FONU FONU2 Inc (PK)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20509

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

October 23, 2015

Date of Report

(Date of earliest event reported)

 

FONU2 INC.

(Exact name of registrant as specified in its charter)

 

NEVADA		000-49652		65-0773383
(State or other jurisdiction of incorporation)		(Commission File No.)		(IRS Employee I.D. No.)

 

135 Goshen Road Ext., Suite 205

Rincon, GA 31326

(Address of Principal Executive Offices)

 

(912) 655-5321

Registrant's Telephone Number

 

N/A

Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 1.01 – Entry into a Material Definitive Agrement

 

Mammoth Settlement Agreement

 

On October 23, 2015, the Company signed a settlement agreement with Mammoth Corporation to settle an August 28, 2015 complaint against Moon River Studios, Inc., Jake Shapiro and the Company. The complaint claims that Moon River, Jake Shapiro and the Company owes Mammoth $136,953 and seeks additional punitive damages and legal expense recovery from the Company. Under the terms of the agreement, the Company signed a Convertible Promissory Note in the amount of $140,000. The note bears no interest unless it goes into default. The agreement calls for monthly cash payments of the principal as follows:

 

In full and complete settlement and satisfaction of the Lawsuit and any and all actual and/or potential claims relating thereto, the Company agreed to:

 

●

Enter into a production agreement which shall be disclosed by it in a Form 8-K filed with the SEC or in a press release, by October 30, 2015;

 

●

Pay $15,000 to Mammoth within 10 days of FONU2 entering into pre production, but in no event later than December 1, 2015;

 

●

Pay $25,000 to Mammoth one month after the payment described in (b) above, which shall be in no event later than January 1, 2016. In the event the payment is not made by January 1, 2016, a l0 day grace period shall apply before action is taken to enforce the Agreement;

 

●

Pay $25,000 to Mammoth one month after the payment described in Section 2(c) above, which shall be in no event later than February 1, 2016. In the event the payment is not made by February 1, 2016, a 10 day grace period shall apply before action is taken to enforce the Agreement;

 

●

Pay $25,000 to Mammoth one month after the payment described in Section (d) above, which shall be in no event later than March 1, 2016. In the event the payment is not made by March 1, 2016, a 10 day grace period shall apply before action is taken to enforce the Agreement;

 

●

Pay $25,000 to Mammoth one month after the payment described in Section (e) above, which shall be in no event later than April 1, 2016. In the event the payment is not made by April 1, 2016, a 10 day grace period shall apply before action is taken to enforce the Agreement; and

 

 

●

Pay the balance of FONU Mammoth Note Number 001 one month after the payment described in Section (h) of the agreement, which shall be in no event later than May 1, 2016. In the event the payment is not made by May l, 2016, a 10 day grace period shall apply before action is taken to enforce the Agreement.

 

The parties also agreed to have the Court retain jurisdiction for the sole purpose of enforcing the terms of the Agreement by entering a judgment against Defendants in the amount of $140,000, less any payments received, plus interest and the costs of enforcing the Agreement, including reasonable attorney fees in the event the terms of the Agreement are not followed.

 

Yellow Distribution Agreements

 

On October 28, 2015, the Company announced that in association with, and as procured by Magna Entertainment, the Company has signed agreements for the distribution of Yellow by Screen Media Ventures, LLC (“Screen Media”). Under terms of the agreement:

 

●

The Company issued a Convertible Promissory Note to Magna Entertainment dated September 30, 2015 for $696,128.73, in replacement of a note in the same amount from Medient. The principal accrues interest at a rate of eight percent per annum and is due in full on August 11, 2016.  The company can prepay the Note on or before the maturity date. Optionally, the Note may be converted by Magna Entertainment at a rate of 65% of the lowest bid price of the Company’s common stock during the ten (10) consecutive trading days prior to the date of the conversion notice.

 

●

Gross receipts from the distribution of Yellow will be allocated as follows:

 

●

30% of all Gross Receipts to Screen Media as a distribution fee.

 

●

70% will be distributed as follows:

 

●

Once all domestic and foreign Distributors have recouped their marketing fees, out of pocket expenses, notes, and costs, the balance of the film’s proceeds will be sent to an independent collection agent.

 

●

The collection agent will determine the waterfall of payments as per the signed agreements.

 

●

As per the agreements, the Company will receive ten percent of remaining receipts, and the balance will be paid to Moon River Studios (formerly known as Medient Studios) as per the written agreements.

 

 

Memorandum of Understanding with Effingham County Industrial Development Authority

 

On October 30, 2015, the Company signed a new Memorandum of Understanding (“MOU”) with the Effingham County Industrial Development Authority. Some of the key terms of the new MOU are as follows:

 

●

The initial leased area will consist of Phase One on the Master Plan, which allows for the construction of ten stages, four warehouses, support buildings, and offices.

 

●

The annual lease payments by the Company will be reduced from $555,000 per year to $51,000 per year.

 

●

The required capital investments by the Company have been reduced from Ninety Million Dollars ($90,000,000) to Ten Million Dollars ($10,000,000) over a five year period.

 

●

Unless otherwise in use, the Company will have full access to the balance of the property for shooting, construction of back lots, etc.

 

●

The IDA will be responsible for all of the construction costs of the roads and waterlines on the initial leased area.

 

●

The IDA has authorized the transfer of the current contract with Preferred Site Construction to be transferred to their name as the client, and upon final review, for construction of the roads and infrastructure to begin as soon as possible.

 

Penny Marshall Agreement

 

It has come to the Company’s attention that there may be some confusion regarding the previously signed agreements between Studioplex, a subsidiary of the Company, and an entity owned by Ms. Penny Marshall regarding the production of two movies.  The confusion apparently relates to the start dates of the film Effa, along with the triggering of required payments.  The Company has sent a draft amended contract for review by Ms. Marshall and her counsel.  The Company has further offered to release Ms. Marshall from the current agreement.  Until notified otherwise by Ms. Marshall, the Company believes that the parties intend to continue their business relationship premised on the original signed agreement, and continues to account for Ms. Marshall’s “make good” provision for her director’s fees as a liability on the Company’s balance sheet.  In the event that there is an amendment or cancellation of the current agreement, the Company shall promptly file a Current Report on Form 8-K describing such event and filing any relevant exhibits.

 

Item 2.04 –

Triggering Events that Accelerate or Increase a Direct Financial Obligation under an Off-Balance Sheet Arrangement

 

ROCWAL Capital Default

 

On October 26, 2015, the Company received a Notice from ROCWAL Capital LLC stating that the Company was in default on a Promissory Note dated February 12, 2015, for an original amount of $23,689. The current outstanding balance is $10,516.60. The notice states that the Company is unable to deliver shares of its common stock to ROCWAL in partial conversion of the Note, because it lacks authorized reserved shares. Negotiations to purchase the Note are ongoing.

