sbv2

As filed with the Securities and Exchange Commission on May 14, 2004
Registration Statement No.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

JILL KELLY PRODUCTIONS HOLDING, INC.

(Name of small business issuer in its charter)


Nevada (State or Other Jurisdiction of Incorporation or Organization)		7812 (Primary Standard Industrial Classification Code Number)		91-1944323 (I.R.S. Employer Identification No.)

8923 Sunset Blvd.
West Hollywood, CA 90069
(310) 360-7900
(Address and Telephone Number of Principal Executive Offices and Principal Place of Business)

Robert A. Friedland, Chief Executive Officer
Jill Kelly Productions Holding, Inc.
8923 Sunset Blvd.
West Hollywood, CA 90069
(310) 360-7900
(Name, Address and Telephone Number of Agent for Service)

Copies of all communications, including all communications sent to the agent for service, should be sent to:
Barry J. Siegel, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 South Broad Street
Philadelphia, PA 19102
(215) 568-6060

Approximate date of proposed sale to the public: From time to time after the effective date of the registration statement until such time as all of the shares of common stock registered hereunder have been sold.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]

CALCULATION OF REGISTRATION FEE


				Proposed
				Maximum		Proposed
Title of Each Class	Amount to be			Offering Price		Maximum Aggregate		Amount of
of Securities Being Registered	Registered			Per Share⁽¹⁾		Offering Price ⁽¹⁾		Registration Fee
Shares of Common Stock		29,266,380	⁽²⁾⁽³⁾	$	1.15	$	33,656,337	$	4,264.26

Total		29,266,380		$	1.15	$	33,656,337	$	4,264.26

Amount Due								$	4,264.26

The registrant hereby amends the registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that the registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

¹ Estimated solely for the purpose of calculating the registration fee. The Proposed Maximum Aggregate Offering Price was calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended, on the basis of the average of the bid and ask prices of May 11, 2004 as reported by www.pinksheets.com.

² Includes 20,820,000 shares issued or issuable upon the conversion of 52,050 shares of our Series A Preferred Stock, 6,180 shares that we issued as payment for dividends on shares of our Series A Preferred Stock that have been converted and 3,241,380 shares that we may issue in the future as payment for dividends on our Series A Preferred Stock. Each share of our Series A Preferred Stock has a stated value of $100 when issued and accumulates a dividend at 8% per annum and may be converted into shares of our common stock at a price of $.25 per share.

³ Includes 5,205,000 shares underlying 5,205,000 common stock purchase warrants. Each warrant is exercisable for the purchase of one share of our common stock at any time before the fifth anniversary of the date of issuance at a price of $.25 per share.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell, nor does it seek an offer to buy, these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION. DATED , 2004.

PROSPECTUS

Jill Kelly Productions Holding, Inc.

29,266,380 Shares of Common Stock

An aggregate of 29,266,380 shares of common stock of Jill Kelly Productions Holding, Inc. covered by this prospectus are being offered and sold from time to time by certain of our stockholders hereinafter referred to as the selling stockholders. All of these shares are being registered for resale only. We will not receive any of the proceeds from the sale of the shares by the selling stockholders. 5,205,000 of the shares of our common stock which we are registering by this prospectus, however, are issuable upon exercise of common stock purchase warrants. If all of the warrants are exercised, we will receive gross proceeds of $1,301,250 from the holders of the warrants. The shares of our common stock which we are registering by this prospectus will be offered for sale by the selling stockholders, from time to time, at prevailing market prices or in negotiated transactions.

Our common stock is not traded on any market and, although we intend to initiate steps to include our common stock for quotation on the Over-the-Counter Bulletin Board, we may not be successful in such efforts and our stock may never trade in any market.

We are obligated to register a total of 29,266,380 shares of our common stock standing in the name of the selling stockholders pursuant to the terms of subscription agreements between the selling stockholders and us.

The selling stockholders may be deemed underwriters within the meaning of the Securities Act of 1933 in connection with such sales.

These securities are speculative and involve a high degree of risk. For a discussion of certain important factors that should be considered by prospective investors, see “Risk Factors” beginning on page 8.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

The date of this prospectus is , 2004

SUMMARY

This summary highlights important information included in this prospectus. Because it is a summary, it does not contain all of the information you should consider before making an investment decision. You should read the entire prospectus carefully, including the section titled “Risk Factors” beginning on page 8.

Business

Our company, Jill Kelly Productions Holding, Inc., through its wholly owned operating subsidiary Jill Kelly Productions, Inc., is a producer and distributor of high quality adult movies. With the help of third parties, we process our movies for distribution into popular media formats such as digital versatile disks, commonly known as “DVDs,” videotapes and electronic formats. We, through our wholly owned subsidiary J.K. Distribution, Inc., distribute our movies through a network consisting of:

• independent distributors;

• retailers;

• cable, satellite and hotel television operators; and

• Internet webpage operators.

Our offices are located at 8923 Sunset Blvd., West Hollywood, CA 90069. Our telephone number is (310) 360-7900.

The Offering


Shares offered by the selling stockholders		29,266,380

Common stock outstanding		25,156,180

Use of proceeds		The selling stockholders will receive the net proceeds from the sale of the shares offered by this prospectus. We will receive none of the proceeds from the sale of shares offered by this prospectus. 5,205,000 of the shares of our common stock which we are registering by this prospectus, however, are issuable upon exercise of common stock purchase warrants. If all of the warrants are exercised, we will receive gross proceeds of $1,301,250 from the holders of the warrants. We will use any proceeds from the

Description of Selling Stockholders

In this prospectus we are registering the resale of up to 29,266,380 shares of our common stock by 42 of our stockholders that purchased shares of our Series A Preferred Stock. These selling stockholders will acquire the shares of our common stock that they are offering for resale by this prospectus upon conversion of their shares of our Series A Preferred Stock and upon exercise of common stock purchase warrants. Each share of our Series A Preferred Stock is convertible into 400 shares of our common stock. We sold these selling stockholders in a series of transactions during the period from July 30, 2003 to February 25, 2004 units consisting of one share of our Series A Preferred Stock and warrants to purchase 100 shares of our common stock. We received gross proceeds of $100 per unit in each of these offerings. In these transactions, we sold the following number of shares of our Series A Preferred Stock and issued warrants to the following individuals and entities:


Selling Stockholder	Series A Preferred		Warrants		Consideration
Robert Hollis		4,000		400,000	$	400,000
Stanley Katz		500		50,000		50,000
John Stewart		125		12,500		12,500
Azriel Nagar and Sheila Nagar		500		50,000		50,000
Julian Herkowitz		500		50,000		50,000
AMJ Corp		850		85,000		85,000
Kings Against 3, LLC		5,500		550,000		550,000
Eugene J. Friedman		625		62,500		62,500
JKL Capital LP		1,000		100,000		100,000
Rosemary Friedman		500		50,000		50,000
Bernard Brown		500		50,000		50,000
R. Brooke Hollis		500		50,000		50,000
Emiko Ishioka		1,250		125,000		125,000
Morton Berman		500		50,000		50,000
Azriel Nagar		750		75,000		75,000
Jack Luchese		1,500		150,000		150,000
David A. Hoines, P.A Pension Plan		500		50,000		50,000
Jerome Bresson		250		25,000		25,000
John Stewart		125		12,500		12,500


Selling Stockholder	Series A Preferred		Warrants		Consideration
Mark Friedman		125		12,500		12,500
Mathew Smith		2,000		200,000		200,000
Daniel R. Ice		1,000		100,000		100,000
Charles Potter		125		12,500		12,500
Morris Silver		500		50,000		50,000
Gewinner W. Garrison		500		50,000		50,000
Maximum Ventures, Inc.		6,000		475,000		475,000
Corporate Builders, L.P. (1)		—		125,000		125,000
James L. Long		1,200		120,000		120,000
Robert A. Friedland Trust		12,500		1,250,000		1,250,000
William O. Baxter		1,000		100,000		100,000
Ronald V. Patterson		1,000		100,000		100,000
Michael Slipyan		250		25,000		25,000
Michael Koretsky		2,500		250,000		250,000
Joseph London		1,000		100,000		100,000
Kate Edelman Johnson		225		22,500		22,500
Beryl Weiner		150		15,000		15,000
David Boschart		1,000		100,000		100,000
Alexander R. Ice		250		25,000		25,000
Charles R. Whalen		250		25,000		25,000
Mitchell J. Birzon and Kathleen W. Birzon		250		25,000		25,000
Grace K. Walls		125		12,500		12,500
Victor I. Polakoff		125		12,500		12,500

TOTAL		52,050		5,205,000	$	5,205,000

(1) Corporate Builders, L.P. acquired a warrant to purchase 125,000 shares of our common stock from Maximum Ventures, Inc. This warrant was originally issuable to Maximum Ventures,

Inc. in connection with its purchase of shares of our Series A Preferred Stock.

Our Series A Preferred Stock accrues dividends at the rate of 8% per annum. These dividends are payable in cash, or, at our option, in shares of our common stock valued at the lesser of (i) $0.25 or (ii) the market price per share. This prospectus covers 3,241,380 shares of our common stock which represents the number of shares of our common stock that will be issued in payment of two years of accrued and future dividends on the outstanding shares of our Series A Preferred Stock assuming that:

• each share of our Series A Preferred Stock remains issued and outstanding for two years;

• we elect to pay all of the dividends in shares of our common stock; and

• the shares of our common stock that we issue as dividends are valued at $0.25 per share.

For purposes of the disclosures in this prospectus, these shares that we are registering for resale have been allocated among the holders of our Series A Preferred Stock based on the dividends that they will receive if they hold their shares of Series A Preferred Stock that they currently own for two years. These shares may or may not actually be issued depending on whether or not we are required to pay these dividends or if we elect to pay them in cash.

This prospectus also covers 6,180 shares of our common stock that we issued as payment for accrued dividends on 1,500 shares of our Series A Preferred Stock that were converted into shares of our common stock on January 20, 2004.

RISK FACTORS

You should carefully consider the risks described below, together with all of the other information included in or incorporated by reference in this prospectus, before making an investment decision. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline and you may lose all or part of your investment.

