Exhibit 10.1
Assets Acquisition Term Sheet
Pacificap Entertainment Holdings, Inc.
Battleship VFX, Inc.
The purpose of this letter is to serve as a Term Sheet (the "Term Sheet"),
by and between Battleship VFX, Inc., a Delaware Corporation ("Battleship" and
"Seller"), Brenda Michel ("Principal") and Pacificap Entertainment Holdings,
Inc. a Nevada Corporation ("Pacificap" and the "Company") in connection with the
private sale of assets by the Seller to a special purpose wholly owned limited
liability company subsidiary of the Company ("Subsidiary"), pursuant to the
terms and conditions set forth herein (the "Transaction").
1. The closing of the Transaction shall take place upon the completion of
all matters specified hereto to be performed at closing and upon
performance or waiver of the conditions to such closing as specified
herein (the "Closing").
2. At Closing of the Transaction, the parties shall effect the following:
(a) Battleship shall transfer all of its intellectual property
assets as described under Annex A attached hereto (the "Transferred
Assets"), together with specified liabilities as set forth on Annex B
attached hereto (the "Transferred Liabilities"). All other assets and
liabilities not expressly transferred by Battleship shall be retained
by Battleship.
(b) In consideration for such Transferred Assets to the
Subsidiary, the Company shall issue to the sole shareholder of
Battleship, Brenda Michel (the "Principal") a number of shares of
Common stock, par value, $0.001 per share (the "Common Stock"), equal
to fifteen (15%) of the issued and outstanding shares of the Company
on the record date of November 19, 2004 (the "Principal Shares") as of
the date of execution hereof, which Principal Shares shall have
weighted average anti-dilution protection for a period of not less
than three (3) years from the date of issuance and shall include,
without limitation, all issuances, conversions, splits and
reverse-splits ("Anti-dilution Protection").
(c) Principal shall be granted an earn-out right to obtain an
additional ten percent (10%) of issued and outstanding Pacificap
Common Stock on a fully diluted basis determined as of the date of
such grant, upon generating two ($2) million dollars in gross revenues
from any and all sources, including, without limitation, sponsorships,
distribution fees and/or ancillary revenue streams (the "Earn-out
Stock") which shall be subject to Anti-Dilution Protection.
3. Conditions for Closing:
(a) The Company shall have received a Terms Sheet for funding
dollars in actual funding from the NIR Group (the "NIR Financing
Commitment"), subject to the specified deductions and offsets set
forth on Annex C attached hereto, which specification shall include
any and all fees, costs, expenses and disbursements not to exceed
$500,000 to be deducted, by the Company and such specified
third-parties, from the NIR Financing Commitment (the "Schedule of
Financing and Administration Fees");
(b) The net proceeds of the NIR Financing Commitment (the "NIR
Financing Net Proceeds") shall be allocated in their entirety to the
Subsidiary, as to which a special purpose bank account shall be
established by the Company which shall be jointly controlled by the
Principal and one (1) officer of the Company (the "Subsidiary Funding
Account"), and all such NIR Financing Net Proceeds shall be directed
to be disbursed to the Subsidiary Funding Account.
4. Covenants:
(a) Disbursement of the NIR Financing Net Proceeds shall be
promptly made in accordance with budgets provided by the Principal.
(b) The Company, upon request of Principal, shall use its best
efforts to promptly cause the appointment and election of one (1) of
Principal's nominees to the Pacificap board of directors.. The Company
shall promptly make any and all filings as may be required by the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
such regard.
(c) The Company shall cover any and all reasonable fees, costs,
expenses and disbursements of legal counsel in respect of (1)
development, deployment and operation the Acquired Assets; (2) for
Principal, in respect of personal representation related to the
Transaction, deployment of the Acquired Assets; and (3) for Battleship
VFX, Inc. in regard to general corporate matters related to the
transfer of the Acquired Assets. Principal undertakes to exercise
commercially reasonable discretion in regard to incurring any and all
such legal services.