 

Mammoth Settlement Agreement

 

The disclosure set forth in Item 1 with resepct to the Convertible Promissory Note in the amount of $140,000 are hereby incorporated by reference into this Item 2.04.

 

Yellow Distribution Agreements

 

This disclosure set forth in Item 1 with resepct to the Convertible Promissory Note to Magna Entertainment dated September 30, 2015 for $696,128.73 are hereby incorporated by reference into this Item 2.04.

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d)     Exhibits

 

Exhibit No.		Description of Exhibit
10.1		Mammoth Convertible Promissory Note
10.2		Mammoth Settlement Agreement
10.3		Magna Yellow Distribution Agreement
10.4		Memoruandum of Understanding with Effingham County Industrial Development Authority

  

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:  November 3, 2015	FONU2 INC., a Nevada corporation
	By:	/s/ Roger Miguel
		Roger Miguel,
		Chief Executive Officer

 

 

6

 

 

 

Exhibit 10.1

 

FONU MAMMOTH NOTE NUMBER 001

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED 'WITH THE SECURITIES AND EXCHANGE COMMISSION, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

CONVERTIBLE PROMISSORY NOTE

DUE NINE MONTHS FROM ISSUANCE DATE

OF

FONU2 INC.

 

Issuance Date: October 20, 2015

MOON RIVER STUDIOS, INC. (F/K/A MEDIENT STUDIOS, INC.)

FOLLOWING Debt Securities Assumed by FONU2, Inc.

 

DATE ISSUED		AMOUNT				CURRENT BALANCE				DESCRIPTION OF ASSUMED NOTE
12-6-2013		$	25,000				21,871.96			MDNT MAMMOTH NOTE 002
1-20-2014		$	30,000				35,115.00			MDNT MAMMOTH NOTE 004
3-20-2014		$	50,000				56,900.00			MDNT MAMMOTH NOTE 006
10-10-2014		$	25,000				25,726.04			MDNT MAMMOTH NOTE 007

 

Stated Principal Amount In This Note: $140,000 (Current Balance of Assumed Notes)

 

THIS NOTE ("Note") is one of a duly authorized issue of Promissory Notes of FONU2 INC., a corporation duly organized and existing under the laws of the State of Nevada (the "Company").

 

FOR VALUE RECEIVED, and good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, including settling the action brought by Mammoth Corporation against FONU2, Inc. in the Circuit Court of the 19^th Judicial Circuit in Lake County, Illinois (Case Number 15 L 616) which is being settled pursuant to a Settlement Agreement dated the same date as this Note, the Company hereby promises to pay to the order of Mammoth Corporation or its registered assigns or successors-in-interest ("Holder") the principal sum of One-Hundred Forty Thousand Dollars (U.S.$140,000), which principal amount shall include any commission paid by the Company, together with all accrued but unpaid interest thereon, if any, on the earlier of the Maturity Date or the date on which the Company closes on any transaction relating to the term sheet attached to this Note as Exhibit A, to the extent such principal amount and interest has not been repaid or converted into the Company's Common Stock,$0.000l par value per share (the "Common Stock"), in accordance with the terms hereof. Interest on the unpaid principal balance hereof shall not accrue during the term of this note, unless an uncured default occurs, at which time Interest on this Note shall accrue daily commencing on the date of the uncured default and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in accordance with Section 1 hereof. Notwithstanding anything contained herein, this Note shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 4(a) at the rate (the "Default Rate") equal to the lower of eighteen (18%) per annum or the highest rate permitted by law. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal.

  

 

All payments of principal and interest on this Note shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Note or by a bank certified check. This Note may be prepaid in whole or in part. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

 

For purposes hereof the following terms shall have the meanings ascribed to them below:

 

"Bankruptcy Event" means any of the following events: (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

"Business Day" shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

 

"Change in Control Transaction" will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any "going private" transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 20% or more of the Company's Common Stock), (ii) any person (as defined in Section 13(d) of the Exchange Act), together with its affiliates and associates (as such terms are defined in Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as described in Rule l 3d-3 under the Exchange Act without regard to the 60.-day exercise period) in excess of 35% of the Company's voting power, (iii) there is a replacement of more than one-half of the members of the Company's Board of Directors which is not approved by those individuals who are members of the Company's Board of Directors on the date thereof, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, or (v) the Company enters into any agreement providing for an event set forth in (i), (ii), (iii) or (iv) above.

 

"Conversion Ratio" means, at any time, a fraction, of which the numerator is the entire outstanding Principal Amount of this Note (or such portion thereof that is being redeemed or repurchased), and of which the denominator is the Conversion Price as of the date such ratio is being determined.

 

"Conversion Price" shall equal 60% of the Market Price.

 

"Convertible Securities" means any convertible securities, to exchange for shares of Common Stock.

 

"Equity Conditions" shall mean (i) the resale of all Underlying Shares is covered by an effective registration statement which is not subject to any suspension or stop order (with a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance) or pem1itted pursuant to an exemption including pursuant to Rule 144(b)(l)(i) under the Securities Act.

 

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

 

"Market Price'' shall equal the lesser of the average of the 5 lowest trades of the Common Stock for any Trading Day(s) during the Pricing Period, or the closing bid price on the last day of the pricing period.

 

 

"Pricing Period" shall mean the fifteen trading days preceding the date of the applicable conversion notice. The Pricing Period may be extended to the day before the shares issued pursuant to the conversion notice are delivered, in the event the shares issued are registered or an exemption from registration is available. Delivered shall mean the date the shares clear deposit into Holder's brokerage account which shall be the date Holder is able to trade the shares free from restriction s of any kind including by the Holder's Brokerage firm, DTC, Issuer or Issuer's Transfer Agent (the "Extended Pricing Period"). The pricing period will be extended in the event the Market Price calculated using the Extended Pricing Period would be lower. Extending the pricing period will not adjust the number of shares delivered but will adjust the, market price, conversion price and the amount the note is reduced as a result of the conversion, and will be memorialized by and Amended Conversion Notice, which will be submitted to the Issuer by the Holder, if applicable.

 

"Principal Amount" shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the Principal Amount.

 

"Principal Market" shall mean the OTC Markets or such other principal market or exchange on which the Common Stock is quoted for trading.

 

"Securities Act" shall mean the Securities Act of 1933, as amended.

 

"Trading Day" shall mean a day on which there is trading on the Principal Market.

 

"Underlying Shares" means the shares of Common Stock into which the Notes are convertible (including interest or principal payments in Common Stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section l.         Interest Payments.

 

(a)         Interest Payments. As long as a default does not occur, Interest shall not accrue on the remaining unconverted principal balance of this Note ("Interest Amount").

 

Section 2.         Conversion.

 

(a)         Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at such Holder's option, at any time and from time to time to convert the outstanding Current Principal Amount under this Restated Note in whole or in part by delivering to the Company a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the "Conversion Notice"), which may be transmitted by facsimile or email. Notwithstanding anything to the contrary herein, this Note and the outstanding Principal Amount hereunder shall not be convertible into Common Stock to the extent that such conversion would result in the Holder hereof exceeding the limitations contained in, or otherwise violating the provisions of, Section 2(i) below.

