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UNITED\ue000 STATES
SECURITIES\ue000 AND\ue000 EXCHANGE\ue000 COMMISSION
Washington,\ue000 D.C.\ue000 20549
FORM\ue000 8-K
__________________________
CURRENT\ue000 REPORT
PURSUANT\ue000 TO\ue000 SECTION\ue000 13\ue000 OR\ue000 15(d)\ue000 OF\ue000 THE
SECURITIES\ue000 EXCHANGE\ue000 ACT\ue000 OF\ue000 1934
Date\ue000 of\ue000 Report\ue000 (date\ue000 of\ue000 earliest\ue000 event\ue000 reported):\ue000 \ue000 January\ue000 1,\ue000 2009
__________________________
GENIUS\ue000 PRODUCTS,\ue000 INC.
(Exact\ue000 Name\ue000 of\ue000 Registrant\ue000 as\ue000 Specified\ue000 in\ue000 its\ue000 Charter)
__________________________
Delaware
0-27915
33-0852923
(State\ue000 or\ue000 Other\ue000 Jurisdiction\ue000 of
(Commission\ue000 File\ue000 Number)
(I.R.S.\ue000 Employer
Incorporation\ue000 or\ue000 Organization)
\ue000
Identification\ue000 No.)
\ue000
3301\ue000 Exposition\ue000 Boulevard,\ue000 Suite\ue000 100
Santa\ue000 Monica,\ue000 California\ue000 90404
\ue000 (Address\ue000 of\ue000 Principal\ue000 Executive\ue000 Offices)\ue000 (Zip\ue000 Code)
(310)\ue000 401-2200
(Registrant\u2019s\ue000 telephone\ue000 number,
including\ue000 area\ue000 code)
(Former\ue000 Name\ue000 or\ue000 Former\ue000 Address,\ue000 if\ue000 Changed\ue000 Since\ue000 Last\ue000 Report)
__________________________
Check\ue000 the\ue000 appropriate\ue000 box\ue000 below\ue000 if\ue000 the\ue000 Form\ue000 8-K\ue000 filing\ue000 is\ue000 intended\ue000 to\ue000 simultaneously\ue000 satisfy\ue000 the\ue000 filing\ue000 obligation\ue000 of\ue000 the\ue000 registrant\ue000 under\ue000 any\ue000 of
the\ue000 following\ue000 provisions:

o\ue000\ue000\ue000\ue000\ue000\ue000Written\ue000 communications\ue000 pursuant\ue000 to\ue000 Rule\ue000 425\ue000 under\ue000 the\ue000 Securities\ue000 Act\ue000 (17\ue000 CFR\ue000 230.425)
o\ue000\ue000\ue000\ue000\ue000\ue000Soliciting\ue000 material\ue000 pursuant\ue000 to\ue000 Rule\ue000 14a-12\ue000 under\ue000 the\ue000 Exchange\ue000 Act\ue000 (17\ue000 CFR\ue000 240.14a-12)
o\ue000\ue000\ue000\ue000\ue000\ue000Pre-commencement\ue000 communications\ue000 pursuant\ue000 to\ue000 Rule\ue000 14d-2(b)\ue000 under\ue000 the\ue000 Exchange\ue000 Act\ue000 (17\ue000 CFR\ue000 240.14d-2(b))
o\ue000\ue000\ue000\ue000\ue000\ue000Pre-commencement\ue000 communications\ue000 pursuant\ue000 to\ue000 Rule\ue000 13e-4(c)\ue000 under\ue000 the\ue000 Exchange\ue000 Act\ue000 (17\ue000 CFR\ue000 240.13e-4(c))

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Item\ue000 1.01\ue000\ue000\ue000\ue000\ue000\ue000\ue000\ue000\ue000\ue000 Entry\ue000 into\ue000 a\ue000 Material\ue000 Definitive\ue000 Agreement.