Some statements in this prospectus, including some of the following risk factors, are forward-looking statements. Please refer to the section in this prospectus entitled “Note Regarding Forward-Looking Statements.”

Risks Concerning Our Business

We have a very limited operating history upon which you may evaluate an investment in our company.

We only have a brief operating history. As a result, we have only a limited operating history upon which an investor can base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, such as operating loses, limited access to capital and issues relating to management of growth. We may not be successful in addressing these risks and uncertainties and our failure to do so could have a material adverse effect on our business, financial condition and operating results.

We have had a history of losses and expect continued losses in the foreseeable future.

For the year ended December 31, 2003, we experienced a net loss to common stockholders of $9,235,883. As of December 31, 2003, our accumulated deficit was $10,454,926. We expect to continue to incur losses for the foreseeable future and, if we ever have profits, we may not be able to sustain them. Our expenses will increase as we continue to develop our business. For example, we expect in the near future to rent an additional facility for our operations. We also expect to purchase various production and post-production equipment, such as movie cameras and editing equipment, in order to reduce the amount of production and post-production work on our movies that we outsource to third parties. If any of these and other expenses are not accompanied by increased revenues, then our losses will be greater than we anticipate.

Increased government regulation in the United States or abroad could limit our ability to distribute our movies and expand our business.

New laws or regulations relating to obscenity or the Internet, or more aggressive application of existing laws, could prevent us from making our movies available in various jurisdictions or otherwise have a material adverse effect on our business, financial condition and operating results. These laws or regulations could relate to liability for information retrieved from or transmitted over the Internet, taxation, user privacy and other matters relating to our movies. For example, the United States government has recently enacted laws regarding website privacy, copyrights and taxation. Moreover, the application to the Internet of other existing laws governing issues such as intellectual property ownership and infringement, pornography, obscenity, libel, employment and personal privacy are uncertain and developing.

Cable system operators could also become subject to new governmental regulations that could further restrict their ability to broadcast our movies. If new regulations make it more difficult for cable operators to broadcast our movies, our operating performance would be adversely affected. For a more complete discussion of current and pending government regulation affecting our business, see “Government Approval and Regulation.”

Our movies and related products depict sexually explicit scenes that can create negative publicity, lawsuits and boycotts.

We are engaged in the business of producing and distributing adult-oriented, sexually explicit movies and related products worldwide. Many people regard our primary business as unwholesome. Various national and local governments, along with religious and children’s advocacy groups, consistently propose and enact legislation to restrict the distribution of, access to, and content of such adult entertainment. These groups also often file lawsuits against producers and distributors of adult entertainment products, encourage boycotts against such producers and distributors and mount negative publicity campaigns.

The distribution of our movies over the Internet by our independent distributors may also subject us to obscenity or other legal claims by third parties. We may also be subject to claims based upon the content that is available on the websites maintained by our distributors that offer our movies for sale through links to other sites and in jurisdictions in which we have not previously distributed our movies. Implementing measures to reduce our exposure to these liabilities may require our distributors that utilize the Internet to sell our movies to take steps that would substantially limit the attractiveness of their websites and/or their availability in various geographic areas, which could negatively impact their ability to generate revenue. If our distributors are unable to sell our movies, they will purchase fewer movies from us.

Our future capital requirements and needs for additional financing are uncertain.

The unavailability of funds or the inability to obtain funds on favorable terms could have a material adverse effect on our financial condition, results of operations and our ability to expand our operations. We believe that current and future available capital resources, including cash flow from operations, will be adequate to fund our working capital requirements based upon our present level of operations for the 12 month period following the date of this prospectus.

Future events, however, may cause us to seek additional capital sooner than we anticipated. For example, we intend to expand our business activities in the next 12 months. This expansion may require additional sources of funding. If additional capital resources are required, these funds may not be available on favorable terms to us or at all.

Failure to maintain our relationships with our distributors, retailers and licensees could adversely affect our business, financial condition or result of operation.

If a significant number of our distributors and retailers do not purchase or license our movies, our business, financial condition and operating results would be negatively affected. We distribute our movies in the United States through various distributors and retailers. We do not have formal distribution agreements with these distributors and retailers. Outside of the United States, we license distribution rights for our movies to various foreign distributors. We depend on these distributors and retailers to purchase or license our movies on favorable terms to us.

If we are unable to compete effectively with other forms of adult and non-adult entertainment, we will not be able to increase revenue.

Our ability to increase our revenues is effected by our ability to compete effectively with other forms of adult and non-adult entertainment. We face competition from other providers of adult programming, adult video rentals and sales, books and magazines aimed at adult consumers, adult-oriented telephone chat lines, adult night clubs, adult oriented Internet services and other adult-oriented leisure-time activities, provided by companies, including:

• Playboy Enterprises, Inc.;

• Vivid Entertainment; and

• Video Company of America.

To a lesser extent, we also face general competition from other forms of non-adult entertainment, including sporting and cultural events, other television networks, feature films and other programming.

Our ability to compete depends upon many factors, some of which are outside of our control. These factors include the quality and appeal of our competitors’ content, the technology utilized by our competitors, the effectiveness of their sales and marketing efforts and the attractiveness of their product offerings.

Some of our existing competitors, as well as potential new competitors, have significantly greater name recognition and financial, technical and marketing resources than we do. This may allow them to devote greater resources than we can to the development and promotion of their product offerings. These competitors may also engage in more extensive technology research and development and adopt more aggressive pricing policies for their products and services.

Additionally, increased competition could result in price reductions, lower margins and negatively impact our financial results.

We may not be able to adjust to changing technology.

We are engaged in businesses that have undergone technological change over the past few years. Therefore, we face risks inherent in businesses that are subject to technological advancement and changes in consumer demands. This includes the possibility that a technology in which we have invested may become obsolete, requiring us to invest in new technology. For example, we generate the majority of our revenues from sales of DVDs and videotapes of our movies. If the media format by which the majority of consumers view our movies changes, we will have to adapt to such change. Such a change in technology may cause us delays in the production of our movies. We may also have to incur substantial unanticipated costs and expenses in order to convert our existing library of movies and our new movies to such new media format.

We rely on third party subcontractors to perform services critical to our business.

We may not have access to third party subcontractors that perform critical services for us when their services are required, and their services may not be available to us on favorable terms. We rely on third party subcontractors to perform capital intensive or technically complex services critical to our business. These services include editing, video and videotape duplication, DVD replication and other similar services. If we are unable to use these subcontractors services, we could incur unexpected expenses and experience delays in finalizing our movies.

We are subject to risks relating to laws and regulations regarding our performers.

Our movie productions are subject to United States and foreign regulations which govern the terms and conditions under which sexually explicit media productions may occur, such as laws regarding the protection of minors. We have adopted practices and procedures intended to ensure compliance with these regulations. Although these measures are intended to protect us from liability under applicable United States and foreign laws governing sexually explicit media productions, we cannot guarantee that we will not be subject to successful legal attacks in the future.

We are subject to moratoriums and other limitations on the production of sexually explicit movies related to health concerns of our performers.

We are from time to time subject to moratoriums on producing sexually explicit movies on account of concerns related to the transmission of HIV, the virus that causes AIDS, and other sexually transmitted diseases by adult entertainment performers. We were recently subject to such a moratorium which prevented us from filming any new adult movies for approximately thirty days. In addition, any performer who contracts HIV or certain other sexually transmitted diseases is not permitted to perform in our movies. If our performers are prohibited from producing sexually explicit movies on account of these moratoriums or if a number of our performers contract HIV or certain other sexually transmitted diseases, then we may not be able to produce a sufficient amount of movies to meet the demands of our consumers.

Unauthorized use of our intellectual property and trade secrets may affect our market share and profitability.

We protect intellectual property rights to our productions through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain jurisdictions. We may distribute our movies in some jurisdictions in which there is no copyright and trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our movies or certain portions or applications of our movies. We will rely on a combination of copyright and trademark laws, trade secrets, software security measures, licensing agreements and non-disclosure agreements to protect our movies and to establish a competitive position in the marketplace. Other companies may independently develop or otherwise acquire similar creative materials or gain access to our intellectual property. Despite our precautions, there can be no assurance that we will be able to adequately protect our intellectual property from competitors in the future.

Protecting and defending against intellectual property claims may have a material adverse effect on our business.

From time to time, we may receive notice that others have infringed on our proprietary rights or that we have infringed on the intellectual property rights of others. There can be no assurance that infringement or invalidity claims will not materially adversely effect our business, financial condition or results of operations. Regardless of the validity or the success of the assertion of claims, we could incur significant costs and diversion of resources in protecting or defending against claims, which could have a material adverse effect on our business, financial condition or results of operations.

Piracy, illegal duplication of DVDs and videotapes and file sharing of film products over the Internet may have a material adverse effect on our business.

Our ability to compete depends in part on the successful protection of our intellectual property, including our movie productions. Piracy, illegal duplication and Internet peer-to-peer file sharing of film products has had an adverse effect on the entertainment industry as a whole. If new legislation aimed at protecting entertainment companies against piracy, illegal duplication and Internet peer-to-peer file sharing is not enacted and enforced, and we are unable to protect our movie productions from piracy, illegal duplication and Internet peer-to-peer file sharing, then such continued activities may have a material adverse effect on our business.

Our business may be adversely affected by the impact of free adult media content available on the Internet.

If free adult media content on the Internet becomes more widely available, such as the recent circulation of the Paris Hilton video, then the ability of our distributors to attract consumers willing to purchase our movies may be adversely affected. Our business relies in part on the ability of our independent distributors to attract consumers willing to purchase our movies

over the Internet. A decline in the number of consumers willing to purchase our movies would have a material adverse affect on our business, financial condition and operation results.

Future acquisitions could create significant risks for us.

We intend to acquire complementary or ancillary businesses in the future. We may not be able to integrate acquired businesses into our operations or operate any such businesses on a profitable basis. Acquisitions may not result in profitable operations. In addition, acquisition opportunities may not become available, or may not be accomplished, on favorable terms. Because we may issue securities as full or partial payment for an acquisition, fluctuations in our valuation may have an adverse effect on our ability to make additional acquisitions.