 

 

(b)

Common Stock Issuance upon Conversion.

 

(i)         Conversion Date Procedures. Upon conversion of this Note pursuant to Section 2(a) above, the outstanding Current Principal Amount of the Restated Note elected to be converted hereunder shall be converted into such number of fully paid, validly issued and non-assessable shares of Common Stock, free of any liens, claims and encumbrances and without any restrictions or legends (if the shares are registered or if an exemption from registration is available and restricted if the shares are not registered or an exemption from registration is unavailable), as is determined by dividing the amount of the Current outstanding Principal Amount of this Restated Note being converted by the then applicable Conversion Price:

 

For example, a $40,000 conversion amount with a Conversion Price of $0.25 would be entitled to 160,000 conversion shares ($40,000/$0.25).

 

Obligor shall pay holder liquidated damages in the event holder does not receive free trading shares after a conversion notice has been sent, if the shares are registered or an exemption from registration is available and restricted if the shares are not registered or an exemption from registration is unavailable. The Liquidated Damages are not a penalty but are designed to set and limit damages, which are uncertain and cannot be known at this time. The damages will be the greater of: (1) I 00% of the outstanding Principal Amount of the Notes held by the Holder {plus all accrued and unpaid interest, if any); (2) the product of (A) the average of the 20 highest closing prices at any time up to the date a judgment is entered by the Court times the number of shares that would be delivered on the date of the default if the entire note were converted using the thirty days preceding the date of the default as the Pricing Period.

 

(ii)         Delivery. The Company will deliver to the Holder not later than three (3) Trading Days after the Conversion Date, shares (which certificate(s) shall be free of restrictive legends and trading restrictions if the shares are registered or an exemption from registration is available) representing the number of shares of Common Stock being acquired upon the conversion of this Note via Deposits and Withdrawal at Custodian (DWAC), if possible and unrestricted ce1tificates if the shares cannot be sent via DWAC. If in the case of any conversion hereunder, such shares are not delivered to the Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such shares, to rescind such conversion, in which event the Company shall immediately return this Note tendered for conversion. Lf the Company fails to deliver to the Holder such shares pursuant to this Section 2 of this Agreement (free of any restrictions on transfer or legends, if the shares are registered or if an exemption from registration is available and restricted if the shares are not registered or an exemption from registration is unavailable) in accordance herewith, prior to the fifth Trading Day after the Conversion Date, the Company note shall be in default.

 

(iii)        Surrender of Note Not Required. The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the "Conversion Date". If the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice, the Company shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Note for such outstanding Principal Amount as has not been converted if this Note has been surrendered to the Company for partial conversion. The Holder shall not be required to physically surrender this Note to the Company upon any conversion hereunder unless the full outstanding Principal Amount represented by this Note is being converted or repaid. The Holder and the Company shall maintain records showing the outstanding Principal Amount so convened and repaid and the dates of such conversions or repayments or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon each such conversion or repayment.

 

 

(c)

Conversion Price Adjustments.

 

(i)         Stock Dividends, Split and Combinations. If the Company or any of its subsidiaries, at any time while the Notes are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then each Affected Conversion Price (as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(c)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

 

As used herein, the Affected Conversion Prices (each an "Affected Conversion Price") shall refer to: (i) the Conversion Price, and (ii) each reported lowest closing bid price occurring on any Trading Day included in the period used for determining the Conversion Price, which Trading Day occurred before the record date in the case of events referred to in clause (A) of this subparagraph 3(c)(i) and before the effective date in the case of the events referred to in clauses (B) and (C) of this subparagraph 3(c)(i).

 

(ii)         Distributions. lf the Company or any of its subsidiaries, at any time while the Notes are outstanding, shall distribute to al! holders of Common Stock evidences of its indebtedness or assets or cash or rights or warrants to subscribe for or purchase any security of the Company or any of its subsidiaries (excluding those referred to in Section 3(c)(i) above), then concurrently with such distributions to holders of Common Stock, the Company shall distribute to holders of the Notes the amount of such indebtedness, assets, cash or rights or warrants which the holders of Notes would have received had all their Notes been converted into Common Stock at the Conversion Price immediately prior to the record date for such distribution.

 

(iii)        Rounding of Adjustments. All calculations under this Section 3 or Section I shall be made to 4 decimal places for dollar amounts or the nearest 1/1OOth of a share, as the case may be.

 

 

(iv)         Notice of Adjustments. Whenever any Affected Conversion Price is adjusted pursuant to Section 3(c)(i), (ii) or (iii) above, the Company shall promptly deliver to each holder of the Notes, a notice setting forth the Affected Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that any failure to so provide such notice shall not affect the automatic adjustment hereunder.

 

(v)          Change in Control Transactions. In case of any Change in Control Transaction, the Holder shall have the right thereafter to, at its option , convert this Note, in whole or in part, at the Conversion Price into the shares of stock and other securities, cash and/or property receivable upon or deemed to be held by holders of Common Stock following such Change in Control Transaction, and the Holder shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which this Note could have been converted immediately prior to such Change in Control Transaction would have been entitled if such conversion were permitted, subject to such further applicable adjustments set forth in this Section 3. The terms of any such Change in Control Transaction shall include such terms so as to continue to give to the Holders the right to receive the amount of securities, cash and/or property upon any conversion or redemption following such Change in Control Transaction to which a holder of the number of shares of Common Stock deliverable upon such conversion would have been entitled in such Change in Control Transaction, and interest payable hereunder shall be in cash or such new securities and/or property, at the Holder's option. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi)         Notice of Certain Events. lf:

 

A.

the Company shall declare a dividend (or any other distribution) on its Common Stock; or

 

B.

the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or

 

C.

the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

 

D.

the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Con1pany is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or

 

E.

the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be mailed to the Holder at its last address as it shall appear upon the books of the Company, on or prior to the date notice w the Company's stockholders generally is given, a notice stating (x) the date cm which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger. sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange.

 

 

(d)         Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of the Notes, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Exchange Agreement) be issuable (taking into account the adjustments under this Section 3 but without regard to any ownership limitation s contained herein) upon the conversion of this Note hereunder in Common Stock (including repayments in stock). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, nonassessable, and freely tradable (provided the shares are registered or an exemption from registration is available and restricted if the shares are not registered or an exemption from registration is unavailable).

 

(e)         No Fractions. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing price of a share of Common Stock at such time. If the Company elects not, or is unable, to make such a cash payment , the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock, rounded to the nearest whole share of common stock.

 

(f)         Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the conversion of this Note (including repayment in stock) shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Note when surrender for conversion shall be accompanied by an assignment form; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any such transfer.

 

 

(g)         Cancellation. After all of the Principal Amount (including accrued but unpaid interest and default payments at any time owed on this Note) have been paid in full or converted into Common Stock, this Note shall automatically be deemed canceled and the Holder shall promptly surrender the Note to the Company at the Company's principal executive offices.

