
with respect to Magellan as the Shareholders may reasonably have requested prior
to the Closing Date hereof to carry out the intent and purpose of this Agreement
shall have been delivered.
14
<PAGE>
Section 4.3. Termination of Agreement.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing on the Closing Date:
(a) By mutual consent of Magellan and the Shareholders.
(b) By the Shareholders if Magellan shall fail to or refuse to perform or
observe any covenant or agreement hereof to be performed or observed by it on or
prior to the Closing on the Closing Date or any condition to the obligations of
the Shareholders hereunder shall not have been met or satisfied prior to the
Closing on the Closing Date. Failure of the Shareholders to exercise their
right of termination pursuant hereto, at any time or from time to time, shall
not be deemed a waiver of their right to terminate the Agreement pursuant to the
provisions of this subparagraph (b) even if the failure or refusal to perform or
observe a covenant or agreement hereof, or the failure of any condition to be
met or satisfied, is subsequently cured prior to the Closing on the Closing
Date.
(c) By Magellan if the Shareholders shall fail to perform or observe an
covenant or agreement hereof to be performed or observed by them on or prior to
the Closing on the Closing Date or any condition to the obligations of Magellan
hereunder shall not have been met or satisfied prior to the Closing on the
Closing Date. Failure of Magellan to exercise its right of termination pursuant
hereto, at any time or from time to time, shall not be deemed a waiver of its
right to terminate the Agreement pursuant to the provisions of this subparagraph
(c), even if the failure or refusal to perform or observe a covenant or
agreement hereof, or the failure of any condition to be met or satisfied, is
subsequently cured prior to the Closing on the Closing Date.
ARTICLE V.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations Contained in Agreement.
The representations and warranties contained in this Agreement and in any
schedules, certificates or other documents delivered pursuant hereto shall
survive the execution and delivery hereof and the Closing for a period of three
(3) years.
Section 5.2. Entire Agreement.
This Agreement sets forth the entire understanding and agreement between
the parties and supersedes and replaces any prior understanding, agreement or
statement (written or oral) of intent. No provision of this Agreement shall be
construed to confer any rights or remedies on any person other than the parties
hereto.
15
<PAGE>
Section 5.3. Indemnification by the Shareholders.
For claims asserted with respect to the matters set forth below, including
tax matters, during the time periods set forth in Section 5.1 the Shareholders,
jointly and severally agree to indemnify in respect of, and hold Magellan
harmless against, any and all damages, claims, deficiencies, losses, and all
expenses (including interest, penalties, and reasonable attorneys' and
accountants' fees and disbursements) (collectively, "Damages"), based upon,
resulting from or otherwise in respect of any misrepresentation, breach of
warranty, or nonfulfillment or failure to perform any covenant or agreement on
the part of the Shareholders under this Agreement.
Section 5.4. Indemnification by Magellan.
For claims asserted during the time periods set forth in Section 5.1,
Magellan agrees to indemnify in respect of, and hold the Shareholders and the
Nickel Palace harmless against, any and all Damages based upon, resulting from
or otherwise in respect of any misrepresentation, breach of warranty, or
nonfulfillment or failure to perform any covenant or agreement on the part of
Magellan under this Agreement.
Section 5.5. Notice and Opportunity to Defend.
The party claiming indemnification hereunder (the "Indemnified Party")
shall give the other party (the "Indemnifying Party") written notice of any
claim, event, misrepresentation, breach or occurrence giving rise to such claim
for indemnification within 60 days of its discovery of any such claim, event,
misrepresentation, breach or occurrence. Failure to give such notice within the
aforesaid time period shall release the Indemnifying Party from any liability
therefor under the provisions of Section 5.4 hereof. The Indemnifying Party
shall have the right at its sole cost and expense to:
(a) cure the claim, event, misrepresentation, breach, or occurrence giving
rise to the right of indemnification within 60 days following receipt of such
notice; provided, however, that if such cure is commenced within such 60 day
period and is pursued diligently and in good faith to completion, such period
shall be extended for a reasonable sufficient period of time to enable such cure
to be completed, or
(b) defend any third party claim, other than a claim by or through any
taxing authority, alleged to give rise to the right of indemnification with
counsel satisfactory to the Indemnified Party, and the Indemnifying Party shall
be liable to the extent of all Damages. In computing the amount for which any
party is liable under this Agreement, there shall be deducted an amount equal to
any tax savings or benefits, insurance recoveries, benefits or off-sets to which
the Indemnified Party shall be entitled directly as a result of the Damages.
ARTICLE VI.
POST-CLOSING OBLIGATIONS
Section 6.1. Further Assurances.
Following the Closing, each of the parties hereto shall each execute and
deliver such documents, and take such other action, as shall be reasonably
requested by any of the other parties hereto to carry out the transactions
contemplated by this Agreement.
16
<PAGE>
Section 6.2. Publicity.