We may have difficulty managing our growth.

We expect to grow our operations in the near future. This growth may expose us to increased competition, greater operating, marketing and administrative costs and other risks associated with entry into new markets and the development of new products and services and could place a strain on our operational, human and financial resources. To manage growth effectively, we must:

• attract and retain qualified personnel;

• upgrade and expand our infrastructure so that it matches our level of activity; and

• improve and refine our operating and financial systems and managerial controls and procedures.

If we do not effectively manage our growth, then we will not be successful in executing our business plan, which could materially adversely affect our business, results of operations and financial condition.

We are dependent upon key employees.

We believe that our success depends to a significant extent on the efforts and abilities of certain of our management personnel, in particular those of Robert A. Friedland, our chairman of the board of directors, chief executive officer and secretary, Ronald C. Stone, our chief operating officer and chief financial officer, and Adrianne D. Moore, our president and vice chairman of the board of directors. The loss of any of these persons could have a material adverse effect on our business, prospects, operating results, and financial condition. Additionally, our ability to realize our business plan could be jeopardized if any member of our senior management becomes incapable of fulfilling his or her obligations and a capable successor is not found on a timely basis. There can however be no assurance that, in such event, we will be able to locate and retain a capable successor to any member of management.

Continued imposition of tighter processing restrictions by credit card associations and acquiring banks will make it more difficult to generate revenues from sales of our movies.

The ability of our independent distributors to accept credit cards over the Internet as a form of payment for our movies is critical to the success of our business. There are ongoing efforts by credit card associations to restrict the processing of credit cards for online adult-related content. To protect against such restrictions, our distributors must invest heavily in new technologies to protect against fraud. Unlike a merchant handling a sales transaction in a non-Internet environment, e-commerce merchants are fully responsible for all fraud perpetrated against them.

The ability of our independent distributors to accept credit cards over the Internet as a form of payment for movies could be restricted or denied for many reasons, including:

• if our distributors experience excessive chargebacks and/or credits;

• if our distributors experience excessive fraud ratios;

• if there is a breach of our distributors’ security resulting in a theft of credit card data;

• if there is a change in policy of the acquiring banks and/or credit card associations with respect to the processing of credit card charges for adult-related content; and

• tightening of credit card association chargeback regulations in international commerce.

In addition, American Express has instituted a policy of not processing credit card charges for online, adult-related content. If other credit card processing companies were to implement a similar policy, this could have a material adverse effect on our business, results of operations and financial condition.

We depend upon the future growth of the Internet and the continued viability of the infrastructure supporting it.

The ability of our independent distributors to continue to expand sales of our movies over the Internet relies on rapid technological changes in Internet-driven markets and increased use of the Internet by consumers. These technological changes may not continue and the telecommunications infrastructure supporting the Internet may not be sufficiently developed to support the adoption of new technologies.

Our future success also depends, in part, upon the continued growth of the Internet. The current rate of growth of the Internet may not be sustained in future periods. There is some evidence that the rate of growth of Internet usage has decreased in the last year. Factors that could negatively influence the growth of the Internet in the future include:

• the availability of an Internet infrastructure sufficient to support its growth;

• delays in the development or adoption of new standards and protocols required to handle increased Internet activity;

• increased governmental regulation of the Internet; and

• piracy, particularly in new jurisdictions.

Portions of the Internet have experienced outages due to damage to portions of the Internet’s infrastructure. If outages or delays frequently occur in the future, Internet usage, including usage of the websites that offer our movies for sale, could grow more slowly, stagnate or decline. Any actual or perceived failure of the Internet could undermine the benefits of our products and services. In particular, delays and outages could result in slower response times and adversely affect usage of the websites that offer our movies for sale.

Risks Concerning This Offering and Our Securities

A small number of stockholders own a significant portion of our common stock and control us.

Our executive officers, directors and their affiliates currently own 17,251,000 shares of our common stock. This represents approximately 68.6% of the 25,156,180 shares our common stock presently issued and outstanding. In addition, Robert A. Friedland, our chairman of the board of directors, chief executive officer and secretary, beneficially owns 12,500 shares of our Series A Preferred Stock and a warrant exercisable for 1,250,000 shares of our common stock. If Mr. Friedland converted these shares of Series A Preferred Stock and exercised this warrant, then our officers, directors and their affiliates would own 74.8% of our issued and outstanding shares of common stock. As a result, these individuals have and will continue to have significant influence over our affairs. Such concentration of ownership may have the effect of delaying, deferring or preventing a change in control of our company.

There is a limited public market for our common stock and unless such market is expanded you may have difficulty selling shares of our common stock.

To date there has been only a limited and sporadic public market for our common stock. There can be no assurance that an active and more reliable public market will develop in the future or, if developed, that such market will be sustained. Purchasers of shares of our common stock may, therefore, have difficulty in reselling such shares. As a result, investors may find it impossible to liquidate their investment in us should they desire to do so.

Our common stock is currently available for trading in the over-the-counter market and quoted on the “Pink Sheets.” We plan to initiate steps following this offering to have our common stock quoted on the Over-the-Counter Bulletin Board Trading System, or the OTCBB, pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934. We may not, however, be successful in attracting a sufficient number of broker-dealers to agree to make a market in our common stock in order to have our shares quoted on the OTCBB. Even if we are successful in having our common stock quoted on the OTCBB, similar to quotation on the “Pink Sheets,” this market tends to be highly illiquid, in part because there is no national quotation system by which potential investors can trace the market price of shares except through information received or generated by a limited number of broker-dealers that make a market in that particular stock.

As of the date of this prospectus, our shares of common stock are not listed the NASDAQ stock market or on any national stock exchange. At the present time, we are unable to state when, if ever, we will meet the NASDAQ stock market initial listing requirements or the initial listing requirements of any other securities exchange. Unless we are able to substantially increase our net worth and market valuation, we will never be able to meet the initial listing requirements of the NASDAQ stock market. Moreover, even if we meet the initial listing requirements of the NASDAQ stock market, there can be no assurance that approval will be received or, if received, that we will meet the requirements for continued listing on the NASDAQ stock market. Further, NASDAQ reserves the right to withdraw or terminate a listing on the NASDAQ stock market at any time and for any reason in its discretion. If we are unable to obtain or to maintain a listing on the NASDAQ stock market, quotations, if any, for “bid” and “asked” prices of our common stock would be available only on the OTCBB or in the “Pink Sheets.” This can result in difficulty in selling our common stock or obtaining accurate quotations of prices for our common stock than would be the case if our common stock were listed on the NASDAQ stock market or another national securities exchange. Irrespective of whether or not our common stock is listed on the NASDAQ stock market, there can be no assurance that the public market for our common stock will become more active or liquid in the future.

It may be more difficult for holders of our common stock to resell their shares because the Penny Stock Rules apply to our common stock.

Holders of our shares of common stock may have difficulty selling their shares because our common stock is subject to the penny stock rules. The Securities Enforcement and Penny Stock Reform Act of 1990 requires special disclosure relating to the market for penny stocks in connection with trades in any stock defined as a “penny stock.” Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less that $5.00 per share and is not listed on NASDAQ or a major stock exchange. These regulations subject all broker-dealer transactions involving such securities to the special “penny stock rules” set forth in Rule 15g-9 of the Exchange Act of 1934. It may be necessary for the selling stockholder to utilize the services of broker-dealers who are members of the NASD. The current market price of our common stock is substantially less that $5.00 per share and such stock can, at least for the foreseeable future, be expected to continue to trade in the over-the-counter market at a per share market price of substantially less than $5.00. Accordingly, any broker-dealer sales of our shares will be subject to the penny stock rules.

These rules affect the ability of broker-dealers to sell our securities and also may affect the ability of purchasers of our common stock to sell their shares in the secondary market.

The penny stock rules also impose special sales practice requirements on broker-dealers who sell securities to persons other than their established customers or “accredited investors.” Among other things, the penny stock rules require that a broker-dealer make a special suitability determination respecting the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. In addition, the penny stock rules require that a broker-dealer deliver, prior to any transaction, a disclosure schedule prepared in accordance with the requirements of the Securities and Exchange Commission relating to the penny stock market. Finally, monthly statements have to be sent to any holder of such penny stocks disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Accordingly, for so long as the penny stock rules are applicable to our common stock, it may be difficult to trade such stock because compliance with such rules can delay or preclude certain trading transactions. This could have an adverse effect on the liquidity and price of our common stock.

Our common stock has experienced, and is expected to experience, significant price and volume volatility, which substantially increases the risk of loss to persons owning shares of our common stock.

Due to the limited trading market for our common stock and the volatility of our stock price, investors may not be able to sell their shares of our common stock when they desire to do so. Through the 12 months ended April 30, 2004, our stock price ranged from a high of $5.50 to a low of $.25 per share. The inability to sell shares in a rapidly declining market may substantially increase an investor’s risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price volatility.

Because we are engaged in the adult entertainment business, it may be more difficult for us to raise money or attract market support for our stock.

Some investors, investment banks, market makers, lenders and others in the investment community who oppose adult entertainment products may refuse to participate in the market for our common stock, financings or other activities due to the nature of our primary business. These refusals may negatively impact the value of our common stock and our opportunities to attract market support.

We might expand through acquisitions, which may cause dilution of our common stock and additional debt and expenses.

Any acquisitions of other companies which we complete may result in potentially dilutive issuances of our equity securities and the incurrence of additional debt, all of which could have a material adverse effect on our business, results of operations and financial condition. We plan to seek acquisitions and joint ventures that will complement our services, broaden our consumer base and improve our operating efficiencies. Acquisitions involve numerous additional risks, including difficulties in the assimilation of the operations, services, products and personnel of acquired companies, which could result in charges to earnings or otherwise adversely affect our

operating results. There can be no assurance that acquisition or joint venture opportunities will be available, that we will have access to the capital required to finance potential acquisitions, that we will continue to acquire businesses or that any acquired businesses will be profitable.