 

(h)         Notices Procedures. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Con version Notice, shall be in writing and delivered personally, by facsimile, by email, or by a nationally recognized overnight courier service to the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Exchange Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered personally, (ii) when sent by facsimile or email, upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a nationally recognized overnight courier service.

 

(i)         Conversion Limitation. Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon conversion pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such Holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Notes) that have limitations on the Holder's right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned at such time (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) by the holder's "affiliates" at such time (as defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated for purposes of determining whether a group under Section l3(d) of the Securities Exchange Act of 1934 as amended, exists, would exceed 9.9% of the total issued and outstanding shares of the Common Stock (the "Restricted Ownership Percentage").

 

 

Section 3.         Defaults and Remedies.

 

(a)         Events of Default. An "Event of Default" is: (i) a default in payment of any amount due hereunder which default continues for more than 5 business days after the due date thereof; (ii) a default in the timely issuance of Underlying Shares upon and in accordance with terms hereof, which default continues for five Business Days after the Company has received written notice informing the Company that it has failed to issue shares or deliver stock certificates within the fifth day following the Conversion Date; (iii) failure by the Company for fifteen (l5) days after written notice has been received by the Company to comply with any material provision of any of the Notes or the Exchange Agreement (including without limitation the failure to issue the requisite number of shares of Common Stock upon conversion hereof and the failure to redeem Notes upon the Holder's request following a Change .in Control Transaction pursuant to Section 3(c)(v); (iv) a material breach by the Company of its representations or warranties in the Exchange Agreement; (v) any default after any cure period under, or acceleration prior to maturity of any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company for in excess of $500,000 or for money borrowed the repayment of which is guaranteed by the Company for in excess of $500,000, whether such indebtedness or guarantee now exists or shall be created hereafter (also excepted from this provision is any indebtedness related to the Medient Studioplex project); or (vi) if the Company is subject to any Bankruptcy Event.

 

(b)         Remedies. If an Event of Default occurs and is continuing with respect to any of the Notes, the Holder may declare all of the then outstanding Principal Amount of this Note and all other Notes held by the Holder, including any interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in clauses (v) and (vi) of Section 4(a) this Note shall become due and payable without further action or notice. In the event of such acceleration, the amount due and owing to the Holder shall be the greater of: (l) l00% of the outstanding Principal Amount of the Notes held by the Holder (plus all accrued and unpaid interest, if any); (2) the product of (A) the average of the 20 highest closing prices at any time up to the date a judgment is entered by the Court times the number of shares that would be delivered on the date of the default if the entire note were converted using the thirty days preceding the date of the default as the Pricing Period. The remedies under this Note shall be cumulative.

 

Section 4.         General.

 

(a)         Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(b)         Savings Clause. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. lf the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

 

(c)         Amendment. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

 

(d)         Assignment, Etc. The Holder may assign or transfer this Note. The Holder shall notify the Company of any such assignment or transfer promptly. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the folder and its successors and pem1itted assigns.

 

(e)         No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right remedy or power hereunder shall not operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time.

 

(f)         Governing Law; Jurisdiction.

 

(i)         Governing Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED !N ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE Application OF THE LAW OF ANY OTHER JURISDICTION.

 

(ii)        Jurisdiction. This Note shall be deemed to have been executed in Lake County, Illinois, the State and County where Holder executes this Note and the County from where funds are being sent and to where funds are to be repaid. The Company expressly agrees and consents that the Nineteenth Judicial Circuit in Lake County Illinois or the United States District Court for the Northern District of Illinois shall have sole jurisdiction of any action pertaining to this note.

 

The Company agrees that the service of process upon it mailed by ce11ified or registered mail (and service so made shall be deemed complete three days after the same has been posted as aforesaid) or by personal service shall be deemed in every respect effective service of process upon it in any such suit or proceeding. Nothing herein shall affect Holder's right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.

 

(iii)       NO JURY TRIAL. THE COMPANY AND THE LIMITED GUARANTOR HERETO KNOWINGLY AND VOLUNTARILY WAIVE ANY AND ALL RIGHTS EACH MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, OR IN ANY WAY RELATING OR REFERRING TO THIS NOTE.

 

 

(g)         Replacement Notes. This Note may be exchanged by Holder at any time and from time to time for a Note or Notes with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by Holder, upon surrendering the same. No service charge will be made for such registration or exchange. In the event that Holder notifies the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to The original Note (except for registration number and Principal Amount, if different than that shown on the original Note), shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the Note.

 

(h)         Waiver. The Company hereby waives any and all demands of any nature whatsoever, any and all notices of any nature whatsoever, dishonor, presentment of any kind whatsoever, and protest of or in connection with the Note or any Indebtedness.

 

(i)         Piggyback Registration. At the option of the Holder, if at any time the Company proposes or is required to register any of its equity securities under the Securities Act or file an amendment to any registration statement covering any of its securities, (other than registrations on Form S-4 or Form S-8 or any similar successor forms thereto), the Company shall notify holder of its intention to register its securities and will use its commercially reasonable efforts to cause all shares issuable pursuant to conversions of this note, to be registered under the Securities Act with the securities which the Company at the rime proposes to register to permit the sale or other disposition by the, unless within five (5) Business Days after the Issuer sending notice of its intention to register securities, Holder elects that this note and the shares underlying it not be included in that registration . Any registration shall include, if necessary, the filing with the SEC a post-effective amendment or a supplement to the registration statement filed by the Company or the prospectus related thereto. There is no limitation on the number of such piggyback registrations pursuant to the preceding sentence which the Company is obligated to effect.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the day and in the year first above written.

 

The Company:

 

FONU2 INC.

 

By:
Name:	Roger Miguel
Title:	CEO

 

The Holder:

 

By:
Name:	Brad Hare
Title:	President

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Debenture)

 

TO:       FONU2 INC.

 

RE:       FONU MAMMOTH NOTE NUMBER 002

 

The undersigned hereby Irrevocably elects 10 convert a portion of the of the principal amoun1 of the above Debenture into Shares of Common Stock of FONU2 Inc. according to the conditions stated therein, as of the Conversion Date written below. Please note that should the Conversion Price in effect for this conversion be less than the Par Value ($0.0001) of the Company's Common Stock, the principal reduction resulting from this conversion will be less than the dollar amount of the conversion as set forth below.

