CAVALCADE OF SPORTS MEDIA, INC.
12268 VIA LATINA
DEL MAR, CA 92914
June 11, 2001
Jefferson D. Simmons, President
Cineports, Inc.
1000 Vermont Avenue NW, Suite 450
Washington, DC 20005
Re: Triangular Forward Merger of Cineports, Inc. with and into a
wholly-owned subsidiary of Cavalcade of Sports Media, Inc.
under IRC Sec. 358(a)(1)(A)
Dear Mr. Simmons:
This is to serve as a formal Letter of Intent and a binding agreement,
until superseded by a more formal Agreement of Merger for the merger of
Cineports, Inc. ("Cineports) with and into a wholly-owned subsidiary of
Cavalcade of Sports Media, Inc. ("Cavalcade") in a triangular forward
merger under Internal Revenue Code Section 358(a)(1)(A).
I
GENERAL FORM OF REORGANIZATION (MERGER)
This transaction is structured as a "triangular forward merger" which is
defined as the merger of the merging company (Cineports) with and into
a subsidiary of the acquiring corporation (Cavalcade), with the
shareholders of the merging company receiving "stock or securities" of
the acquiring corporation. The stock of the merging corporation owned
by its shareholders before the merger is canceled by operation of law
in the merger, and the shareholders become shareholders of the acquiring
corporation. As used in this Letter of Intent, the word "Merger" refers
to this transaction as so structured.
Cavalcade will form a new subsidiary, in Nevada, with the name
"Cineports, Inc.", which will be wholly-owned. Immediately prior to the
merger, Cavalcade will contribute sufficient "stock and securities" (of
itself) to the subsidiary, which will issue such "stock and securities"
in the merger to the Cineports shareholders as provided in the Agreement
of Merger. (The term "stock and securities" is emphasized because the
Internal Revenue Service has amended (1998) the applicable regulations
to permit the issuance of warrants, in addition to common or preferred
stock, to effectuate a merger.) Cineports will merge with and into the
Cavalcade subsidiary, which will be the surviving corporation.
Cineports will remain as a separate subsidiary, owning its film library,
as may be augmented from time to time, and continuing to
develop its own business plan.
Jefferson D. Simmons, President
Cineports, Inc.
June 11, 2002
Page 2
II
CURRENT CAPITAL STRUCTURE OF CINEPORTS, INC.
At present, Cineports is authorized to issue 10,000,000 shares of
undesignated Preferred Stock and 40,000,000 shares of Common Stock. Of
this authorized capital, Cineports has issued and outstanding two series
of Preferred Stock and Common Stock, as follows:
1. 1,135,519 shares of the Series A Preferred Stock;
2. 80,000 shares of the Series B Preferred Stock; and
3. 10,154,556 shares of Common Stock(1).
III
STOCK AND SECURITIES OF CAVALCADE TO BE ISSUED AND RESERVED
To effectuate the Merger, Cavalcade shall issue its Common Stock and
Warrants as follows:
1. For the 1,135,519 shares of Cineports' Series A Preferred Stock,
Cavalcade shall issue 283,890 shares of its Common Stock, or one (1)
share of Cavalcade's Common Stock for each four (4) shares of the Series
A;
2. For the 80,000 shares of Cineports' Series B Preferred Stock,
Cavalcade shall issue 100,000 shares of its Common Stock, or one and a
quarter (1.25) shares of Cavalcade's Common Stock for each one (1) share
of the Series B; and
3. For the 10,154,5561 shares of Cineports' Common Stock, Cavalcade
shall issue (i) 4,061,822 shares of Cavalcade's Common Stock and (ii)
6,092,734 Warrants, each giving the holder the right to purchase a share
of Cavalcade's Common Stock, within a two year period after issuance, at
an exercise price of One Dollar and Twenty Cents ($1.20), or four-tenths
of a shares of Cavalcade's Common Stock and one (1) Warrant for each
share of Cineports' Common Stock.
IV
CAVALCADE CHANGE OF NAME
Immediately upon effectiveness of the Merger, Cavalcade shall change its
corporate name to "Cavalcade Media, Inc." so as to reflect the broadened
scope of the business to be conducted.
_________________________________
<FN>
(1) This number is to be adjusted at Closing to reflect changes due to
the exercise of outstanding options and warrants and the issuance of
additional shares, provided, however, that no additional shares shall be
issued, except upon the exercise of already issued and outstanding
options and warrants, without Cavalcade's prior written approval.
</FN>
Jefferson D. Simmons, President
Cineports, Inc.