We may issue additional shares of our capital stock that could dilute the value of existing stockholder’s shares of common stock.

We may issue authorized and unissued shares of common stock at below current market prices or preferred stock that could dilute the earnings per share and book value of shares of our common stock owned by existing stockholders.

In addition, our board of directors has the authority to issue up to 400,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of such stock without further stockholder approval. The rights of the holders of common stock will be subjected to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company.

We do not intend to pay dividends on our common stock for the foreseeable future.

We have not paid any cash dividends, nor do we contemplate or anticipate paying any dividends upon our common stock in the foreseeable future.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. Statements other than statements of historical fact included in this prospectus regarding future events or prospects, are forward-looking statements. The words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “should” or variations of these words, as well as other statements regarding matters that are not historical fact, are indicative of or constitute forward-looking statements. We have based these forward-looking statements on our current view with respect to future events and financial performance. These views involve a number of risks and uncertainties which could cause actual results to differ materially from those we predict in our forward-looking statements and from our past performance. Although we believe that the estimates and projections reflected in our forward-looking statements are reasonable, they may prove incorrect, and our actual results may differ, as a result of the following and other uncertainties and assumptions:

• our operating development and financial condition;

• our expectations of growth in demand for our products and services;

• our expansion and acquisition plans;

• the impact of expansion on our revenue potential, cost basis and margins;

• the effects of regulatory developments and legal proceedings with respect to our business;

• the impact of exchange rate fluctuations; and

• our ability to obtain additional financing.

Many of these risks are beyond our control.

As a result, you should not place undue reliance on these forward-looking statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and related liabilities. On a going forward basis, we evaluate our estimates based on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Overview

We produce and distribute high quality adult movies. During 2003, we derived our revenues from:

• the sale of our movies through independent wholesale and retail distributors in popular media formats such as DVDs, videotapes and electronic formats;

• the licensing of our movies to cable, satellite and hotel television operators; and

• the licensing of our movies to Internet webpage operators.

These parties then distribute our movies to consumers. We do not sell our movies directly to consumers. We produced 94 movies in 2003 and expect to produce over 100 movies in 2004. We believe that, due to our extensive library of completed adult movies and our production pipeline of new adult movies, we have achieved the critical mass and brand acceptance necessary to allow us to focus our efforts on growing our business. We plan to pursue acquisitions of companies that operate in related industries. In addition, we plan to move to a larger facility that will include a warehouse and additional office space. This move will enable us to perform our own order fulfillment operations. In addition, we plan to purchase additional production and post-production equipment. This equipment will enable us to perform the editing and post-production aspects of our movies. As we presently outsource our order fulfillment operations and most of our editing and post-production activities, we anticipate that these actions will have the long-term effect of reducing our cost of sales and increasing our gross profits.

In order to implement our growth plan, we will need to spend cash. We intend to use cash from operations to pay for our new facility and to purchase equipment. We will use cash from our operations to fund a certain amount of the purchase price for acquisitions but anticipate needing to raise additional funds in order to fully finance any acquisitions. We are not certain that we will be able to raise these additional funds when needed to complete these acquisitions. Any delay or inability in raising these funds will cause us to delay future acquisitions.

The adult movie industry is presently facing a production shutdown due to the increased incidence of actors and actresses being diagnosed with HIV. While this shutdown has been lifted, we have not re-commenced our movie production activities out of concern for the safety and health of our employees and contractors who perform in our movies. While we intend to commence our movie production activities shortly, we will honor any future shutdowns or moratoriums to the extent necessary to protect our employees and contractors. This is an industry-wide problem that may have an adverse effect on our operations. While we believe that the extent of our production pipeline will allow us to experience a shutdown lasting as long as six months with no material adverse effect on our operations, there can be no assurance that a shutdown of this duration will not have a material adverse effect on our operations. To the extent that we experience a production shutdown that is longer than six months, our revenues will be adversely affected causing a decrease in our earnings.

History

We were incorporated in Nevada on November 4, 1998 under the name Carve Industries Inc. and conducted our operations as a designer, manufacturer and distributor of consumer products devoted to the extreme sports industry, including surfing, snowboarding and skateboarding. On December 2, 1998, we changed our name to CARV.com Inc. In March 1999, we merged with Pacific Trading Post, Inc., a Nevada corporation, and on April 21, 1999, we changed our name to PacificTradingPost.com, Inc. In June 2000, we merged with Carv Industries Incorporated, a Colorado corporation. In December 2000, we changed our name to San West, Inc. and in May 2001, we changed our name to Pacific Trading Post, Inc.

In February 2002, our then president and principal shareholder, Alan Schram, entered into a Stock Purchase Agreement with Turf Holding Inc., Ming Capital Enterprises Inc. and Private Investment Company Ltd., pursuant to which such purchasers collectively paid Alan Schram $125,000 in exchange for an aggregate of 900,000 shares or approximately 91% of our common stock. Concurrently, we changed our name to IDC Technologies, Inc. and from February 2002 to August 2003 we did not conduct operations.

In August 2003, we completed a reverse triangular merger via our acquisition subsidiary IDC Acquisition I Corp. with Jill Kelly Productions, Inc. Jill Kelly Productions, Inc. was incorporated in Delaware in July 2000 by our Chairman of the Board, Robert A. Friedland, and Adrianne D. Moore (a/k/a Jill Kelly) and engaged in the same adult movie production and distribution operations in which we engage in today. IDC Acquisition I Corp. merged with and into Jill Kelly Productions, Inc., such that as of the closing of the transaction, Jill Kelly Productions, Inc. was the surviving entity. Pursuant to this merger, we acquired 100% of the outstanding capital stock of Jill Kelly Productions, Inc. in exchange for 19,000,000 shares of our common stock that was issued to the former stockholders of Jill Kelly Productions, Inc. Jill Kelly Productions, Inc. became our wholly owned operating subsidiary, and the former stockholders of Jill Kelly Productions, Inc. owned approximately 95% of our outstanding shares of common stock. In August 2003, we changed our name to Jill Kelly Productions Holding, Inc.

The merger with Jill Kelly Productions, Inc. was accounted for as a reverse acquisition. Although we were the legal acquirer in the merger, Jill Kelly Productions, Inc. was the accounting acquirer since its stockholders acquired a majority ownership interest in our

company. Consequently, the historical financial information included in the financial statements prior to August 8, 2003 is that of Jill Kelly Productions, Inc. All significant intercompany transactions and balances have been eliminated.

Critical Accounting Policies

Financial Reporting Release No. 60, released by the SEC, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Note 2 to our consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. Presented below are those accounting policies that we believe require subjective and complex judgment that could potentially affect reported results.

Revenue Recognition

We recognize revenue from the sale or licensing of movies meeting all recognition requirements of Statement of Position (“SOP”) 00-2, “Accounting by Producers or Distributors of Films.” According to SOP 00-2, an entity should recognize revenue from a sale or licensing arrangement of a movie when all of the following conditions are met:

• persuasive evidence of a sale or licensing arrangement with a customer exists;

• the film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery;

• the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale;

• the arrangement fee is fixed or determinable; and

• collection of the arrangement fee is reasonably assured.

If we do not meet any one of the preceding conditions, then we will defer recognizing revenue until all of the conditions are met.

Capitalized Film Production Costs

Costs of making motion picture films that are produced for sale to third parties are stated at the lower of cost, less accumulated amortization, or fair value. In accordance with SOP 00-2,

we expense film production costs based on the ratio of the current period gross revenues to estimated total gross revenues from all sources on an individual production basis.

Film production costs are expensed based on the ratio of the current period’s gross revenues to estimated remaining total gross revenues from all sources on an individual production basis. Estimated remaining gross revenue from all sources for film productions includes revenue that will be earned within ten years of the date of the initial release for film productions. For acquired film libraries, remaining revenues include amounts to be earned for up to 20 years from the date of acquisition. Development costs for projects that have been determined will not go into production or have not been set for production within three years, are written-off. Estimates of total gross revenues can change significantly due to a variety of factors, including the level of market acceptance of the film. Accordingly, revenue estimates are reviewed periodically and amortization is adjusted, if necessary. Such adjustments could have a material effect on results of operations in future periods.

Capitalized film production costs at December 31, 2003 are $5,711,104 net of accumulated amortization of $4,076,237. Amortization expense for the years ending December 31, 2003 and 2002 was $1,736,596 and $1,359,851, respectively.

Stock Based Compensation

Financial Accounting Statement No. 123, Accounting for Stock Based Compensation, encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. We have chosen to continue to account for stock-based compensation using the intrinsic method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of our common stock at the date of the grant over the amount an employee must pay to acquire the stock. We have adopted the “disclosure only” alternative described in SFAS 123 and SFAS 148, which require pro forma disclosures of net income and earnings per share as if the fair value method of accounting had been applied.

Results of Operations

Year Ended December 31, 2003 compared to the Year Ended December 31, 2002 are as follows:


	2003			2002			$ Change			% Change
Net Income (Loss)		($9,235,083	)	$	229,223			($9,464,306	)		(4,129	)%
Net Loss From Operations		(3,143,329	)		420,278			(3,563,607	)		(848	)%
Revenues		3,908,788			3,619,905			288,883			8	%
Costs of Revenue		2,242,746			1,828,823			413,923			23	%
Operating Expenses		4,809,371			1,370,804			3,438,567			251	%
Other Income (Expense)		(5,818,397	)		(14,055	)		(5,804,342	)		41,297	%

The following table sets forth certain consolidated statements of income data as a percentage of net revenues for Year Ended December 31, 2003 compared to Year Ended December 31, 2002.


	2003			2002
Net Revenues		100	%		100	%
Cost of Revenues		57	%		51	%

Gross Profit		43	%		49	%
Operating Expenses:		123	%		37	%

Operating Income (Loss)		(80	%)		12	%

Net Loss

We recognized interest expense of $5,754,494 on the issuance of warrants to settle various outstanding debts of ours. We also recognized $3,181,920 of stock based compensation for shares of capital stock issued to consultants as payment for fees for services. These grants were valued at the market price of our common stock at the date of issuance. Lastly, there was a charge of $274,157 on deemed and accrued preferred stock dividends. These three transactions resulted in the significant decline in net income from $229,223 for the year ended December 31, 2002 to a net loss of $9,235,883 for the year ended December 31, 2003.

