ADDENDUM TO AGREEMENT
AND
PLAN OF REORGANIZATION
THIS ADDENDUM dated June 13, 1996, is to the Agreement and Plan of
Reorganization made the 4th day of April 1996, by and among Zeitgeist Werks,
Inc., a Nevada corporation ("ZWI"), Zeitgeist, Inc., a Nevada corporation and
a wholly-owned subsidiary of ZWI ("Zeitgeist"), MediaX, a California
corporation ("MediaX"), Matthew MacLaurin, Gaben Chancellor (referred to
collectively as "Shareholders" and individually as "Shareholder"), and Assisi
Limited Partnership ("Assisi"), a shareholder of ZWI.
PREMISES
A. This Addendum to the Agreement and Plan of Reorganization is a
result of further negotiations among the parties while they were conducting
their due diligence investigations.
B. The parties hereby have mutually agreed to the revisions to the
terms of the Agreement and Plan of Reorganization set forth herein.
NOW, THEREFORE, on the stated premises and in consideration of the
mutual promises contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Pursuant to paragraph 3.6 of the Agreement and Plan of
Reorganization, the parties agree to extend the Closing Date to June 15, 1996,
or such earlier date as the parties mutually agree.
2. Paragraph 3.4 of the Agreement and Plan of Reorganization shall be
revised to read as follows:
"As part of the merger between MediaX and Zeitgeist, ZWI agrees to
pay a total of $350,000 in cash to the shareholders of MediaX as set forth on
Schedule 1 hereto, with such payments due on the earlier of (a) six months
from the Effective Date; or (b) the closing of ZWI's proposed $2 million
private offering. If less than the full $2 million is raised, a pro rata
share of the $350,000 will be paid, and such pro rata payments will be made at
each closing if there are more than one closing. In the event that the
closing of ZWI's proposed $2 million private offering fails to occur on or
before six months from the Effective Date of the merger, ZWI shall issue to
the shareholders of MediaX which are of record as of the closing an aggregate
of 100,000 shares, which shares shall be issued to each shareholder in
proportion to the number of shares each such shareholder holds relative to all
outstanding shares of MediaX as of the closing."
3. With respect to paragraph 3.5 of the Agreement and Plan of
Reorganization, the twelve month period used to calculate the net income will
be changed from April 1, 1996 through March 31, 1997, to June 1, 1996 through
May 31, 1997. The payment dates will be moved from June 1 to August 1.
4. With respect to subparagraph 3.2(b) of the Agreement and Plan of
Reorganization, the parties agree that the actual number of options to be
granted will be 678,164 and that such options will have an exercise price of
$2.25 per share which was the closing price of ZWI's common stock on April 11,
1996. The parties further agree that any plan under which such options shall
be granted shall provide, to the extent allowed by applicable law, that (i)
50% of the options issued shall vest on the first anniversary of the Effective
Date, and the remaining options shall vest at the rate of 1/24 of such options
per month until fully vested, (ii) no shares issued on exercise of such
options may be transferred, except for estate planning purposes, until the
second anniversary of the Effective Date, (iii) all options shall vest in the
event that the optionee's employment with Zeitgeist or ZWI is terminated
without cause, and (iv) only then vested options may be exercised by any
employee whose employment with Zeitgeist or ZWI is terminated with cause.
5. With respect to paragraph 3.3 of the Agreement and Plan of
Reorganization, the parties agree that Assisi will surrender for cancellation
.681988427 shares of its common stock for every share which is issued pursuant
to the exercise of the stock options set forth on Schedule 1.
6. The following shall be added at the end of Section 5.8 of the
Agreement:
"The indemnification set forth in this Section 5.8 shall extend to
any breach of Section 1.11 with respect to MediaX's office space located at
325A River Street, Santa Cruz, California."
7. Schedule 1 of the Agreement shall be replaced with that Schedule 1
attached to this Addendum.
AGREED TO AND ACCEPTED as of the 13th day of June, 1996.
ZEITGEIST WERKS, INC. MEDIAX
By /s/ Nancy Poertner By /s/ Matthew MacLaurin
Nancy Poertner, President Matthew MacLaurin
ZEITGEIST, INC.
By /s/ Nancy Poertner
Nancy Poertner, President
SHAREHOLDERS:
By /s/ Matthew MacLaurin By /s/ Gaben Chancellor
Matthew MacLaurin Gaben Chancellor
ASSISI LIMITED PARTNERSHIP
By /s/ Nancy Poertner
Nancy Poertner, General Partner
SCHEDULE 1
MEDIAX
If the disclosures on such Schedule are not acceptable to ZWI, ZWI shall
have two days from the receipt of such Schedule to terminate the Agreement.