Purchase\ue000 and\ue000 Sale\ue000 Agreement

On\ue000 January\ue000 1,\ue000 2009\ue000 (the\ue000 \u201cClosing\ue000 Date\u201d),\ue000 Genius\ue000 Products,\ue000 Inc.\ue000 (the\ue000 \u201cCompany\u201d),\ue000 Genius\ue000 Products,\ue000 LLC\ue000 (the\ue000 \u201cDistributor\u201d),\ue000 The\ue000 Weinstein Company\ue000 Holdings\ue000 LLC\ue000 (\u201cTWC\ue000 Holdings\u201d),\ue000 Weinstein\ue000 GP\ue000 Holdings\ue000 LLC\ue000 (\u201cWeinstein\ue000 GP\ue000 Holdings\u201d),\ue000 W-G\ue000 Holding\ue000 Corp.\ue000 (\u201cW-G\ue000 Holding\u201d and,\ue000 collectively\ue000 with\ue000 TWC\ue000 Holdings\ue000 and\ue000 Weinstein\ue000 GP\ue000 Holdings,\ue000 the\ue000 \u201cTWC\ue000 Parties\u201d),\ue000 Quadrant\ue000 Management,\ue000 Inc.\ue000 (\u201cQuadrant\u201d)\ue000 and\ue000 GNPR Investments\ue000 LLC,\ue000 an\ue000 affiliate\ue000 of\ue000 Quadrant\ue000 (\u201cGNPR\ue000 Investments\u201d),\ue000 entered\ue000 into\ue000 a\ue000 Purchase\ue000 and\ue000 Sale\ue000 Agreement\ue000 (the\ue000 \u201cPurchase\ue000 Agreement\u201d)\ue000 in connection\ue000 with\ue000 the\ue000 restructuring\ue000 of\ue000 the\ue000 Distributor\u2019s\ue000 distribution\ue000 relationship\ue000 with\ue000 The\ue000 Weinstein\ue000 Company\ue000 LLC\ue000 (\u201cTWC\u201d)\ue000 and\ue000 the\ue000 sale\ue000 by\ue000 the TWC\ue000 Parties\ue000 of\ue000 substantially\ue000 all\ue000 of\ue000 their\ue000 respective\ue000 shares\ue000 and\ue000 ownership\ue000 interests\ue000 in\ue000 the\ue000 Company\ue000 and\ue000 the\ue000 Distributor\ue000 (the\ue000 \u201cQuadrant Transaction\u201d).

Pursuant\ue000 to\ue000 the\ue000 Purchase\ue000 Agreement\ue000 and\ue000 effective\ue000 as\ue000 of\ue000 the\ue000 Closing\ue000 Date,\ue000 the\ue000 Distributor\ue000 and\ue000 TWC\ue000 agreed\ue000 to\ue000 settle\ue000 all\ue000 monetary\ue000 obligations owing\ue000 to\ue000 TWC\ue000 by\ue000 Genius\ue000 on\ue000 an\ue000 accrued\ue000 basis\ue000 for\ue000 all\ue000 distribution\ue000 activity\ue000 through\ue000 September\ue000 30,\ue000 2008\ue000 pursuant\ue000 to\ue000 the\ue000 Distribution\ue000 Agreement between\ue000 the\ue000 Distributor\ue000 and\ue000 TWC\ue000 (as\ue000 amended,\ue000 the\ue000 \u201cTWC\ue000 Distribution\ue000 Agreement\u201d).\ue000 \ue000 In\ue000 connection\ue000 with\ue000 such\ue000 settlement,\ue000 (i)\ue000 the\ue000 Distributor issued\ue000 to\ue000 TWC\ue000 a\ue000 promissory\ue000 note\ue000 in\ue000 the\ue000 principal\ue000 amount\ue000 of\ue000 $20\ue000 million\ue000 (the\ue000 \u201cTWC\ue000 Note\u201d),\ue000 which\ue000 is\ue000 payable\ue000 on\ue000 January\ue000 1,\ue000 2011\ue000 and\ue000 accrues interest\ue000 at\ue000 a\ue000 rate\ue000 of\ue000 5%\ue000 per\ue000 annum,\ue000 (ii)\ue000 the\ue000 Distributor\ue000 agreed\ue000 to\ue000 pay\ue000 to\ue000 TWC\ue000 up\ue000 to\ue000 an\ue000 additional\ue000 $43.3\ue000 million,\ue000 \ue000 from\ue000 the\ue000 Closing\ue000 Date\ue000 through February\ue000 2010,\ue000 subject\ue000 to\ue000 the\ue000 satisfaction\ue000 by\ue000 TWC\ue000 of\ue000 