We do not expect to issue warrants or capital stock for services or debt that will result in a significant net loss during 2004. We will continue to issue stock as payment for fees for services at a valuation equal to the market price of our common stock on the date of issuance.

Revenues

The increase in our revenues was the result of a number of factors, including:

Sales to Distributors and Retailers

In 2003, we increased revenues from DVD and videotape sales of our movies from 2002 to 2003 by $108,460, or 3.6% over 2002. The reason for this increase was due to an increase in the number of titles that we had available for sale.

Internet Fees

In 2003, we increased revenues from licensing our movies to Internet webpage operators from 2002 to 2003 by $53,801, or 48% over 2002. We believe that our revenues from licensing our movies to Internet webpage operators have increased mostly because of the increase in the Video on Demand format utilized by such operators to distribute our movies to consumers. This technology allows a consumer to download and watch one of our movies from a webpage that licenses our movies whenever the consumer desires. We anticipate that this revenue stream will continue to grow as more companies offer Video on Demand downloads and the number of homes with broadband capabilities increases. Also, as the technologies of the computers and television combine, we anticipate that the Video on Demand market will continue to grow.

Foreign Licensing

In 2003, we increased our revenue from licensing distribution rights to our movies to foreign distributors by $160,060, or 149% over 2002. As our movie library has expanded and our company brand becomes more established, we have increased our efforts to license our movies to foreign market. We currently license our movie to distributors in Europe, Asia, Australia and North and South America. We see the foreign market as an area of expansion for our business.

Product Licensing and Merchandising

In 2003, we had $21,120 in revenue from our licensing agreement for the sale of adult toys, which represented 0.5% of our total revenues for the year. This was the first year that we licensed such products. We anticipate that as our brand awareness increases, our opportunities to expand this segment of our business will also increase.

Cable, Satellite and Television Licensing

In 2003, we decreased our revenue from licensing our movies to cable, satellite and television station operators by $242,577, or 91% from 2002. The reason for this decrease is primarily due to the expiration in June 2002 of a licensing agreement that we had with Colorado Satellite Broadcasting. We expect to increase our revenue from cable, satellite and television licensing in 2004 by identifying and contacting potential licensees for our movies.

Costs of Revenues

Cost of revenues are cost associated directly with the creation revenue and include inventory, and film production cost amortization. Most costs of revenue expenses remained consistent from 2002 to 2003 with the exception of film amortization. As discussed in “Critical Accounting Policies” above, the Financial Accounting Standards Board (FASB) has ruled that film production costs are amortized based on the projected income the movie will earn. We increased production from 44 movies in 2002 to 94 movies in 2003. This increase of 50 more movies in 2003 resulted in increase of amortization by $376,745, or 27% in 2003 over 2002.

Our increase in cost of revenues resulted in part from our decision to increase the production and post-production cycles from two months to four months. The result of this is to have increased production costs with no corresponding increase in revenues. We believe that this change will result in our movies having a better production value. Also, we believe that this increase will result in us being able to more readily meet our shipping deadlines and more effectively market our movies. The increase in cost of revenues resulted in lower gross profits.

Operating Expenses

Our operating expenses increased in 2003 due to the following:

Stock based compensation of $3,181,920 resulted in significantly increased costs to operations.

Our general and administrative expenses increased by $288,608, or 123%. This increase is mostly the result of increased professional fees that occurred due to the merger that we consummated on August 8, 2003 and the private placement offering of our Series A Preferred Stock.

Our other operating expenses increased by $236,562, or 39%. This increase was the result of additional overhead expenses that we incurred to create an infrastructure able to accommodate the anticipated growth of future years.

Our advertising expenses decreased by $28,479, or 11%. This decrease occurred due to a change in our strategy of promoting our movies with only printed material, such as magazines, to also using the Internet and other electronic media.

Our bad debt expense decreased by $202,544, or 88%, due to an extraordinary large write-off in 2002 and better collection efforts instituted in 2003.

We also had a significant royalty expense under our distribution agreements that in 2003 was not present in 2002. On a number of our distribution agreements with other producers, we recoup all expenses prior to repaying the producer. A number of these movies had very insignificant royalties in 2002, but significant royalties in 2003.

Liquidity and Capital Resources


	2003		2002		$ Change			% Change

Cash Flows From Operating Activities	$	1,864,336	$	2,214,943	$	<350,607	>		< 19%	>
Cash Flows From Investing Activities		4,118,046		3,227,201		890,845			28%
Cash Flows From Financing Activities		2,331,599		1,082,094		1,249,505			115%

As of December 31, 2003, we had cash of $171,748 and a negative working capital of $1,572,413.

On April 21, 2004, we sold 600,000 shares of our Series B Preferred Stock to Armadillo Investments, PLC pursuant to a Convertible Stock Purchase Agreement. In consideration of the issuance of the shares of our Series B Preferred Stock, Armadillo issued 3,191,459 shares of its ordinary shares to us. We subsequently sold all of these ordinary shares, which resulted in gross proceeds to us of $2,825,000.

We had cash balances totaling approximately $1,200,000 at May 14, 2004. Since inception in July 2000, our principal sources of funds have been cash generated from financing activities and from operations.

We believe that we can satisfy our cash requirements for the next 12 months. We intend, however, to raise an additional $5,000,000 by offering equity or debt securities over the next 12 months. The sale of additional equity or debt securities would result in additional dilution to our stockholders. We also are actively seeking to acquire companies that are in related industries. If we find a company or companies that we wish to acquire, we may need to obtain additional funding to complete the acquisition. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If we are not successful in obtaining additional financing we will not be able to implement our growth and acquisition plans.

The reduction of our net cash provided from operation is the result of our merger activities in 2003 and the enhancement to our infrastructure to accommodate our anticipated growth.

Our net cash used in investing activities include film production costs of $4,045,528 in 2003 and $3,225,344 in 2002.

Net cash provided by financing activity for 2003 included proceeds from the sale of our Series A Preferred Stock of $2,276,500 and proceeds from loans payable of $233,249 offset by payments to investors of $203,352. Net cash provided by financing activities for 2002 included proceeds from a related party of $698,966, the sale of common stock for cash of $200,000, investors of $205,033 and proceeds from notes payable of $132,921, offset by payments to an officer of $154,826.

As of May 14, 2004, there was a balance of $132,121.45 under a promissory note that we issued to Matzuda Corporation. We issued this note to evidence money that we borrow from Matzuda Corporation from time to time to finance film production costs. Matzuda Corporation is controlled by Robert A. Friedland, our chairman of the board, chief executive officer and secretary. We make payments under this note from our available cash. Under the terms of the promissory note, Matzuda Corporation has the right to demand payment in full from us at any time. If Matzuda Corporation made such a demand to be repaid in full under the promissory note, our cash balance would be reduced. We do not anticipate that Matzuda Corporation will make a demand to be repaid in full under this promissory note until we have sufficient available cash.

Off-Balance-Sheet Arrangements

As of May 14, 2004, we did not have any significant off-balance sheet arrangements, as defined in Item 303(c)(2) of SEC Regulation S-B.

Recent Accounting Pronouncements

In August 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit, or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities. We believe that the adoption of SFAS 146 will have no significant impact on its financial statements. This statement is effective for exit or disposal activities initiated after December 31, 2002.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—An Amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for interim periods beginning after December 15, 2002 and for fiscal years ending after December 15, 2002.

In April 2003, the Financial Accounting Standards Board issued SFAS No. 149, “Amendment of FASB Statement No. 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The statement is effective for contracts entered into or modified after June 30, 2003.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). We believe that the adoption of SFAS 150 will have no significant impact on our financial statements. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities.

DESCRIPTION OF BUSINESS

Overview

We produce and distribute high quality adult movies. With the help of third parties, we process our movies for distribution into popular media formats such as digital versatile discs, commonly known as “DVDs,” videotapes and electronic formats. We, through our wholly owned subsidiary J.K. Distribution, Inc., distribute our movies through approximately 150 independent distributors, retailers, cable, satellite and hotel television operators and Internet

webpage operators. These parties then distribute our movies to consumers. We do not sell our movies directly to consumers. During the fiscal year ended December 31, 2003, sales of our DVDs and videotapes totaled 425,000 units, which accounted for approximately 80% of our revenues.

Internationally, we license distribution rights to our movies to approximately 13 foreign distributors. These distributors then produce DVDs and videotapes of our movies for distribution in foreign countries. We receive a license fee for each movie that we license to a foreign distributor. In 2003, we generated $267,782 in license fees from the licensing of our movies to foreign distributors, which accounted for approximately 7% of our revenues.

We also sell our movies to cable, satellite and hotel television operators and Internet webpage operators. These operators broadcast our movies to their audiences for a fee. In 2003, we generated $208,660 from sales to these operators, which accounted for approximately 5% of our revenues.

To a lesser extent, we also distribute and license through our network of distributors and retailers adult movies that were filmed by independent third parties. We will often provide editing and other post-production services with respect to these movies. Through December 31, 2003, we distributed and licensed 91 movies filmed by third parties. In 2003, these films generated $612,023 in fees, or approximately 16% of our revenues.

Our Movies

We currently have over 254 movies in our library. In 2003, we produced 94 of these movies and we anticipate producing approximately 100 new movies in 2004.

We select movie scripts from various independent writers. All scripts are approved by both our production manager and our director of production. Once a script has been finalized and approved, we contract with independent directors and performers to produce the movie. We have agreements with six performers that provide that they can only produce movies for us during the term of such agreements, which is usually for six years. We also contract with freelance performers on a per movie basis.

After a movie is filmed, we, with the help of third parties, edit and finalize the movie to our specifications. During this process, we ensure that each movie meets with our quality control specifications. We also generate graphics and art for the packaging for the movie and promotion advertisements.