June 11, 2002
Page 3
V
CAVALCADE BOARD OF DIRECTORS
As of the date of this Letter of Intent, Cavalcade's Board of
Directors consists of three (3) persons:
1. Edward E. Litwak
2. Donald A. Parson
3. Michael F. Carroll
Immediately upon effectiveness of the Merger, Cavalcade's Board shall
meet, increase the size of the Board to five (5) members, and elect
the two nominees of Cineports to fill the two vacancies created. The
two nominees of Cineports to be elected are:
1. Jefferson D. Simmons
2. Harold Vogel
VI
SUBSIDIARY'S BOARD OF DIRECTORS POST-MERGER
Immediately upon effectiveness of the Merger, the Board of Directors
of the Cavalcade subsidiary (Cineports, Inc. - Nevada) shall meet and
the following shall be elected as the Board of Directors of such
company:
1. Edward E. Litwak
2. Jefferson D. Simmons
3. Harold Vogel
4. Arnold Lutzker
5. Angel Durandez
VII
CAVALCADE'S OFFICERS POST-MERGER
Immediately upon effectiveness of the Merger and the election of the
new Board of Directors of Cavalcade, the Board of Directors of
Cavalcade shall elect the following as the officers of such
corporation:
President/CEO - Jefferson D. Simmons
Chief Operating Officer - Marshall Orson
Chief Financial Officer - James Chamberlain
Executive Vice President - F. Patrick Scanlon
Vice President - Arnold Lutzker
Secretary - Arnold Lutzker
Treasurer - James Chamberlain
VIII
SUBSIDIARY'S OFFICERS POST-MERGER
Immediately upon effectiveness of the Merger and the election of
Jefferson D. Simmons, President
Cineports, Inc.
June 11, 2002
Page 4
the new Board of Directors of the surviving corporation, the Board of
Directors of that corporation shall elect the following as the
officers of such corporation:
President/CEO - Jefferson D. Simmons
Chief Operating Officer - James Chamberlain
Chief Financial Officer - James Chamberlain
Vice President - Arnold Lutzker
Secretary - Arnold Lutzker
Treasurer - James Chamberlain
IX
APPOINTMENT OF JEFFERSON D. SIMMONS AS INTERIM PRESIDENT
Upon the execution by both parties of this Letter of Intent, Cavalcade
shall appoint Jefferson D. Simmons as its interim President pending
effectiveness of the merger.
X
DUE DILIGENCE INQUIRIES/REPRESENTATIONS AND WARRANTIES
The parties are entering into this Letter of Intent on the basis of
various representations made by each of them. In order to allow the
parties an opportunity to verify the representations, the parties
shall have a period of fourteen (14) business days from the date of
execution of this Letter of Intent to determine the validity of the
representations made. If either party shall determine that there has
been a material misstatement or misrepresentation, including
particularly with respect to the contents and condition of their
respective film libraries, then that party may withdraw from this Letter
of Intent.
During the fourteen day due diligence period, both parties shall have
access to the books and records of each other in order to perform such
due diligence investigation. During the interim between the execution
of the definitive Agreement of Merger and the Closing of the Merger,
Cavalcade and its representatives shall have continuing access to the
books and records of Cineports in order to obtain such information for
disclosure in the SEC Registration Statement as Cavalcade and/or its
attorneys and auditors shall deem necessary or desirable.
The Plan and Agreement of Merger shall contain the usual
representations and warranties of both parties as mutually agreed upon
by the respective counsels of the constituent corporations.
Jefferson D. Simmons, President
Cineports, Inc.
June 11, 2002
Page 4
X
CLOSING
Closing of the Merger shall occur at the offices of Lutzker & Lutzker,
1000 Vermont Avenue NW, Suite 450, Washington, DC 20005 at 10:00 a.m.
on Wednesday, July 10, 2002. Closing shall be deemed to have occurred
effective as of 12:01 a.m., July 1, 2002 for all relevant accounting
purposes. At Closing, Cavalcade shall deliver:
1. stock certificates, each for the appropriate number of
shares as provided in the Agreement of Merger, in the names of the
shareholders of Cineports; and
2. warrant certificates, each for the appropriate number of
shares purchasable upon exercise thereof, in the names of the
shareholders of Cineports.
Yours truly, AGREED AND ACCEPTED:
CAVALCADE OF SPORTS MEDIA, INC. CINEPORTS, INC.
By: /s/ Edward Litwak By: /s/ Jefferson D. Simmons
----------------------------- -----------------------------
Edward Litwak, President/CEO Jefferson D. Simmons, Pres.
Dated: June 11, 2002 Dated: June 11, 2002