EXHIBIT 10.7
OPTIONAL EXCHANGE AGREEMENT
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This AGREEMENT is made this 2nd day of July, 2001, by and between WOW
ENTERTAINMENT, INC., a Delaware corporation (the "Company"), Carter Fortune
("Fortune") and XXXXXX DEVELOPMENT, LTD. (the "LLC").
1. Nature of the Transaction.
(a) Fortune has loaned Five Hundred Thousand Dollars
($500,000.00) to LLC, which loan is represented by an Exchangeable
Promissory Note of even date herewith. In addition, Fortune will loan
up to Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00) to
LLC, which loan is represented by an Exchangeable Line of Credit
Promissory Note of even date herewith (collectively the "Notes").
(b) At the option of Fortune, all or any portion of the unpaid
principal and accrued interest under the Notes may be exchanged into
common stock ("Exchange Shares") of Company. This option may be elected
at any time prior to the maturity date of the Notes. The portion of the
unpaid principal and accrued interest elected to be exchanged shall be
converted into that number of shares of common stock equal to the
quotient of (i) such applicable portion of the unpaid principal and
interest, divided by (ii) $0.407401. For example, if $500,000 of unpaid
principal and accrued interest was converted, 1,227,292 common shares
would be issued by Company. If Fortune desires to make this election,
he shall notify LLC and Company, in writing, of his intent. A closing
shall occur within thirty (30) days of such written notice. At closing,
Fortune shall surrender the applicable note and Company shall issue the
Exchange Shares to Fortune. If only a portion of the unpaid principal
and accrued interest is exchanged, LLC shall issue a new note to
Fortune in the amount of the unpaid principal and accrued interest that
was not exchanged. The new note shall have substantially similar terms
to the note that was surrendered.
2. Representations of Company. Company represents and warrants
to Fortune that:
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and
has full power and authority to enter into this Agreement and to carry
out the transaction contemplated herein. This Agreement constitutes the
valid and legally binding obligation of Company, enforceable in
accordance with the terms and conditions.
(b) Company's authorized capital stock consists of 150,000,000
shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $0.01 par value. Company has full right and authority
to issue to Fortune, upon the terms and conditions set forth in this
Agreement, the shares specified by this Agreement and, pursuant to the
terms and conditions hereof, the shares will be duly and validly issued
as fully paid and nonassessable shares of Company's common stock.
3. Representations and Warranties of Fortune. Fortune represents
and warrants to Company that:
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(a) Lack of Restrictions. As of the date of this Agreement and
as of the date of any exchange, Fortune holds of record and
owns beneficially the Notes, free and clear of any
restrictions on transfer (other than any restrictions under
the Securities Act and state securities laws) encumbrances,
security interests, options, warrants, purchase rights,
contracts, commitments and/or equities. Fortune is not a party
to any option, warrant, purchase right or other contract or
commitment that could require Fortune to sell, transfer or
otherwise dispose of the Notes (other than this Agreement).
(b) Accredited Investor. Fortune is an "accredited investor"
as that term is defined in Regulation D of the Securities Act
and has sufficient knowledge and experience in financial and
business matters that he is capable of evaluating the merits
and risks of the transaction contemplated by this Agreement
and making an informed business decision.
4. Certificate for the Exchange Shares. Upon issuance of the
Exchange Shares, Company shall forthwith deliver a duly executed certificate
evidencing ownership of the Exchange Shares in the name of Fortune individually,
which certificate shall bear the usual restrictive legend pertaining to Rule 144
of the General Rules and Regulations promulgated under the Securities Act of
1933.
5. Tax Consequences. Each party represents that it/he has
consulted with its/his own tax advisors and has made has made its/his own
independent conclusion regarding the tax consequences of the intended
transaction.
6. Assignment. This Agreement may not be assigned nor any of the
performances hereunder delegated by operation of law or otherwise by any
party hereto, and any purported assignment or delegation shall be void.
7. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors,
legal representatives, assigns and transferors.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof. There
are no representations, warranties, conditions or other obligations except as
specifically provided. Any waiver, amendment or modification hereof must be in
writing. A waiver in one instance shall not be deemed to be a continuing waiver
or waiver in any other instance.
9. Arbitration. Any and all disputes, claims and controversies
arising under or by reason of this Agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and any award
rendered in such arbitration shall be binding and conclusive upon the parties.
The arbitrators may decree specific performance or grant
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injunctions or any other equitable relief deemed proper by the arbitrators under
the circumstances. Such arbitration shall be held in Indianapolis, Indiana.
Judgment on any award may be entered and enforced in any court located in
Indianapolis, Indiana.
10. Notices. Any written notice permitted or required hereunder shall
be effective when (a) mailed by certified United States mail, postage prepaid
with return receipt requested, or (b) sent by an overnight carrier which
provides for a return receipt, to the applicable address specified below:
If to LLC: Xxxxxx Development, Ltd.
000 Xxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxxxxxxxx, Xxxxxxx 00000
If to Company: WOW Entertainment, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxxxxxxxx, Xxxxxxx 00000
If to Fortune: Xxxxxx X. Xxxxxxx
X.X. Xxx 00
Xxxxxxx, Xxxxxxx 00000
or to such other addresses as Company, LLC or Fortune may from time to time
specify for itself/himself by notice hereunder.
11. Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Indiana.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
deemed executed upon receipt of a facsimile copy bearing signatures of the
parties, provided that a complete document bearing original signatures is
assembled within five business days of such execution.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
XXXXXX DEVELOPMENT, LTD.
By its Manager and Sole Member:
/s/ Carter Fortune /s/ Xxxxxxx X. May
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Carter Fortune, Individually Xxxxxxx X. May, CFO
WOW Entertainment, Inc.
Date: July 2, 2001
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WOW ENTERTAINMENT, INC.
By: /s/ Xxxxxxx X. May
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Xxxxxxx X. May, CFO
Date: July 2, 2001
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