Once one of our movies has been edited and finalized, it is placed on a digital linear tape in order to make our DVDs and videotapes. We contract with International Video Innovations, to place our movies on DVDs and videotapes. We will initially produce 2,000 units of DVDs and 700 units of videotapes for each new movie that we make, and will produce more copies thereafter based on consumer demand.

Distribution in the United States

We distribute our movies on DVDs and videotapes in the United States through approximately 50 independent distributors. Our distributors sell our movies to video stores, adult entertainment stores and other retails outlets where they are purchased by consumers. We do not have formal distribution agreements with these distributors. Thirty of these distributors have “standing orders” with us, in that they agree to purchase a specified number of copies of each new movie that we produce. In 2003, we sold approximately 275,000 units of DVDs and videotapes pursuant to these standing orders, which accounted for approximately 50% of our revenues. These distributors will then place additional orders for movies with us based on consumer demand.

In 2003, we generated approximately 15% of our revenues from three distributors. We believe that we have a strong relationship with these three distributors and our other distributors, and that they will continue to purchase our movies from us in the future.

We also sell our movies to retailers. In 2003, we sold approximately 150,000 units of DVDs and videotapes to retailers, which accounted for approximately 30% of our revenues. The retailers that we sell to are located throughout the United States.

We do not sell our movies directly to consumers.

All of our movies are distributed exclusively by our wholly-owned subsidiary, J. K. Distribution, Inc., a Nevada corporation. Prior to February 25, 2004, J.K. Distribution, Inc. was owned and operated independently from us by our management team of Robert A. Friedland, Ronald C. Stone and Adrianne D. Moore. We acquired all of the capital stock of J.K. Distribution, Inc. from our management team on February 25, 2004 for the sum of $1.00.

Foreign Distribution

Because of high shipping costs, we typically license distribution rights to our movies outside of the United States instead of selling DVDs and videotapes to foreign distributors. We have entered into licensing agreements with 13 foreign distributors operating in Europe, Asia, Japan, Canada and Australia. We are actively looking to increase our presence in these markets and to expand to other foreign markets.

The licensing agreements with our foreign distributors generally provide that we deliver our movies to the distributor in digital linear “master” format in exchange for a licensing fee. The foreign distributor then produces DVDs and videotapes from the master, and distributes the movie to retailers and consumers in its territory during the term of the license. Our licensing agreement with Global Distributors Netherlands B.V. provides that we will deliver a specified number of new movies each month for distribution. In 2003, we generated $163,000 in licensing fees pursuant to this agreement. Our other foreign distributors license our movies from us on a per title basis.

Internet Distribution

We also license our movies to Internet webpage operators. These operators then make our movies available for sale on their webpages. We have entered into 15 licensing agreements with webpage operators that sell our movies using a Video on Demand format. In 2003, we generated $164,926 in licensing fees pursuant to these agreements, which accounted for approximately 4% of our revenues.

These agreements generally provide that we deliver our movies subject to the licensing agreement to the operator in a digital electronic format. The operator then makes the movie available on its webpage for consumers to download and watch for a fee via a Video on Demand format. Depending on the licensing agreement, we receive either a flat fee for each movie that we license or a fee based upon the number of times that one of our movies is downloaded. In addition, with the webpages “jillkellyproductions.com” and “jillkelly.com” operated by an independent third party, we also receive an additional fee for each new paid subscriber to the webpages.

We believe that this part of our business will continue to increase since the Video on Demand format provides the consumers of our movies with immediate access to the desired product without the delays and costs that would be incurred if the movie was shipped to the consumer. Accordingly, we anticipate licensing more of our movies in the future to Internet webpage operators for this form of distribution.

Broadcasting

We also sell our movies to cable, satellite, and hotel television operators. These operators then broadcast our movies to their viewers for a fee, either through scheduled programming or through a Video on Demand format. In 2003, we generated $43,734 in revenues from agreements with cable, satellite and hotel television operators. This amount is substantially less than the $306,182 that we generated in 2002 due primarily to the expiration of a broadcasting agreement that we had with Colorado Satellite Broadcasting. We intend to increase this part of our business by identifying and entering into licensing agreements with cable, satellite, and hotel television operators that serve a market for our movies.

Our Strategy

Our vision is to be the world’s preferred provider of adult movies to consumers anywhere, at any time and across all distribution platforms and devices. We have developed the strategies described below to increase sales and operating margins while maintaining the quality of our movies and the integrity of our brand name.

• Develop strategic alliances and joint ventures with businesses both inside and outside of the adult entertainment industry to broaden our distribution channels;

• Adapt new technology and distribution channels, such as broadband distribution of our movies;

• Increase market share through strategic acquisitions;

• Complete the digitalization of our entire movie library in order to prepare our library for distribution in new electronic media; and

• Continue to increase and strengthen brand awareness.

Competition

Our movies compete with movies and other forms of adult entertainment produced by other companies, including Playboy Enterprises, Inc., Vivid Entertainment and Video Company of America. To a lesser extent, we also face general competition from other forms of non-adult entertainment, including sporting and cultural events, other television networks, feature films and other programming.

The entertainment industry, of which we are a part, is highly competitive. Many of our competitors, as well as potential new competitors, have significantly greater name recognition and financial, technical, marketing and distribution resources than we do. This may allow them to devote greater resources than we can to the development, promotion and distribution of their product offerings. We cannot guarantee you that we can compete successfully.

We believe that the following strengths, however, will help us compete in our industry and grow our business:

• Extensive library of high quality adult movies – We have an extensive library of high quality adult movies. Subject to existing license agreements, we hold exclusive worldwide rights to this entire movie archive. We believe that this electronic archive constitutes one of the largest libraries of premier quality adult movies.

• Recognized brand name - We believe that our target consumers associate our Jill Kelly Productions brand name with high quality adult movies. This name recognition attracts talent, leading producers of adult media content, retailers, distributors and prospective joint venture partners interested in working with us.

• Established market position and distribution network - We have a well-established worldwide distribution network which has been built up, including numerous points of sale in the United States, Europe, Asia, Japan, Canada and Australia. This broad distribution network provides an effective channel to introduce new products and services and new formats for existing products and services. We believe that our broad, multi-format distribution network affords the consumers of our products convenient access to high quality adult media content in the format of their choice.

• Flexible operating structure - We produce our own adult movies and acquire adult movies from third party directors on a project basis. This

approach gives us substantial flexibility in terms of production volume and delivery time, significantly reduces our fixed production overhead and largely eliminates the risk to us of cost overruns in production.

Intellectual Property

We rely on a combination of copyright and trademark laws, trade secrets, software security measures, license agreements and non-disclosure agreements to protect our proprietary products.

While we have not registered our trade names or our logo with the United States Patent and Trademark Office or any foreign jurisdictions, we believe that the name recognition and image that we have developed in each of our markets significantly enhance responses from our distributors and retailers. Accordingly, our trademarks are important to our business and we intend to aggressively defend them.

Government Approval and Regulation

While the actual production of our movies does not require governmental approval, we are subject to many federal, state, local and foreign regulation with respect to the production and distribution of our movies. Accordingly, we are required to be aware and sensitive to government laws and regulations, including laws and regulations designed to protect minors or which prohibit the distribution of obscene material. We distribute our movies to wholesalers and retailers in the United States and abroad. We have taken steps to ensure compliance with all federal, state, local and foreign regulations regulating the content of motion pictures, by staying abreast of all legal developments in the areas in which motion pictures are distributed and by specifically avoiding distribution of motion pictures in areas where the local standards clearly or potentially prohibit these products. Moreover, we do not knowingly engage the services of any business or individual that does not adhere to the same standards. In light of our efforts to review, regulate and restrict the distribution of our materials, we believe that the distribution of our movies does not violate any statutes or regulations.

Federal and state government officials have targeted “sin industries,” such as tobacco, alcohol, and adult entertainment for special tax treatment and legislation. In 1996, the United States Congress passed the Communications Decency Act of 1996, or the CDA. The United States Supreme Court, in ACLU v. Reno, 521 U.S. 844 (1997), held certain substantive provisions of the CDA unconstitutional. Businesses in the adult entertainment and programming industries expended millions of dollars in legal and other fees in overturning the CDA. Investors should understand that the adult entertainment industry may continue to be a target for legislation. In the event we must defend ourselves and/or join with other companies in the adult entertainment business to protect our rights, we may incur significant expenses that could have a material adverse effect on our business and operating results.

Employees

We have 15 full-time and approximately 50 part-time employees. Of these employees:

• three are in accounting;

• two are in sales;

• three are in production and post-production;

• one is a movie director/producer;

• four are movie performers; and

• the remainder are in management and general operations.

None of our employees are covered by a collective bargaining agreement. We believe that we maintain a satisfactory relationship with our employees.

Properties

Our corporate offices are in West Hollywood, California. Our offices are in a two-story building of which we occupy the entire second floor having approximately 2,200 square feet. We rent our offices pursuant to a five year “triple net” lease that has approximately four years remaining. The monthly rent is $4,730, plus certain other costs and expenses. We believe that our properties are adequate and suitable for their intended purposes.

LEGAL PROCEEDINGS

We are not subject to any pending or threatened legal proceedings, except for the lawsuits described below.

Kevin Smith and Canyon Capital Marketing, Inc. v. IDC Technologies Inc., et al.: On May 29, 2003, Kevin Smith and Canyon Capital Marketing, Inc. filed an action against our predecessor, IDC Technologies, Inc., in the Superior Court of the State of California, San Diego County, seeking payment of $165,137, plus other expenses, interest and costs of the lawsuit. The plaintiffs claim that they are the holders of a promissory note issued by our predecessor company on June 1, 1999 in the original principal amount of $165,137 which bears interest at a rate of 8% per annum. In their complaint, the plaintiffs ask the court to award them a judgment against us for the amount of the promissory note and all interest and expenses and to foreclose on their alleged security interest. On October 22, 2003, we filed our answer in this action, denying the material allegations in the complaint. We also asserted a counterclaim against the officers of our predecessor company seeking payment and indemnification for their failure to disclose the alleged promissory note. We intend to defend this action and prosecute our counterclaim vigorously.