 

Conversion Date:
Amount to be converted:	$
Market Price	$
Conversion Price per share:	$
Number of shares of Common Stock to be issued:
Amount of Principal Reduced:	$
Amount of Debenture unconverted :
Please issue the shares of Common Stock in the following name and to the following address:	Mammoth Corporation DELIVERY INSTRUCTIONS
Issue to:	Mammoth Corporation
Name:	Brad Hare
Authorized Signature:
Title:	President
Phone Number:	(847) 540-5044
Broker DTC Participant Code:
Account Number:

 

 

 

 

Exhibit 10.2

 

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

 

This Settlement and Mutual Release Agreement (the "Agreement") is entered into as of this 23 day of October 2015 between and among Plaintiff Mammoth West Corporation d/b/a Mammoth Corporation ("Mammoth") and Defendants Moon River Studios, Inc. F/K/A Medient Studios, Inc. ("MDNT"), Joel Shapiro a/k/a Jake Shapiro ("Shapiro"), and FONU2, Inc. ("FONU2") ("collectively the "Defendants"). Mammoth and each of the Defendants may be referred to as a "Party" and collectively they may be referred to as the "Parties".

 

WHEREAS, Mammoth filed a lawsuit against Defendants entitled Mammoth Corporation v. Moon River Studios, et al., No. 15 L 616 in the Circuit Court for the Nineteenth Judicial Circuit Lake County Illinois, which suit is pending (the "Lawsuit");

 

WHEREAS, to avoid protracted litigation, expense and inconvenience and to settle, compromise and fully and finally resolve all outstanding and potential matters between them, Plaintiff and Defendants wish enter into this Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.

The foregoing recitals are incorporated into this Agreement for all purposes.

 

2.           In full and complete settlement and satisfaction of the Lawsuit and any and all actual and/or potential claims relating thereto, FONU2 shall:

 

a.

Issue to Mammoth Corporation at the same time as this Settlement Agreement, the Convertible Promissory Note (FONU Mammoth Note Number 00l ) ("the Note");

 

b.

The Note will be held by Mammoth and will be returned marked Paid, upon Mammoth receiving all payments indicated in this Section 2 or, upon receipt of the Discounted Payment in the event Defendants prepay and receive a discount as described in Section 4 of this Agreement.

 

c.

FONlJ2 will enter into a production agreement which shall be disclosed by FONU2, in a Form 8-K filed with the SEC or in a press release, by October 30, 2015;

 

d.

Pay $15,000 to Mammoth within 10 days of FONU2 entering into the pre production, but in no event later than December I, 2015;

 

e.

Pay $25,000 to Mammoth one month after the Payment described in Section 2(d) of this agreement, which shall be in no event later than January 1, 2016. In the event the payment is not made by January 1, 2016, a l0 day grace period shall apply before action is taken to enforce this Agreement;

 

 

f.

Pay $25,000 to Mammoth one month after the Payment described in Section 2(e) of this agreement. which shall be in no event later than February 1, 2016. In the event the payment is not made by February l, 20l6, a l0 day grace period shall apply before action is taken to enforce this Agreement

 

g.

Pay $25,000 to Mammoth one month after the Payment described in Section 2(f) of this agreement which shall be in no event later than March 1, 2016. In the event the payment is not made by March 1, 2016, a l 0 day grace period shall apply before action is taken to enforce th.is Agreement.

 

h.

Pay $25,000 to Mammoth one month after the Payment described in Section 2(g) of this agreement, which shall be in no event later than April 1, 2016. In the event the payment is not made by April l, 20l 6, a l 0 day grace period shall apply before action is taken to enforce this Agreement.

 

	i.	Pay the balance of FONU Mammoth Note Number 001 one month after the Payment described in Section 2(h) of this agreement, which shall be in no event later than May 1, 2016. ln the event the payment is not made by May l, 20l6, a 10 day grace period shall apply before action is taken to enforce this Agreement.
	j.	In the event any of the listed actions in this Section 2 of the Settlement Agreement do not occur when due, then Section 3 of this Agreement shall apply.

 

3.           The Parties agree to have the Court retain jurisdiction for the sole purpose of enforcing the tem1s of this Agreement by entering a judgment against Defendants in the amount of $140,000, less any payments received, plus interest and the costs of enforcing this Agreement, including reasonable attorney fees in the event the terms of this Agreement are not followed.

 

4.           Prepayment Incentive ("Discounted Payment"): Provided none of the payments described in Section 2 have been missed, Defendants may prepay at any time and receive the following discount, with the number of days being measured from the date of the first payment described in Section 2(d) of this Agreement:

 

Discount:	If Paid within:
50%	45 Days
40%	90 Days
30%	120 Days

 

 

5.           Upon receipt of all payments contemplated by this Settlement Agreement, in exchange for the promises, covenants and undertakings made in this Agreement, Mammoth does hereby, forever, fully and finally release and discharge, Defendants and all their respective officers, directors, employees, agents, attorneys, heirs, successors and assigns, if any, of and from any and all liabilities, rights, claims, causes of action, agreements, bills, bonds, controversies, counterclaims, covenants, cross-claims, damages, debts, demands, executions, indemnities, judgments, liens, notes, obligations, promises, suits, third- party actions, filed or untiled, and sums of money whatsoever, and any and all claims arising from any one or more of the foregoing, whether in law or in equity, known or unknown, liquidated or unliquidated, mature or contingent, including any matters that arise pursuant to any law, act, statute or ordinance and including any claims, liabilities or damages relating to or arising from the Note, or any claims made in or relating to the claims made in the Lawsuit.

 

6.           In exchange for the promises, covenants and undertakings made in this Agreement, Defendants do hereby, forever, fully and finally release and discharge Mammoth and its officers, directors. employees, agents, attorneys, heirs, successors and assigns, if any, of and from any and all liabilities, rights, claims, causes of action, agreements, bills, bonds, controversies, counterclaims, covenants, cross-claims, damages, debts, demands, executions, indemnities, judgments, liens, notes, obligations, promises, suits, third- party actions, filed or unfiled, and sums of money whatsoever, and any and all claims arising from any one or more of the foregoing, whether in law or in equity, known or unknown, liquidated or unliquidated , mature or contingent, including any such matters that arise pursuant to any law, act, statute or ordinance and including any claims, liabilities or damages relating to or arising from the Note, or any claims made in or relating to the claims made in the Lawsuit.

 

7.           The acknowledgments, covenants, promises, recitals and releases made in this Agreement are made solely to compromise disputed claims and are not ton be construed as an admission of liability on the part of any Party.

 

8.           Each Party shall promptly take any and all action necessary, proper, or convenient and to promptly execute and deliver any and all documents necessary, proper, and convenient to carry out and perform all of the provisions of this Agreement.

 

9.           This Agreement may not be assigned without the express written consent of each Party, and any unauthorized assignment shall be null and void, however nothing in this Section shall prohibit Mammoth from being able to assign the Note describe in Section 2(a) of this Agreement.

 

10.         This Agreement contains the entire agreement of the Parties, any and all prior agreements between the Parties are hereby superseded and revoked, and no Party has relied on any agreement, statement or promise that is nor set forth in this Agreement.

 

11.         Each Party has had the benefit of professional legal advice from the attorneys of his or its own choosing, is fully satisfied with that advice, and has relied solely and completely upon his or its own judgment together with the independent professional advice of his or its counsel in executing this Agreement, and has fully informed himself or itself of the contents, terms, conditions and effects of this Agreement and has read and fully understands this Agreement.