(d) Upon the Subsidiary attaining $500,000 in gross revenues
attributable to the exploitation of the Acquired Assets, the Chief
Financial Officer of the Subsidiary, as appointed by the Principal,
shall be added as an authorized co-signatory on the Subsidiary Funding
Account, who shall be authorized to sign as one of two (2) authorized
persons, together with the Principal or designated officer of the
Company as provided in Paragraph 3(b) above, and to disburse funds of
the Subsidiary in accordance with the approved budget of the
Subsidiary.
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(e) All Company fillings prepared and/or contemplated to be made
with the U.S. Securities and Exchange Commission (the "SEC") shall be
submitted to the Principal's legal counsel for review and comment
reasonably prior to the contemplated date of such filings.
(f) The Company shall, at its sole cost and expense, maintain
commercially reasonable and adequate Directors and Officers insurance
coverage for the Principal and all of the Principals' nominees serving
as Directors of the Company, as well as any and all other officers
appointed by the Board at the request of Principal. The Company will
indemnify and hold harmless Principal, Battleship and its officers,
agents and counsel for any and all losses and damages arising prior to
the effective date and thereafter due to any wrong doing on the part
of the Company, its officers, directors, employees, agents, counsel,
partners or consultants (including, in each case, without limitation,
reasonable fees, costs, expenses and disbursements of Principal's
counsel incurred in defending against allegations or findings of
wrong-doing).
5. Employment Contract:
(a) The Subsidiary shall execute a two year Employment Contract
with Principal, to include the following:
(i) Principal shall be granted the title of her choice
commensurate with the executive capacity of responsibility in
regard to development, deployment and operations in the
Subsidiary of the Acquired Assets.
(ii) Principal shall be granted complete managerial control
over the development, deployment and operations in the Subsidiary
of the Acquired Assets.
(iii) Principal shall be granted complete creative control
over all entertainment projects and properties controlled by or
created in respect of the Acquired Assets, and sole power of
determination in regard to appointment of officers, production
partners and contractors including, without limitation, in regard
to exploitation of all ancillary products and services in respect
of the Acquired Assets.
(iv) Principal shall be paid a salary not less than, but not
limited to, $150,000 per year, to be paid incrementally on the
1st and the 15th of each month. Annual salary increases shall be
granted to Principal annual at a rate not less than documented
cost of living increases within the metropolitan census region
applicable to Principal. .
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(v) Company will cover Principal and her immediate family
with full medical benefits, by the health-services insurer and/or
provider of her choice. Company will provide full coverage short
term and long-term disability insurance coverage for Principal.
(vi) Employment Agreement of Principal can be terminated for
"Cause" if she is found by a court of competent jurisdiction to
have engaged in willful misconduct, gross negligence or convicted
of a crime constituting a felony. In the event of termination for
a reason other than Cause, Principal shall receive not less than
an amount equal to two (2) years' salary and a non-recourse loan
in exchange for any and all Company Common Stock then held by
Principal, at a repurchase price determined as the weighted
average price of the Company Common Stock during the thirty (30)
days immediately preceding the effectiveness of such termination.
Any and all such termination payments must be made to Principal
within 30 days of the effective date of termination. Any demotion
or removal of Principal from her scope of authority or
requirements to perform such duties other than at her customary
base of operations will in any and all such cases be deemed to be
constructive termination.
(vii) Company shall carry life insurance to benefit
Principal's survivors in amount of coverage of not less than two
(2) years of Principal's base salary. Company may, at its
discretion, carry Key-Man life insurance on Principal as to which
the Company will be the beneficiary.
(viii) Provided that Principal has performed in accordance
with the conditions set forth herein, the Principal's employment
agreement shall automatically renew at the respective completion
date for subsequent renewal periods of two years.
6. The Seller represents as of the date of this Term Sheet and as of
Closing:
o Except with respect to Transferred Liabilities, the
Transferred Assets are free and clear of all liens, charges
and encumbrances of any nature whatsoever, contingent or
otherwise, and that good and marketable title to all of the
Transferred Assets shall be transferred to the Company at
the Closing subject only to liens imposed directly in
connection with the Transferred Liabilities.