certain\ue000 conditions\ue000 set\ue000 forth\ue000 in\ue000 the\ue000 Purchase\ue000 Agreement\ue000 and\ue000 (iii)\ue000 the\ue000 Distributor\ue000 agreed\ue000 to pay\ue000 to\ue000 TWC\ue000 a\ue000 further\ue000 amount\ue000 to\ue000 the\ue000 extent\ue000 the\ue000 estimate\ue000 of\ue000 amounts\ue000 payable\ue000 from\ue000 October\ue000 through\ue000 and\ue000 including\ue000 December\ue000 2008\ue000 is\ue000 less\ue000 than the\ue000 actual\ue000 amounts\ue000 determined\ue000 to\ue000 be\ue000 payable\ue000 for\ue000 such\ue000 period,\ue000 based\ue000 on\ue000 the\ue000 monthly\ue000 accounting\ue000 statements\ue000 for\ue000 such\ue000 periods\ue000 and\ue000 subject\ue000 to audit\ue000 by\ue000 TWC\ue000 (to\ue000 the\ue000 extent\ue000 such\ue000 estimate\ue000 exceeds\ue000 the\ue000 actual\ue000 amounts\ue000 determined\ue000 to\ue000 be\ue000 payable\ue000 for\ue000 such\ue000 period,\ue000 such\ue000 excess\ue000 may\ue000 be\ue000 offset\ue000 by the\ue000 Distributor\ue000 against\ue000 future\ue000 amounts\ue000 owed\ue000 to\ue000 TWC)\ue000 Subject\ue000 to\ue000 the\ue000 Distributor\u2019s\ue000 satisfaction\ue000 of\ue000 the\ue000 aforementioned\ue000 payment\ue000 obligations,\ue000 all remaining\ue000 amounts\ue000 owed\ue000 by\ue000 the\ue000 Distributor\ue000 to\ue000 TWC\ue000 through\ue000 December\ue000 31,\ue000 2008\ue000 shall\ue000 be\ue000 reduced\ue000 to\ue000 zero\ue000 and\ue000 shall\ue000 be\ue000 extinguished.

Also\ue000 pursuant\ue000 to\ue000 the\ue000 Purchase\ue000 Agreement\ue000 and\ue000 effective\ue000 as\ue000 of\ue000 the\ue000 Closing\ue000 Date,\ue000 (i)\ue000 the\ue000 TWC\ue000 Parties\ue000 sold\ue000 to\ue000 GNPR\ue000 Investments\ue000 an\ue000 aggregate\ue000 of 122,010,252\ue000 Class\ue000 W\ue000 Units\ue000 of\ue000 the\ue000 Distributor\ue000 (representing\ue000 a\ue000 60%\ue000 ownership\ue000 interest\ue000 in\ue000 the\ue000 Distributor)\ue000 and\ue000 the\ue000 TWC\ue000 Note\ue000 for\ue000 $20\ue000 million,\ue000 and (ii)\ue000 the\ue000 TWC\ue000 Parties\ue000 sold\ue000 to\ue000 the\ue000 Company\ue000 an\ue000 aggregate\ue000 of\ue000 100\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 Series\ue000 W\ue000 Preferred\ue000 Stock\ue000 (representing\ue000 100%\ue000 of\ue000 the issued\ue000 and\ue000 outstanding\ue000 shares\ue000 of\ue000 such\ue000 Series\ue000 W\ue000 Preferred\ue000 Stock).\ue000 \ue000 Immediately\ue000 following\ue000 the\ue000 Closing\ue000 Date,\ue000 the\ue000 TWC\ue000 Parties\ue000 collectively retained\ue000 20,335,042\ue000 Class\ue000 W\ue000 Units\ue000 of\ue000 the\ue000 Distributor,\ue000 representing\ue000 a\ue000 10%\ue000 ownership\ue000 interest\ue000 in\ue000 the\ue000 Distributor;\ue000 provided\ue000 that\ue000 in\ue000 connection with\ue000 such\ue000 sale,\ue000 the\ue000 TWC\ue000 Parties\ue000 transferred\ue000 to\ue000 the\ue000 applicable\ue000 purchaser\ue000 all\ue000 of\ue000 its\ue000 rights\ue000 to\ue000 assert\ue000 any\ue000 management,\ue000 control\ue000 or\ue000 voting\ue000 rights\ue000 over the\ue000 Distributor.