Actions Holdings LLC v. Jill Kelly Productions, Inc. Robert A. Friedland and Adrianne Diane Moore-Rios: Actions Holdings LLC, or the plaintiff, filed an action against Jill Kelly Productions, Inc., in the Federal District Court for the Northern District of Ohio on April 19, 2004. The plaintiff claims that it is a 5% shareholder in Jill Kelly Productions, Inc. The plaintiff alleges, among other things, that it had an agreement with the defendants whereby Jill Kelly Productions, Inc. agreed not to sell any shares of its stock without notice and a right of first refusal to the plaintiff. The plaintiff has also asserted that it is

contractually entitled to consultant fees during its tenure as a shareholder of Jill Kelly Productions, Inc. Subsequently, the stockholders of Jill Kelly Productions, Inc. sold its shares to a company called IDC Technologies, Inc., allegedly without notice to and approval of the plaintiff, and were issued shares of IDC Technologies, Inc. stock. We deny that the plaintiff was not provided notice of the sale. We have not yet responded to the plaintiff’s complaint, but we expect to file an answer and a counterclaim seeking specific performance of an agreement defendants believe was made with the plaintiff to purchase plaintiffs ownership interest in Jill Kelly Productions, Inc.

DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS

The following table sets forth certain information with respect to our directors and executive officers as of May 14, 2004.


				Date of Election
				or Appointment
Name	Positions Held	Age		as Director
Robert A. Friedland	Chief Executive Officer, Chairman of Board and Secretary		68	August 11, 2003

Adrianne D. Moore	President and Vice Chairman of the Board		33	November 20, 2003

Ronald C. Stone	Chief Operating Officer and Chief Financial Officer, Director		45	November 20, 2003

The following is a brief summary of the business experience of our directors and executive officers:

Robert A. Friedland has served as our chief executive officer, secretary and chairman of our board of directors since August 2003. He has served in similar capacities for our wholly owned operating subsidiary, Jill Kelly Productions, Inc., since its formation in July 2000. Mr. Friedland has more than thirty years of management experience. Prior to working with us, Mr. Friedland owned and operated a mortgage brokerage and banking company which he sold in 1988.

Adrianne D. Moore has served as our president and vice chairman of our board of directors since November 2003. She has served our wholly owned operating subsidiary, Jill Kelly Productions, Inc., as president and as a director since its formation in July 2000 and as chief operating officer from July 2000 to May 2003. Prior to July 2000, Ms. Moore was the chief executive officer of Jill Kelly Enterprises, which was a partnership she formed to produce adult movies. Ms. Moore has been in the adult film industry for over ten years and has starred in over two hundred films under the stage name “Jill Kelly.” She is primarily responsible for reviewing and approving scripts, casting production, marketing and special promotional events.

Ronald C. Stone has served as our chief operating officer and chief financial officer since November 20, 2003. He has served our wholly owned operating subsidiary, Jill Kelly Productions, Inc., as chief operating officer since May 2003 and as chief financial officer since

November 2002. Mr. Stone started working as a consultant for Jill Kelly Productions, Inc. in May 2002. From January 1997 through January 2002, Mr. Stone was the chief financial officer of a mid-sized engineering and manufacturing company specializing in factory and machine automation. Mr. Stone graduated from the University of California, Los Angeles with a Bachelor of Arts in 1985.

Employment Agreements

Each of Robert A. Friedland, Adrianne D. Moore and Ronald C. Stone entered into employment agreements with us. The employment agreements have similar terms other than the amount of compensation. Under the employment agreements, we have agreed to pay Ms. Moore and Mr. Friedland each an annual salary of $360,000 and Mr. Stone an annual salary of $240,000, subject to annual increases. The agreements are for five years commencing on September 1, 2003. In the event that we terminate any of these executives for other than good cause, as defined in the agreements, we have to pay the executive’s salary and provide them with benefits for the remainder of the term of the agreement. The executives have agreed by these agreements not to compete against us for a period of one year following the end of their employment with us and to keep confidential all of our proprietary information.

Board of Directors

Our directors receive no cash remuneration for acting as such. Our board of directors may designate from among its members an executive committee and one or more other committees. No such committees have been appointed to date.

EXECUTIVE COMPENSATION

The following table reflects all compensation awarded to, earned by or paid to our chief executive officer, president, chief operating officer, chief financial officer and secretary, for the fiscal years ended December 31 2003, 2002 and 2001. Since we did not compensate any executive during 2003, 2002 and 2001, the information in the table includes compensation paid or awarded by our operating subsidiary only.

Summary Compensation Table


Name and	Fiscal Year Ended						Other
Principal Position	December 31,		Salary		Bonus		Compensation (5)
Robert A. Friedland		2003	$	0	$	0	$	15,000
Chief Executive Officer,		2002	$	0	$	0	$	15,000
Secretary (1)		2001	$	0	$	0	$	15,000
Adrianne D. Moore		2003	$	305,000	$	0	$	10,000
President (2)		2002	$	0	$	0	$	10,000
		2001	$	0	$	0	$	10,000
Ronald C. Stone		2003	$	240,000	$	0	$	0
Chief Operating Officer,		2002	$	180,000	$	0	$	0
Chief Financial Officer (3)		2001		—		—		—
Michael Hillerbrand		2003	$	0	$	0	$	0
Chief Operating Officer (4)		2002	$	0	$	0	$	0
		2001	$	0	$	0	$	0

(1)		Mr. Friedland has served as our chief executive officer and secretary since August 2003 and has served as chief executive officer and secretary of Jill Kelly Productions, Inc. since July 2000. During fiscal year 2003, Mr. Friedland agreed to forgo salary we would have otherwise been obligated to pay him. See “Certain Relationships and Related Transactions” for a description of consulting fees paid to Matzuda Corporation.

(2)		Ms. Moore has served as our president since November 2003 and has served as president of Jill Kelly Productions, Inc. since July 2000.

(3)		Mr. Stone has served as chief operating officer and chief financial officer since November 2003, has served as chief operating officer of Jill Kelly Productions, Inc. since May 2003 and has served as chief financial officer of Jill Kelly Productions, Inc. since November 2002.

(4)		Mr. Hillerbrand served as our chief executive officer from February 2002 to August 2003.

(5)		Other compensation represents automobile expenses that we paid on behalf of these officers.

We currently have no stock option plan or other long-term compensation plan in effect.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following tables set forth information with respect to the beneficial ownership of our common stock, Series A Preferred Stock and Series B Preferred Stock known by us as of May 14, 2004 by:

• each person or entity known by us to be the beneficial owner of more than 5% of our common stock, Series A Preferred Stock or Series B Preferred Stock, as applicable;

• each of our directors;

• each of our executive officers; and

• all of our directors and executive officers as a group.

Common Stock


		Amount and
		Nature of
Name of		Beneficial		Percentage
Beneficial Owner	Position	Ownership		of Class (1)
Robert A. Friedland (2)(3)	Chief Executive Officer, Secretary and Chairman of the Board of Directors		16,594,000		52.8	%
Adrianne D. Moore (2)	President and Vice Chairman of the Board of Directors		5,172,000		20.6	%
Ronald C. Stone (2)	Chief Operating Officer, Chief Financial Officer and Director		1,735,000		6.9	%
Robert Hollis (4)	Beneficial Owner		2,000,000		7.4	%
Kings Against 3, LLC (5)	Beneficial Owner		2,750,000		9.9	%
Maximum Ventures, Inc. (6)	Beneficial Owner		2,881,180		10.5	%
Jubilee Investment Trust, PLC (7)	Beneficial Owner		4,001,213		15.9	%
All Officers and Directors as a Group (3 persons)			23,501,000		74.8	%

(1)		As of May 14, 2004, 25,156,180 shares of our common stock were issued and outstanding. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act of 1934. Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all shares of our common stock owned by them.

(2)		The address for each of our officers and directors is the address of our company, c/o Jill Kelly Productions Holding, Inc., 8923 Sunset Blvd., West Hollywood, CA 90069.

(3)		Robert A. Friedland is the trustee of the Robert A. Friedland Trust. The number of shares reported includes (i) 10,344,000 shares of our common stock owned by the Trust, (ii) 5,000,000 shares of our common stock issuable upon conversion of 12,500 shares of our Series A Preferred Stock owned by the Trust, and (iii) 1,250,000 shares of our common stock issuable upon the exercise of 1,250,000 common stock purchase warrants owned by the Trust. The address of the Robert A. Friedland Trust is P.O. Box 691447, Los Angeles, CA 90069.

(4)		The number of shares reported includes (i) 1,600,000 shares of our common stock issuable upon conversion of 4,000 shares of our Series A Preferred Stock, and (ii) 400,000 shares of our common stock issuable upon exercise of common stock purchase warrants. Mr. Hollis’ address is 4021 Gulfshore Blvd., N 1901, Naples, FL 34103.

(5)		Tim Burgess owns a majority of the membership interests of Kings Against 3, LLC. The number of shares reported includes (i) 2,200,000 shares of our common stock issuable upon conversion of 5,500 shares of our Series A Preferred Stock, and (ii) 550,000 shares of our common stock issuable upon exercise of common stock purchase warrants. The address of Kings Against 3, LLC is c/o Tim Burgess, P.O. Box 82055, Athens, GA 30608.

(6)		The number of shares reported represents (i) 606,180 shares of our common stock, (ii) 1,800,000 shares of our common stock issuable upon exercise of 4,500 shares of our Series A Preferred Stock, and (iii) 475,000 shares of our common stock issuable upon exercise of 475,000 common stock purchase warrants. The address of Maximum Ventures, Inc., is 1175 Walt Whitman Road, Suite 100, Melville, NY 11747.

(7)		The number of shares reported includes 4,001,213 shares of our common stock. The address of Jubilee Investment Trust, PLC is 30 Farringdon Street, London EC4A 4HJ, United Kingdom.