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o The Seller has complete and due authority to execute and
deliver this Term Sheet and to legally deliver the
Transferred Assets at Closing as contemplated hereunder and
all necessary corporate actions regarding the Transaction
have been taken by the Seller.
o The Transaction shall not constitute a violation of any
provision of the respective charter or governance documents
of the Seller or any contractual agreement of Seller or any
other instrument to which the Seller is subject.
7. The Seller represents, acknowledges and agrees to the following
provisions with respect to federal and state Securities law and
regulatory authority compliance:
o The Seller understands and acknowledges that this Term Sheet
and the Transaction are private and that the Principal
Shares have not been registered, approved or disapproved by
the United States Securities and Exchange Commission or any
state or foreign securities agencies.
o The Seller is not acting as an underwriter and is acquiring
the Principal Shares solely for investment for its own
account and not with a view to, or for, resale in connection
with any distribution with in the meaning of any federal
securities laws, state securities acts or any other
applicable laws.
o Seller acknowledges that the Company is not under an
obligation to register or seek an exemption under any
federal, state or foreign securities acts for any stock of
the Company or to cause or permit such stock to be
transferred in the absence of any such registration or
exemption and that the Seller herein must hold the Principal
Shares indefinitely unless such stock is subsequently
registered under any federal and/or state securities acts or
an exemption from registration is available (e.g., under
Rule 144).
o The Seller understands the speculative nature and risks of
investments associated with the Company and confirms that
the Principal Shares are suitable and consistent with its
investment program and that its financial position enables
it to bear the risks of this investment; and that there may
not be any public market for the Principal Shares subscribed
for herein.
8. The Company acknowledges and agrees that as of the effective date
and time of the Closing, the Transferred Assets are constituted
only of intangible unregistered Intellectual Property and that
the Transferred Liabilities shall also be transferred to the
Company.
9. The parties agree that time is of the essence. All parties agree to
use their respective best efforts to cause the Transaction to close.
10. The Seller acknowledges and agrees that the Company may, at its
sole discretion, issue a press release upon the execution of this
Term Sheet, provided, however, the Company shall obtain written
consent and approval from the Principal in respect of any and all
matters pertaining to the Battleship and/or the Transferred Assets.
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11. The Company and the Seller shall promptly execute and transfer
such further documents and will promptly take such further action
as the Company may require in order to effectively consummate the
Transaction, including, without limitation, any and all filings
in respect of any required compliance with applicable Bulk
Transfer laws and in respect of compliance with the Exchange Act
and the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. The Company shall, at its own
cost and expense, promptly cause Company counsel to properly
prepare and file any and all Form 3s Form 4s Schedule 13D by and
on behalf of the Principal.
12. Miscellaneous. This Term Sheet sets forth the entire understanding
between the parties as to the subject matter hereof and merges and
supersede all prior discussions, agreements and understandings of
every kind and nature between such persons and any of their respective
officers, directors, affiliates, representatives and agents with
respect to the subject matter hereof. It is further understood and
agreed that money damages would not be a sufficient remedy for any
breach of this Term Sheet by any party hereto or its representatives
and that, in addition to all other remedies available at law or in
equity, each party shall be entitled to temporary, preliminary and
permanent restraining orders and injunctions, in each case without the
necessity of posting a bond or other security, and to specific
performance, as remedies for any such breach. It is further understood
and agreed that no failure or delay by either party hereto in
exercising any right, power or privilege hereunder will operate as a
waiver thereof, now will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder. This Term Sheet will be governed
and construed in accordance with the domestic laws of the State of New
York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. This Term Sheet may be
amended only in writing signed by the parties.
[Signature Page Follows]
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This Term Sheet accurately reflects our understanding and is intended to be
fully binding upon the parties. This Term Sheet may be executed in one or more
counterparts, each of which will be deemed an original and taken together shall
constitute one and the same agreement.
PACIFICAP ENTERTAINMENT HOLDINGS, INC.
By: /s/ EDWARD LITWAK
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Name: Edward Litwak
Title: Chief Executive Officer
BATTLESHIP VFX, INC.
By: /s/ BRENDA MICHEL
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Name: Brenda Michel
Title: President and CEO
PRINCIPAL: BRENDA MICHEL (Individually)
/s/ BRENDA MICHEL
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Brenda Michel
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