In\ue000 consideration\ue000 for\ue000 the\ue000 sale\ue000 of\ue000 the\ue000 Series\ue000 W\ue000 Preferred\ue000 Stock,\ue000 the\ue000 Company\ue000 issued\ue000 to\ue000 TWC\ue000 Holdings\ue000 two\ue000 warrants\ue000 (the\ue000 \u201cTWC\ue000 Warrants\u201d) entitling\ue000 TWC\ue000 Holdings\ue000 to\ue000 purchase\ue000 in\ue000 the\ue000 aggregate\ue000 27,043,636\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common\ue000 stock\ue000 (representing\ue000 10%\ue000 of\ue000 the\ue000 fully-diluted shares\ue000 of\ue000 the\ue000 Company\ue000 immediately\ue000 following\ue000 the\ue000 Closing\ue000 Date).\ue000 \ue000 The\ue000 first\ue000 of\ue000 the\ue000 TWC\ue000 Warrants\ue000 has\ue000 a\ue000 term\ue000 of\ue000 six\ue000 (6)\ue000 years,\ue000 entitles\ue000 TWC Holdings\ue000 to\ue000 purchase,\ue000 for\ue000 an\ue000 exercise\ue000 price\ue000 of\ue000 $0.0001\ue000 per\ue000 share,\ue000 up\ue000 to\ue000 13,521,818\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common\ue000 stock\ue000 and\ue000 becomes exercisable\ue000 in\ue000 twelve\ue000 (12)\ue000 equal\ue000 monthly\ue000 installments\ue000 commencing\ue000 on\ue000 January\ue000 1,\ue000 2010.\ue000 \ue000 The\ue000 second\ue000 of\ue000 the\ue000 TWC\ue000 Warrants\ue000 has\ue000 a\ue000 term\ue000 of\ue000 seven (7)\ue000 years,\ue000 entitles\ue000 TWC\ue000 Holdings\ue000 to\ue000 purchase,\ue000 for\ue000 an\ue000 exercise\ue000 price\ue000 of\ue000 $0.0001\ue000 per\ue000 share,\ue000 up\ue000 to\ue000 13,521,818\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common stock\ue000 and\ue000 becomes\ue000 exercisable\ue000 in\ue000 twelve\ue000 (12)\ue000 equal\ue000 monthly\ue000 installments\ue000 commencing\ue000 on\ue000 January\ue000 1,\ue000 2011.\ue000 \ue000 The\ue000 vesting\ue000 of\ue000 shares\ue000 under\ue000 each\ue000 of the\ue000 TWC\ue000 Warrants\ue000 is\ue000 conditioned\ue000 on\ue000 the\ue000 effectiveness\ue000 of\ue000 the\ue000 amended\ue000 and\ue000 restated\ue000 TWC\ue000 Distribution\ue000 Agreement\ue000 and\ue000 TWC\ue000 continuing\ue000 to\ue000 be in\ue000 the\ue000 principal\ue000 business\ue000 of\ue000 producing,\ue000 distributing,\ue000 licensing\ue000 and\ue000 acquiring\ue000 theatrical\ue000 motion\ue000 pictures,\ue000 with\ue000 unvested\ue000 shares\ue000 subject\ue000 to forfeiture\ue000 in\ue000 the\ue000 event\ue000 that\ue000 TWC\ue000 terminates\ue000 such\ue000 agreement\ue000 or\ue000 ceases\ue000 to\ue000 engage\ue000 in\ue000 such\ue000 business\ue000 activities.