 

 

12.         This Agreement is to be governed by, construed, and enforced in accordance with the laws of the State of Illinois.

 

13.         Wherever and whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under the laws of the State of Illinois and any other applicable law.

 

14.         If any provision of this Agreement is prohibited by or determined to be void or invalid under applicable law, such provision shall be ineffective to the extent it is prohibited, void or invalid, without impacting the remainder of such provision or the remaining provisions of this Agreement and shall not exclude or preclude the Parties from exercising any other rights or remedies provided in this Agreement or by law.

 

15.         This Agreement may be executed and transmitted by the Parties in counterparts, by email and/or by facsimile, each of which, for all purposes, shall be considered an original.

 

16.         Any notices, demands or other legal documents required, permitted or contemplated by this Agreement shall be in writing and may be sent either to the street address or the email address listed below:

 

if to Mammoth , then by email to:

 

Mammoth Corporation

One First Bank Plaza, Suite 205

Lake Zurich, IL 60047

Email: mammothcorp@hotmail.com

 

and if to Defendants:

 

Roger Miguel, CEO

Jake Shapiro

FONU2, Inc.

135 Goshen Road Ext. Suite 205

Rincon, GA 31326

Email: rogermiguel@fonu2.com

 

17.         Each person signing this Agreement on behalf of a Party warrants and represents by his or her signature that he or she has the authority to execute this Agreement on that Party's behalf.

 

18.         This Agreement shall be binding on the heirs, successors, and assigns of each Party hereto.

 

19.         Each Party shall cooperate fully and in good faith in carrying out the terms of this Agreement and effecting its purpose.

 

 

20.         This Agreement is to be construed according to the fair import of its language as a whole, and not to be construed in favor of or against any of the Parties hereto.

 

21.         This Agreement may be executed in counterparts which counterparts together shall have the same force and effect as a single original executed by all the panics. A counterpart signed and sent electronically including, but not limited to, by facsimile or email, and any reproduction of that counterpart including printing or photocopying the counterpart, shall be an original and binding document.

 

IN WITNESS W HEREOF, the Parties hereto, have caused this Agreement to be duly executed as of October 23, 2015.

 

MAMMOTH WEST CORPORATION d/b/a
MAMMOTH CORPORATION
By:
	Brad Hare, President
FONU2, INC.
By:
	Roger Miguel, CEO
JOEL (a/k/a JAKE) SHAPIRO, individually
and MOON RIVER STUDIOS, INC.
f/k/a Medient Studios, Inc.
By:
	Joel (a/k/a Jake) Shapiro, Individually and as a
	former Officer of MOON RIVER STUDIOS,
	INC. f/k/a Medient Studios, Inc.

 

 

- 5 -

 

Exhibit 10.3

 

DISTRIBUTION AGREEMENT

 

This Agreement and the attached Standard Terms (collectively, the “Agreement”) are dated as of September 30, 2015 and set forth the terms of the Agreement between FONU2, Inc. doing business as Moon River Studios, Inc. (“Owner” or a “Party”) of 135 Goshen Road Ext., Suite 205, Rincon, Georgia 31326 and Magna Entertainment (“Magna” or a “Party”) (and together with the Owner, collectively, “Parties”) with respect to Owner’s engagement of Magna as agent in connection with the distribution and exploitation of the motion picture “Yellow.” The motion picture (written by Nick Cassavetes and Heather Wahlquist, directed by Nick Cassavetes and starring Heather Wahlquist, Sienna Miller, Melanie Griffith, Lucy Punch, Ray Liotta, Gena Rowlands…), currently titled Yellow (“Picture”) shall be distributed on the following terms and conditions:

 

1) Engagement	Magna will be exclusive Owner’s agent for all sales, licensing, distribution, and other exploitation of the Picture in the Territory (as defined below) across all Licensed Media (as defined below). Magna will also have the right to advertise and promote, and arrange for the advertising and promotion of, the Picture.
2) Territory	Worldwide.
3) Term	The period beginning on execution of the Agreement and continuing for two (2) years from completion of materials delivery, with successive one (1) year extensions unless either Party ceases such extensions on sixty (60) days advance written notice to the other Party. For clarity, after expiration or termination of the Term, Magna will continue to receive its fee in connection with all exploitation of the Picture arranged by Magna during the Term for any agreements mutually agreed upon.
4) Licensed Media	All forms of exploitation, whether on a free, paid or subscription basis, or otherwise, including without limitation:   (a)     theatrical (b)     via all forms of Internet Protocol delivery to all IP-capable devices; (c)     via all forms of video-on-demand and pay-per-view; (d)     via all modes of television exhibition; (e)     via traditional distribution of home video devices; (f)      via so called “disc on demand,” “manufacture on demand,” and similar fulfillment services; (g)     to hotels, educational institutions, libraries, hospitals and corporate locations; (h)     to airlines, ships, oil rigs and military bases registered in and/or flying the flag of any part of the Territory.
5) Gross Receipts	All sums received by Magna in connection with all sales, licensing, distribution and exploitation of the Picture hereunder.

 

 

6) Magna Fee	As partial consideration for Magna entering into this Distribution Agreement, the Owner shall have assumed and hereby fully guarantees $696,128.73 of indebtedness of Medient Studios, a predecessor to the Owner, to an entity that may be deemed an affiliate of Magna (which the Owner represents such funds were used by Medient Studios in connection with production expenses of the film “Yellow”) and the Owner shall immediately exchange such $696,128.73 of indebtedness for an 8% Senior Convertible Exchange Note of the Owner in the aggregate principal amount of $696,128.73 made payable to Magna, the form of which is annexed hereto as Exhibit 1. Upon the Owner’s recoupment and receipt of all distribution fees owed to it from the release of the film “Yellow”, and the payment of all obligations of the Owner to Magna pursuant to the Exchange Note, the balance of all remaining funds received by the Owner as a result of the distribution of the film Yellow, shall be paid to Medient and/or its debtors.
7) Print & Advertising Spend	For clarity, the budget for the Print & Advertising spend of the Picture, including without limitation the theatrical exhibition, and all promotion of the Picture, shall be mutually determined and agreed in advance by Owner and Magna.  Owner hereby approves Magna’s theatrical distribution of the Picture via Screen Media.
8) Additional Owner Representations	Owner hereby represents and warrants that the claims of breach of contract, breach of covenant and fair dealing, fraudulent misrepresentation, and negligent misrepresentation that were filed against Nick Cassavetes, a producer of the Picture, in Los Angeles Superior Court on December 18, 2012 by plaintiffs John Thomas and Twinspin Music, naming Owner as a defendant, have been fully and adequately resolved and that no further action is, or will be, taken by any party in connection with any such claims. Further, Owner represents that it is the exclusive owner of the worldwide distribution rights for the Picture. The foregoing representations shall be in addition to any other representations made by Owner in this Agreement and any addendum hereto.
9) Allocation of Receipts	1.    Except as otherwise agreed, first, Magna will deduct and retain from Gross Receipts all funds until all obligations to Magna under the Note and is paid in full:. 2.    After item 9.1 is fully satisfied, from Gross Receipts, Owner shall receive One Hundred Percent (100%) of further remaining sums pursuant to the payment terms as per the Agreement (“Net Receipts”). All payments of Net Receipts to the Owner shall be made within thirty (30) days of actual receipt by Magna.