All disclosures on this Schedule provide exceptions to each representation
made in the Agreement. ZWI shall have received a complete copy of all written
contracts referenced in this Schedule, and the provisions of such contracts
shall be exceptions to the representations made in the Agreement.
Stock Options Outstanding:
ZWI contemplates issuing to the following people the following number of
shares, or options exercisable for the following number of shares, all of
which are expressed in shares of ZWI:
Individual Number of Shares
Chris Culp 62,292
Eric Ellis 59,583
Anne Mcchan 55,520
Mark Karlstrand 54,167
Bill Davidson 56,875
Tate Schieferle 59,583
J.J. Furman 32,500
Jack Terheun 21,667
Chrissy Van Sant 10,833
Brian Fanning 10,833
Mark Machina 10,833
Kristyna Polata 10,833
Tim Blake 4,062
Doug Rhodes 37,917
Nick Keefer 32,500
Jenny Jacobs 5,417
Chris Ramey 5,417
Tauna Coulson 6,770
Reid Ridgeway 4,062
David Traub 136,500
Officers and Directors of MediaX:
Matthew MacLaurin - President, Chief Financial Officer and
Director
Gaben Chancellor - Vice President, Secretary and Director
MediaX understands that the State of California is investigating the
multimedia industry to determine whether the services provided by multimedia
companies can be subject to sales tax liabilities. Because MediaX has not
paid any sales tax for the services it has provided, such an imposition would
require the payment of substantial tax by MediaX or its successor. Such taxes
would be based on substantially all revenue generated by MediaX since its
founding.
The Company is taxed as an S corporation. Because corporate income may
be attributable as taxable income to the Company's shareholders, the Company
reserves certain amounts as a tax reserve for taxes which will be attributable
to, and payable by, the Company's shareholders. For income related to
projects which will be earned over more than one year (such as with the
Company's agreement with Groliers), a reserve is made for each year in which
income will be generated. The reserve is then distributed to the shareholders
for payment of taxes attributable to such income.
The Company's use of its property at its current premises may violate
zoning laws and regulations. MediaX's sublease may not be enforceable against
either or both of the sublessor or lessor thereof.
MediaX's contract with Groliers requires the consent of Groliers in the
event of any change in control of the Company. Groliers has not given its
consent to the transactions contemplated by this Agreement but has indicated
that it will deliver to MediaX a written acknowledgment of the transaction.
Material Contract of MediaX:
1. Contract with Groliers, including Toobers contract.
2. Contract concerning Genius, Inc. game pursuant to which the Company
will receive 30% of the net profits, as such term is contemplated in such
contract.
3. Lease dated ______, 19__, between MediaX and _______.
4. MediaX owes David Traub the following, all of which amounts are
reported on the Company's financial statements:
(a) $2,000 for advances made be Mr. Traub to Tim Leary in
connection with the filming for the Moody Blues CD ROM. Such amount will be
paid as and when the project becomes funded.
(b) MediaX owes Mr. Traub 1/3 of all royalty payments paid by EMI
for the "Promised Land" CD ROM produced by MediaX. This includes all
subsequent rollovers and cross-media iterations as stipulated in the
EMI/MediaX contract.
5. MediaX owes David Traub, Alex Melnyk and Michael Shaun Conaway a
finder's fee equal to an aggregate of 5% of the amount of any funding received
by MediaX for a Moody Blues CD ROM. MediaX shall negotiate some lesser
"project development" fee with this group should Zeitgeist itself choose to
finance the Moody Blues CD ROM project. MediaX shall negotiate a reasonable
royalty position with this group upon funding of the project.
Allocation of Shares:
Number of Number of
Shares of Shares of
MediaX Zeitgeist
Common Stock Common Stock Amount of
Name Owned to be Issued Cash Payment
---- ------------ ------------ ------------
Matthew MacLaurin 47,500 956,250 $166,250
Gaben Chancellor 47,500 956,250 166,250
David Traub 5,000 125,000 17,500
------- --------- --------
Total 100,000 2,037,500 $350,000
The parties agree that the following table represents the projected
breakdown of the ownership of Zeitgeist immediately after the closing of the
Zeitgeist/MediaX transaction:
MediaX Shareholders 2,037,500
Assisi Limited Partnership<FN1> 7,437,500
Cabana Holdings Ltd.<FN2> 1,162,500
Mizzentop Holdings Ltd.<FN3> 1,162,500
Mark R. Moldenhauer 763,333
_________________
<FN>
<FN1>
Nancy Poertner, General Partner.
<FN2>
Daniel Taylor is named as one of the beneficiaries of the Cabana Trust but has
no guaranteed value in such trust and disclaims control over it.
<FN3>
Kevin O'Neill is named as one of the beneficiaries of the Winchester Trust
(the owner of Mizzentop), but has no guaranteed value in such trust and
disclaims control over it.
</FN>