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\ue000
Amended\ue000 TWC\ue000 Distribution\ue000 Agreement

Pursuant\ue000 to\ue000 the\ue000 Purchase\ue000 Agreement\ue000 and\ue000 effective\ue000 as\ue000 of\ue000 the\ue000 Closing\ue000 Date,\ue000 the\ue000 Distributor\ue000 and\ue000 TWC\ue000 entered\ue000 into\ue000 an\ue000 Amended\ue000 and\ue000 Restated Distribution\ue000 Agreement\ue000 (the\ue000 \u201cAmended\ue000 TWC\ue000 Distribution\ue000 Agreement\u201d),\ue000 amending\ue000 and\ue000 restating\ue000 the\ue000 TWC\ue000 Distribution\ue000 Agreement.\ue000 \ue000 The Amended\ue000 TWC\ue000 Distribution\ue000 Agreement\ue000 provides\ue000 for,\ue000 among\ue000 other\ue000 things,\ue000 (i)\ue000 the\ue000 grant\ue000 to\ue000 the\ue000 Distributor\ue000 of\ue000 the\ue000 exclusive\ue000 right,\ue000 in\ue000 the\ue000 United States\ue000 and\ue000 its\ue000 territories,\ue000 to\ue000 distribute,\ue000 design,\ue000 manufacture,\ue000 advertise,\ue000 publicize,\ue000 promote\ue000 and\ue000 market\ue000 TWC-owned\ue000 or\ue000 controlled\ue000 motion\ue000 picture titles,\ue000 with\ue000 TWC\ue000 retaining\ue000 digital\ue000 distribution\ue000 rights\ue000 to\ue000 such\ue000 titles;\ue000 (ii)\ue000 a\ue000 term\ue000 expiring\ue000 on\ue000 December\ue000 31,\ue000 2010,\ue000 subject\ue000 to\ue000 extension\ue000 by\ue000 mutual consent\ue000 until\ue000 December\ue000 31,\ue000 2011;\ue000 (iii)\ue000 an\ue000 increase\ue000 in\ue000 the\ue000 distribution\ue000 fee\ue000 payable\ue000 to\ue000 the\ue000 Distributor\ue000 for\ue000 theatrical\ue000 titles\ue000 released\ue000 on\ue000 home\ue000 video after\ue000 January\ue000 1,\ue000 2009;\ue000 (iv)\ue000 the\ue000 elimination\ue000 of\ue000 all\ue000 performance-based\ue000 adjustment\ue000 to\ue000 the\ue000 distribution\ue000 fee\ue000 payable\ue000 to\ue000 the\ue000 Distributor\ue000 (i.e., adjustments\ue000 based\ue000 on\ue000 the\ue000 level\ue000 of\ue000 home\ue000 video\ue000 sales\ue000 of\ue000 a\ue000 title\ue000 as\ue000 compared\ue000 to\ue000 theatrical\ue000 box\ue000 office\ue000 performance);\ue000 (v)\ue000 the\ue000 addition\ue000 of\ue000 provisions requiring\ue000 that\ue000 all\ue000 Distributor\ue000 home\ue000 video\ue000 inventory\ue000 created\ue000 on\ue000 or\ue000 after\ue000 October\ue000 1,\ue000 2008\ue000 and\ue000 unsold\ue000 at\ue000 the\ue000 end\ue000 of\ue000 the\ue000 term\ue000 be\ue000 purchased\ue000 by\ue000 TWC at\ue000 Distributor\u2019s\ue000 cost,\ue000 with\ue000 all\ue000 inventory\ue000 created\ue000 prior\ue000 to\ue000 such\ue000 date\ue000 and\ue000 unsold\ue000 at\ue000 the\ue000 end\ue000 of\ue000 the\ue000 term\ue000 to\ue000 be\ue000 delivered\ue000 to\ue000 TWC\ue000 at\ue000 no\ue000 cost;\ue000 (vi)\ue000 the pre-approval\ue000 by\ue000 TWC\ue000 of\ue000 the\ue000 outsourcing\ue000 (and\ue000 the\ue000 Distributor\u2019s\ue000 right\ue000 to\ue000 recoup\ue000 outsourced\ue000 costs)\ue000 of\ue000 certain\ue000 distribution\ue000 services;\ue000 (vii)\ue000 an increase\ue000 in\ue000 the\ue000 Distributor\u2019s\ue000 permissible\ue000 returns\ue000 reserve;\ue000 (viii)\ue000 