 

 

STANDARD TERMS

 

10) Appointment	Owner appoints Magna to act as Owner’s agent in connection with all sales, licensing, distribution and other exploitation of the Picture throughout the Territory and for the Term in the Licensed Media, in all formats and versions (including, without limitation, versions formatted for television as well as segments or episodes derived from the Picture), as further set forth in this Agreement and these Standard Terms. Magna shall additionally have the right to advertise and promote the Picture, and arrange for the advertising and promotion of the Picture, in all media now known or hereafter devised (the “Advertising Rights”). For clarity, capitalized terms used herein that are not defined shall have the meaning assigned to them in the Cover Sheet.
11) Accounting, Reporting & Payment	Magna will make available accounting statements to Owner’s account via email, and will deliver to Owner payment of Net Receipts (if any) to the reporting and payment contact in accordance with paragraph 9 of the Agreement. All statements submitted to Owner shall include, at a minimum, transactional data and revenues generated by the Picture as reported to Magna by each such licensee of the Picture, and all expenses incurred hereunder. Owner shall have the right, upon at least thirty (30) days prior written notice, to audit Magna’s books and records solely related to the Picture, at Magna’s regular place of business and during Magna’s regular business hours. Such right to audit is limited to the Picture, and under no circumstances shall Owner have the right to examine records relating to Magna’s business generally, or with respect to any other titles or content. Such audit shall be conducted by an independent certified accountant at Owner’s sole cost and expense, and not more frequently than once per year. No statement may be audited more than once and no such audit shall be conducted in a manner that unreasonably interferes with Magna’s business.
12) Residuals & Third Party Participations	Owner is responsible for any and all residual and other additional or supplemental payments payable to any union, guild or other entity (e.g., SAG, DGA, WGA) required to be made by reason of the exploitation of the Picture and the advertising rights as set forth herein. Owner is responsible for paying all third party participations granted by Owner in connection with the Picture.
13) Delivery	All necessary clearance, preparation, and delivery to Magna of such materials necessary for the reasonable and efficient distribution and exploitation of the Picture (“Materials”) shall be at Owner’s sole cost and expense. Owner acknowledges and agrees that Owner’s failure to timely deliver Materials may prevent Magna from making the Picture available for distribution, and any delayed performance or non-performance by Magna arising from (i) Owner’s failure to meet its delivery obligations of the Materials hereunder, or (ii) the failure of the video elements of the Picture or any trailers for the Picture to meet quality control standards of any licensee shall not be a breach hereof by Magna.

 

 

14) Source Copy Loss or Damage	Owner is solely responsible for creating and retaining copies of the Picture or other Materials prior to submitting them to Magna. Magna shall not be responsible for any loss of or damage to physical elements of the Picture or other Materials submitted to Magna under any circumstances or for any reason whatsoever, provided such loss or damage is not the result of Magna’s negligence or willful misconduct.
15) Editing	Magna will not edit, and will not permit third parties to edit the Picture except for the following purposes: (i) to prepare closed captioned, subtitled and/or dubbed versions the Picture; (ii) to avoid legal liability or conform the Picture to applicable laws, standards and practices; (iii) if applicable, to insert interstitial advertisements; (iv) if applicable, to compress the Picture and/or the credits as required by any third party licensee in connection with time limitations in a manner customary in the television industry; (v) to create clips, excerpts and segments for  promotional use or in connection with serialized exhibition of the Picture; and, (vi) if necessary, to create advertising and publicity materials for the Picture, including without limitation trailers, still photos and customized metadata.
16) Magna Logo	Magna shall be entitled to insert its trade names and/or logos before the main titles of the Picture and after the end titles of the Picture, and to insert such trade names and/or logos in all commercialization thereof and/or paid advertising related thereto.  At Magna’s option, it shall have the right to one additional logo to be added to the end titles. In addition, Magna shall have the right to assume two (2) executive producer credits on the Picture.
17) Publicity	Other than as required by law, Owner shall not, without Magna’s prior written consent, issue any press release or other publicity relating to the Agreement or reference any trade name, trademark, logo, or commercial symbol of Magna or its affiliated entities in brochures, websites, advertisements, email communications, client lists or any other promotional materials, and/or otherwise except as provided in these Standard Terms. The foregoing shall not prevent Owner from making incidental, non-derogatory references to the existence of the relationship between the Parties hereunder in general interviews, provided that such references do not violate the Confidentiality provision set forth below.
18) Confidentiality	Other than as required by law, governmental authority, or to enforce its rights hereunder, neither Party will, without the express written consent of the other Party, disclose the terms of the Agreement or any other business information shared by the other Party which should reasonably be understood to be confidential, except to its attorneys, agents, accountants, investors, lenders, or directors on a “need-to-know” basis, provided that such persons are similarly required to keep such information confidential.
19) Waiver	No waiver by either Party of any provision of the Agreement, or of any breach or default by the other Party shall constitute a continuing waiver, and no waiver shall be effective unless made in a signed writing.

 

 

20) Representations & Warranties	Each of the Parties represents and warrants the following: (i) that it is a duly organized, validly existing corporation or other legally recognized business organization in good standing under the laws of its jurisdiction of incorporation or formation, and (ii) that it has the full legal right, power, and authority to execute this Agreement and to perform its obligations hereunder, and the consent of no other person or entity is necessary in connection with the foregoing. Owner further represents and warrants that it has obtained all rights and clearances necessary to exploit the Picture and all elements contained therein (as further set forth in the attached Schedule 1 and incorporated by reference herein) and that Owner has not entered into and will not enter into any agreement in conflict with Magna’s rights hereunder.
21) Disclaimer	Magna agrees to use good faith efforts to generate exposure for the Picture and to maximize revenue from the sales, licensing, distribution and other exploitation of the Picture. However, Magna makes no representations or warranties that it will obtain opportunities to exploit the Picture or generate any minimum amount of revenue.
22) Insurance	Owner shall obtain, or cause to be obtained, a standard producer’s and distributor’s errors and omissions liability insurance policy in connection with the Picture, with minimum coverage limits in the amount of One Million Dollars ($1,000,000) per claim and Three Million Dollars ($3,000,000) in the aggregate. Upon request, Owner shall provide Magna with proof of such coverage, and a certificate naming Magna or sub-distributor as additional insured, in a form acceptable to Magna.
23) Indemnification	Each Party (an “Indemnifying Party”) agrees to defend, indemnify and hold harmless the other Party and such other Parties, control persons (as defined under the Federal Securities Laws), affiliates, officers, attorneys, members, directors, equity and/or debt holders, employees, agents, representatives and the other related persons (an “Indemnified Party”) from and against any third party claim, action, judgment or liability of any kind arising out of or in connection with any breach of any representation, warranty or agreement made by the Indemnifying Party in the Agreement or these Standard Terms or any addenda thereto.  By way of example, any cost or liability that results from Owner’s failure to clear the Picture or to own or control the applicable rights will be Owner’s sole responsibility.