Except as permitted by Section 3.2 hereof, the parties hereto shall not
issue or make, or cause to have issued or made, any publicity release or
announcement concerning the transactions contemplated hereby, without the
advance approval in writing of the form and substance thereof by all parties.
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Notices.
All notices or other communications required or permitted by this Agreement
shall be sufficiently given if in writing and only delivered (personally, by
courier service such as Federal Express or by other messenger) or mailed by
registered or certified mail, return receipt requested, as follows:
If to the Shareholders, as follows:
330-J North Maple Street
Burbank, California 91505
Attention: Marc Fusco, Michael Garrity, and Michael Gabrawy
If to Magellan, as follows:
Magellan Filmed Entertainment, Inc.
8756 122 Avenue NE
Kirkland, Washington 98033
Attention: Patrick F. Charles, President
or to such other address as hereafter shall be furnished as provided in this
Section 7.1 by any of the parties hereto to the other party hereto.
Section 7.2. Assignment and Amendment.
This Agreement shall not be assignable by any party, and shall not be
altered or otherwise amended except pursuant to a writing executed by all of the
parties hereto.
Section 7.3. Severability.
If any provision of this Agreement, or the application of any such
provision to any person or circumstance, shall be held invalid by a court of
competent jurisdiction, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid, shall not be affected thereby.
17
<PAGE>
Section 7.4. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by all of
the parties hereto.
Section 7.5. Variation in Pronouns.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons or entity or entities may require.
Section 7.6. Indulgences, Etc.
Neither the failure nor any delay on the part of either party to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.
Section 7.7. Controlling Law; Jurisdiction.
This Agreement and all questions relating to its validity, interpretation,
performance and enforcement (including, without limitation, provisions
concerning limitations of actions), shall be governed by and construed in
accordance with the laws of the State of Nevada, notwithstanding any
conflict-of-laws doctrines of such state or other jurisdiction to the contrary,
and without the aid of any canon, custom or rule of law requiring construction
against the draftsman.
Section 7.8. Resolution of Disputes; Arbitration.
All disputes concerning this Agreement or any claim or issue of any nature
(whether brought by the Parties hereto or by any other person whatsoever)
arising from or relating to this Agreement or to the corporate steps taken to
enter into it (including, without limitation, claims for alleged fraud, breach
of fiduciary duty, breach of contract, tort, etc.) which cannot be resolved
within reasonable time through discussions between the opposing entities, shall
be resolved solely and exclusively by means of arbitration to be conducted in
King County, WASHINGTON, which arbitration will proceed in accordance with the
rules of the American Arbitration Association (or any successor organization
thereto) then in force for resolution of commercial disputes.
The Arbitrators themselves shall have the right to determine and to
arbitrate the threshold issue of arbitrability itself, the decision of the
Arbitrators shall be final, conclusive, and binding upon the opposing entities,
and a judgment upon the award may be obtained and entered in any federal or
state court of competent jurisdiction.
18
<PAGE>
Each entity or Party involved in litigation or arbitration shall be
responsible for its own costs and expenses of any litigation or arbitration
proceeding, including its own attorney's fees (for any litigation, arbitration,
and any appeals).
Section 7.9. Exhibits and Schedules.
All Exhibits and Schedules attached hereto are incorporated by reference
into, and made a part of, this Agreement.
Section 7.10. Headings.
The Article and Section headings are for convenience only, and they shall
not affect the interpretation of this Agreement.
Section 7.11. Waiver of Rights.
The Shareholders waive any and all Dissenter's Rights under the Laws of the
State of Nevada.
Section 7.11. Full Disclosure; Acknowledgement of Restriction on Transfer.
The Shareholders declare that they had been given access to all material
information concerning Magellan and its affairs, and that any and all questions
they had posed had been fully answered to their satisfaction. They also
acknowledged that they understood that the Magellan Securities they will be
receiving are "Restricted Securities" with the meaning of the State and Federal
Securities Acts, which they understand mean that there are restrictions upon
their rights to sell or other wise disposed of those securities, that their
certificates would actually contain a legend to that effect, and that they may
have to hold these Securities for an indefinite amount of time.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THIS SPACE LEFT BLANK INTENTIONALLY - SIGNATURE PAGES FOLLOW
19
<PAGE>
MAGELLAN
ATTEST: MAGELLAN FILMED ENTERTAINMENT, INC
__________________________ By:___s/Patrick F. Charles_________
----------------------
Patrick F. Charles, President
ATTEST: SHAREHOLDERS
MICHAEL GARRITY
__________________________ By:__s/Michael Garrity______________
------------------
Michael Garrity
ATTEST: MICHAEL GABRAWY
__________________________ By:__s/ Michael Gabrawy_____________
--------------------
Michael Gabrawy
ATTEST: MARC FUSCO
__________________________ By:___s/Marc Fusco________________
-------------
Marc Fusco
20
<PAGE>