the\ue000 elimination\ue000 of\ue000 provisions\ue000 requiring\ue000 the\ue000 Distributor\ue000 to\ue000 maintain\ue000 dedicated\ue000 staff for\ue000 the\ue000 distribution\ue000 of\ue000 TWC\ue000 product;\ue000 (ix)\ue000 the\ue000 elimination\ue000 of\ue000 provisions\ue000 requiring\ue000 the\ue000 Distributor\ue000 to\ue000 present\ue000 content\ue000 acquisition\ue000 opportunities\ue000 to TWC\ue000 before\ue000 the\ue000 Distributor\ue000 engages\ue000 in\ue000 such\ue000 opportunities;\ue000 (x)\ue000 additional\ue000 rights\ue000 of\ue000 the\ue000 Distributor\ue000 to\ue000 recoup\ue000 the\ue000 costs\ue000 of\ue000 all\ue000 approved\ue000 third party\ue000 manufacturing,\ue000 distribution\ue000 and\ue000 marketing\ue000 expenses,\ue000 including\ue000 all\ue000 supply-chain\ue000 expenses;\ue000 (xi)\ue000 the\ue000 addition\ue000 of\ue000 potential\ue000 incentive payments\ue000 to\ue000 TWC\ue000 if\ue000 certain\ue000 distribution\ue000 fees\ue000 are\ue000 earned\ue000 by\ue000 the\ue000 Distributor\ue000 from\ue000 January\ue000 1,\ue000 2009\ue000 through\ue000 December\ue000 31,\ue000 2010,\ue000 subject\ue000 to\ue000 certain terms\ue000 and\ue000 conditions;\ue000 (xii)\ue000 the\ue000 ability\ue000 of\ue000 the\ue000 Distributor\ue000 to\ue000 cross-collateralize\ue000 and\ue000 recoup\ue000 up\ue000 to\ue000 $7.5\ue000 million\ue000 of\ue000 unrecouped\ue000 distribution\ue000 and marketing\ue000 expenses\ue000 each\ue000 month\ue000 (up\ue000 to\ue000 $10\ue000 million\ue000 for\ue000 the\ue000 period\ue000 from\ue000 October\ue000 1,\ue000 2009\ue000 through\ue000 March\ue000 31,\ue000 2010),\ue000 subject\ue000 to\ue000 certain\ue000 terms\ue000 and conditions;\ue000 (xiii)\ue000 the\ue000 requirement\ue000 to\ue000 deliver\ue000 to\ue000 TWC\ue000 monthly\ue000 accounting\ue000 statements\ue000 within\ue000 forty\ue000 (40)\ue000 days\ue000 after\ue000 the\ue000 end\ue000 of\ue000 each\ue000 month;\ue000 (xiv)\ue000 the elimination\ue000 of\ue000 provisions\ue000 allowing\ue000 TWC\ue000 to\ue000 terminate\ue000 the\ue000 agreement\ue000 based\ue000 on\ue000 performance\ue000 levels\ue000 of\ue000 the\ue000 Distributor,\ue000 such\ue000 that\ue000 TWC\ue000 retains\ue000 the right\ue000 to\ue000 terminate\ue000 the\ue000 Amended\ue000 TWC\ue000 Distribution\ue000 Agreement\ue000 only\ue000 upon\ue000 material\ue000 default,\ue000 an\ue000 insolvency\ue000 event\ue000 or\ue000 certain\ue000 change\ue000 of\ue000 control events;\ue000 (xv)\ue000 the\ue000 elimination\ue000 of\ue000 TWC\u2019s\ue000 right\ue000 and/or\ue000 obligation\ue000 to\ue000 \u201cbuy\ue000 back\u201d\ue000 the\ue000 distribution\ue000 rights\ue000 granted\ue000 to\ue000 the\ue000 Distributor,\ue000 with\ue000 all\ue000 such distribution\ue000 rights\ue000 terminating\ue000 on\ue000 expiration\ue000 or\ue000 termination\ue000 of\ue000 the\ue000 term;\ue000 (xvi)\ue000 the\ue000 elimination\ue000 of\ue000 \u201cmost\ue000 favored\ue000 nation\u201d\ue000 clauses\ue000 in\ue000 favor\ue000 of\ue000 TWC, except\ue000 with\ue000 respect\ue000 only\ue000 to\ue000 distribution\ue000 fees\ue000 payable\ue000 to\ue000 the\ue000 Distributor.