 

 

24) Governing Law	This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereto covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York, New York. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other parties hereto of all of its reasonable counsel fees and disbursements.
25) Severability	If any provision of the Agreement shall be determined by any court of competent jurisdiction to be void and unenforceable, all other provisions of the Agreement shall nevertheless continue in full force and effect.
26) Complete Agreement:	This Agreement contains the full and complete understanding between the Parties and supersedes all prior agreements and understandings, and cannot be modified except in a writing signed by both Parties.

 

SIGNATURE PAGE TO FOLLOW

 

  

By signing below, the Parties agree to the terms set forth in this Agreement including the Standard Terms that are incorporated herein by this reference. In the event of a conflict between the Agreement and the Standard Terms, the terms of the Agreement shall prevail:

 

Magna Entertainment			Fonu2, Inc.
Name:			Name:	Roger Miguel
Title:			Title:	Chief Executive Officer

 

 

Exhibit 10.4

 

Confidential

Memorandum of Understanding

 

PURPOSE

 

This Memorandum of Understanding (“MOU”) between Effingham County Industrial Development Authority (“ECIDA”) and FONU2, a publicly traded company, that operates under the name of Moon River Studios (“Moon River”). Moon River is currently in default under a Bond Lease and MOU (with associated agreements) with the ECIDA that it wishes to terminate and renegotiate a new movie studio project. The planned movie studio site is located in Effingham County, Georgia on property commonly known as the “North Tract”.

 

It is the common intention of the Parties to develop an approximate 51-acre portion of the property for the purpose of making motion pictures and the development of studios and sound stages. It is the stated goal of the ECIDA to attract businesses that will ultimately provide jobs and careers for the citizens of Effingham County and beyond. It is the stated goal of Moon River to develop and construct movie studios to film and edit motion pictures.

 

The Parties hereby seek to terminate any existing obligations of either Party with respect to the former project on approximately 1,550-acres and commonly known as the “Studioplex”.

 

In its place, the Parties hereto seek to agree on a revised film studio project that would be built on approximately 51-acres anticipating a minimum of $10M in direct capital expenditures and the creation of 250 full time jobs within five (5) years by Moon River.

 

Initial Terms:

 

1.

The scale of the revised project is to essentially reflect Phase 1 of former “Studioplex” Master plan, approximately 51+/- acres.

 

2.

10 Years of 100% ad valorem tax abatement with a PILT at a rate of $51,000 per year. ($10,000 per acre “Freeze”.) First payment due at closing. Subsequent payments due 12 months from closing.

 

3.

Will allow for use via lease on unencumbered property from time to time as long as there is no impact on other tenants.

 

4.

IDA to fund and complete access road and water line to site.

 

5.

Moon River to utilize on-site septic system (with no further obligation by IDA for wastewater treatment).

 

6.

IDA to control all acreage outside of lease agreement.

 

7.

250 Job minimum to be created within five (5) years. Annual minimums will be required such that; by the end of Year 1, 95 full time, permanent jobs are created and maintained, by the end of Year 2 a minimum of 100 full time, permanent jobs have been created and maintained, by the end of Year 3 a minimum of 150 full time, permanent jobs have been created and maintained, by the end of Year 4 a minimum of 200 full time, permanent jobs have been created and maintained and by the end of Year 5 a minimum of 250 full time, permanent jobs have been created and maintained. See requirements table in attached Exhibit “A”.

 

 

8.

$10M Capital Investment minimum within five (5) years. Annual minimums will be required such that: by the end of Year 1, $2,000,000 in building and/or equipment will have been invested directly by the company, by the end of Year 2, an additional $2,000,000 in building and/or equipment will have been invested directly by the company, by the end of Year 3, an additional $2,000,000 in building and/or equipment will have been invested directly by the company, by the end of Year 4, an additional $2,000,000 in building and/or equipment will have been invested directly by the company, by the end of Year 5, an additional $2,000,000 in building and/or equipment will have been invested directly by the company. See requirements table in attached Exhibit “A”.

 

9.

Buy out at FMV by a mutually agreed appraiser after Year 2 cumulative targets have been met (i.e. total capital investment of at least $4,000,000 and at least 100 full time jobs).

 

DEFINITIVE AGREEMENT

 

The parties agree that this document shall be superseded by a definitive agreement that is mutually acceptable, which agreement will contain, among other things (1) the termination of the MOU, Economic Development Agreement, Bond Purchase Loan Agreement, Lease Agreement, as well as other documents and agreements generally dated July 1, 2013, all of which pertain to the 1,550-acres (Studioplex”) project; and (2) the terms and conditions referenced herein pertaining to the “new” 51-acre project and other acceptable terms and conditions for the definitive agreement. This MOU is an expression of interest only and is not a commitment of Moon River or ECIDA to enter into a binding agreement. Each party acknowledges and agrees that except for the Confidentiality portion of this MOU, which provisions shall be binding upon the parties, this MOU is not intended to be a contract or evidence of any contract or other binding obligation, and neither party shall have any liability or legal obligation until such time as a mutually agreeable and more comprehensive agreement can be prepared, executed and delivered by the parties. This MOU shall be governed in all respects by the laws of the State of Georgia.

 

IN WITNESS WHEROF, the parties have signed this MOU as of the _____ day of October, 2015.

 

FONU2, INC. “Moon River Studios”

 

By: ________________________________

 

Name: _____________________________

 

Title: ______________________________

 

Date: ______________________________

  

EFFINGHAM COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY

  

By: ________________________________

 

Name: ______________________________

 

Title: _______________________________

 

Date: ______________________________

 

 

Exhibit “A”

 

Rules for satisfying job and investment requirements will be the same as under Schedules 4.2 and 4.4 of previous agreement.

 

The Jobs and investment requirements applicable to the Company are set forth in the table below:

 

PERFORMANCE PERIOD (INCLUDES ALL CALENDAR YEARS SCHEDULED BELOW, AND ANY YEAR THROUGH WHICH THE PERFORMANCE PERIOD IS EXTENDED)	COMMUNITY JOBS GOAL (CUMULATIVE)	CAPITAL INVESTMENT GOAL (CUMULATIVE) BY FONU2 (MOON RIVER)
Year 1 (2016)	95	$2 million
Year 2 (2017)	100	$4 million
Year 3 (2018)	150	$6 million
Year 4 (2019)	200	$8 million
Year 5 – Year 20 (2020 & on)	250	$10 million

 

 

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