Exchange\ue000 Agreement\ue000 and\ue000 Other\ue000 Transaction\ue000 Documents
Exchange\ue000 Agreement

Pursuant\ue000 to\ue000 the\ue000 Purchase\ue000 Agreement,\ue000 the\ue000 Company,\ue000 GNPR\ue000 Investments\ue000 and\ue000 the\ue000 TWC\ue000 Parties\ue000 entered\ue000 into\ue000 an\ue000 Exchange\ue000 Agreement\ue000 (the \u201cExchange\ue000 Agreement\u201d),\ue000 pursuant\ue000 to\ue000 which\ue000 GNPR\ue000 Investments\ue000 and\ue000 the\ue000 TWC\ue000 Parties\ue000 agreed,\ue000 subject\ue000 to\ue000 obtaining\ue000 all\ue000 necessary\ue000 approvals\ue000 from the\ue000 Company\u2019s\ue000 Board\ue000 of\ue000 Directors\ue000 and\ue000 stockholders,\ue000 to\ue000 transfer\ue000 to\ue000 the\ue000 Company\ue000 all\ue000 of\ue000 their\ue000 respective\ue000 Class\ue000 W\ue000 Units\ue000 of\ue000 the\ue000 Distributor\ue000 in exchange\ue000 for\ue000 shares\ue000 of\ue000 a\ue000 newly\ue000 created\ue000 Series\ue000 A\ue000 Interim\ue000 Convertible\ue000 Preferred\ue000 Stock\ue000 of\ue000 the\ue000 Company,\ue000 which\ue000 Series\ue000 A\ue000 Convertible\ue000 Preferred Stock\ue000 would\ue000 entitle\ue000 (i)\ue000 GNPR\ue000 Investments\ue000 to\ue000 convert\ue000 their\ue000 preferred\ue000 shares\ue000 into\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common\ue000 stock\ue000 representing\ue000 60%\ue000 of all\ue000 issued\ue000 and\ue000 outstanding\ue000 common\ue000 shares\ue000 and\ue000 (ii)\ue000 the\ue000 TWC\ue000 Parties\ue000 to\ue000 convert\ue000 their\ue000 preferred\ue000 shares\ue000 into\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common stock\ue000 representing\ue000 10%\ue000 of\ue000 all\ue000 issued\ue000 and\ue000 outstanding\ue000 common\ue000 shares.\ue000 \ue000 The\ue000 transactions\ue000 contemplated\ue000 by\ue000 the\ue000 Exchange\ue000 Agreement\ue000 were consummated\ue000 effective\ue000 as\ue000 of\ue000 January\ue000 15,\ue000 2009,\ue000 and,\ue000 as\ue000 a\ue000 result,\ue000 effective\ue000 as\ue000 of\ue000 such\ue000 date,\ue000 the\ue000 Distributor\ue000 became\ue000 a\ue000 wholly-owned\ue000 subsidiary\ue000 of the\ue000 Company.

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