Series A Preferred Stock


		Amount and
		Nature of
		Beneficial		Percentage
Beneficial Owner	Position	Ownership		of Class (1)
Robert A. Friedland (2)	Chief Executive Officer, Secretary and Chairman of the Board		12,500		24.7	%
Robert Hollis (3)	Beneficial Owner		4,000		7.9	%
Kings Against 3, LLC (4)	Beneficial Owner		5,500		10.9	%
Maximum Ventures, Inc. (5)	Beneficial Owner		4,500		8.9	%
All Executive Officers and Directors as a Group (1 person)			12,500		24.2	%

(1)		As of May 14, 2004, 50,550 shares of our Series A Preferred Stock were issued and outstanding.

(2)		Includes shares owned by the Robert A. Friedland Trust. Robert A. Friedland is the trustee of the Robert A. Friedland Trust. Mr. Friedland’s address is the address of our company, c/o Jill Kelly Productions Holding, Inc., 8923 Sunset Blvd., West Hollywood, CA 90069. The address of the Robert A. Friedland Trust is P.O. Box 691447, Los Angeles, CA 90069.

(2)		Mr. Hollis’ address is 4021 Gulfshore Blvd., N 1901, Naples, FL 34103.

(3)		The address of Kings Against 3, LLC is c/o Tim Burgess, P.O. Box 82055, Athens, GA 30608.

(4)		The address of Maximum Ventures, Inc., is 1175 Walt Whitman Road, Suite 100, Melville, NY 11747.

Series B Preferred Stock

Armadillo Investments, PLC, is the beneficial owner of 600,000 shares of our Series B Preferred Stock, which represents all of our issued and outstanding shares of Series B Preferred Stock. The address of Armadillo Investments, PLC is 30 Farringdon Street, London EC4A 4HJ, United Kingdom.

SELLING HOLDERS

The following table sets forth the names of the selling stockholders, the number of shares of our common stock, to our knowledge, beneficially owned by each selling stockholder as of May 14, 2004 and the number of shares of our common stock which may be offered for sale pursuant to this prospectus by the selling stockholders.

The number of shares set forth in this table represents an estimate of the number of shares of our common stock to be offered for resale by the selling stockholders. The selling stockholders own shares of our Series A Preferred Stock and common stock purchase warrants. These selling stockholders are entitled to receive dividends on their shares of Series A Preferred Stock at the rate of 8% per annum. These dividends are payable in cash, or, at our option, in shares of our common stock valued at the lesser of (i) $0.25 or (ii) the market price per share at the time of issuance. This prospectus covers 3,241,380 shares of our common stock with respect to these dividends. This amount will cover all shares of common stock that we would be required to issue in payment of dividends, provided that such shares are valued at $0.25 per share and that we elect to pay all such dividends by issuing shares of our common stock. The number of shares of our common stock which we may actually issue in connection with these dividends could be significantly less than this amount if the selling stockholders elect to exercise their conversion rights prior to the second anniversary date of the date on which their shares of Series A Preferred Stock were issued or if we elect to pay some or all of these dividends in cash.

On January 20, 2004, one of the selling stockholders, Maximum Ventures, Inc., converted 1,500 shares of our Series A Preferred Stock into 600,000 shares of our common stock and received 6,180 shares of our common stock as payment for accrued dividends. We are registering these shares of common stock issued in connection with this conversion.

The number of shares of common stock listed in this table was calculated assuming:

• that the holders of our Series A Preferred Stock will convert their shares of our Series A Preferred Stock into an aggregate of 20,820,000 shares of our common stock;

• that the selling stockholders will exercise all 5,205,000 issued and outstanding warrants;

• that the holders of our outstanding shares of Series A Preferred Stock will not elect to exercise their conversion rights for at least two years; and

• that we will pay the holders of our Series A Preferred Stock shares of our common stock valued at $0.25 per share as payment of two years of accrued dividends.

These shares may be offered from time to time by the selling stockholders named below. The selling stockholders are, however, under no obligation to sell all or any portion of these shares of our common stock. In addition, the selling stockholders are not obligated to sell such shares of our common stock immediately under this prospectus. Since the selling stockholders

may sell all or part of the shares of common stock offered in this prospectus, we cannot estimate the number of shares of our common stock that will be held by the selling stockholders upon termination of this offering.

Except as otherwise noted below, none of the selling stockholders is an officer or director of our company and none of the selling stockholders has had any material relationship with our company, affiliates or predecessors within the last three years.


			Number of
			Shares of				Percentage Ownership(1)
	Number of Shares		Common		Number of
	of Common Stock		Stock After		Shares		Before			After
Name	Before Offering		Offering		Being Sold		Offering			Offering
Robert Hollis		2,256,000		0		2,256,000		8.2	%		0	%
Stanley Katz		282,000		0		282,000		1.1	%		0	%
John Stewart		70,500		0		70,500		*			0	%
Azriel Nagar/Sheila Nagar		282,000		0		282,000		1.1	%		0	%
Julian Herkowitz		282,000		0		282,000		1.1	%		0	%
AMJ Corp (2)		479,400		0		479,400		1.9	%		0	%
Kings Against 3, LLC (3)		3,102,000		0		3,102,000		11	%		0	%
Eugene J. Friedman		352,500		0		352,500		1.4	%		0	%
JKL Capital LP (4)		564,000		0		564,000		2.2	%		0	%
Rosemary Friedman		282,000		0		282,000		1.1	%		0	%
Bernard Brown		282,000		0		282,000		1.1	%		0	%
R. Brooke Hollis		282,000		0		282,000		1.1	%		0	%
Emiko Ishioka		705,000		0		705,000		2.7	%		0	%
Morton Berman		282,000		0		282,000		1.1	%		0	%
Azriel Nagar		423,000		0		423,000		1.7	%		0	%
Jack Luchese		846,000		0		846,000		3.3	%		0	%
David A. Hoines, P.A. Pension Plan (5)		282,000		0		282,000		1.1	%		0	%
Jerome Bresson		141,000		0		141,000		*			0	%
John Stewart		70,500		0		70,500		*			0	%
Mark Friedman		70,500		0		70,500		*			0	%
Mathew Smith		1,128,000		0		1,128,000		4.3	%		0	%


			Number of
			Shares of				Percentage Ownership(1)
	Number of Shares		Common		Number of
	of Common Stock		Stock After		Shares		Before			After
Name	Before Offering		Offering		Being Sold		Offering			Offering
Daniel R. Ice		564,000		0		564,000		2.2	%		0	%
Charles Potter		70,500		0		70,500		*			0	%
Morris Silver		282,000		0		282,000		1.1	%		0	%
Gewinner W. Garrison		282,000		0		282,000		1.1	%		0	%
Maximum Ventures, Inc. (6)		3,767,967		598,787		3,169,180		13	%		2.32	%
Corporate Builders, L.P. (7)		625,000		500,000		125,000		2.5	%		1.98	%
James L. Long		676,800		0		676,800		2.3	%		0	%
Robert A. Friedland Trust (8)		17,394,000		10,344,000		7,050,000		54	%		41.1	%
William O. Baxter		564,000		0		564,000		2.2	%		0	%
Ronald V. Patterson		564,000		0		564,000		2.2	%		0	%
Michael Slipyan		141,000		0		141,000		*			0	%
Michael Koretsky		1,410,000		0		1,410,000		5.3	%		0	%
Joseph London		564,000		0		564,000		2.2	%		0	%
Kate Edelman Johnson		126,900		0		126,900		*			0	%
Beryl Weiner		84,600		0		84,600		*			0	%
David Boschart		564,000		0		564,000		2.2	%		0	%
Alexander R. Ice		141,000		0		141,000		*			0	%
Charles R. Whalen		141,000		0		141,000		*			0	%
Mitchell J. Birzon and Kathleen W. Birzon		141,000		0		141,000		*			0	%
Grace K. Walls		70,500		0		70,500		*			0	%
Victor I. Playoff		70,500		0		70,500		*			0	%

*		Less then one percent (1%)

(1)		Calculated based on 25,156,180 shares of our common stock issued and outstanding as of May 14, 2004 and assuming issuance of two years of dividends on outstanding shares of our Series A Preferred Stock.

(2)		The beneficial owner of AMJ Corp is Leonard Pearlman.

(3)		Kings Against 3, LLC beneficially owns 10.36% of our shares of common stock as determined in accordance with Rule 13d-3 under the Exchange Act.

(4)		The beneficial owner of JKL Capital LP is Jeffrey Kit.

(5)		The beneficial owner of David A. Hoines, P.A. Pension Plan is David Hoines.

(6)		The beneficial owner of Maximum Ventures, Inc. is Abraham Mirman. Maximum Ventures, Inc. beneficially owns 12.71% of our shares of common stock as determined in accordance with Rule 13d-3 under the Exchange Act of 1934.

(7)		The beneficial owners of Corporate Builders, L.P. are Ernest Chu and Vito Lamonco.

(8)		The beneficial owner of Robert A. Friedland Trust is Robert A. Friedland, an executive officer and director of ours. Mr. Friedland, through the Robert A. Friedland Trust, beneficially owns 53.23% of our shares of common stock as determined in accordance with Rule 13d-3 under the Exchange Act.

PLAN OF DISTRIBUTION

As of the date of this prospectus, the selling stockholders have not determined how they will distribute the shares of our common stock which they or their respective pledgees, donees, transferees or other successors in interest are offering for resale. Accordingly, such shares may be sold from time to time in one or more of the following transactions:

• block transactions;

• transactions on the over-the-counter electronic bulletin board or on such other market on which our common stock may from time to time be trading;

• privately negotiated transactions;

• through the writing of options on the shares;

• short sales; or

• any combination of these transactions.

The sale price to the public in these transactions may be:

• the market price prevailing at the time of sale;

• a price related to the prevailing market price;

• negotiated prices; or

• such other price as the selling stockholders determine from time to time.

In the event that we permit or cause this registration statement to lapse, the selling stockholders may sell shares of our common stock pursuant to Rule 144 promulgated under the Securities Act of 1933.

The selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell these shares of our common stock directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. These broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of these shares of our common stock for whom such broker-dealers may act as agents or to whom they sell as principal or both. As to a particular broker-dealer, this compensation might be in excess of customary commissions. Market makers and block purchasers purchasing these shares of our common stock will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of our common stock in block transactions to market makers or other purchasers at a price per share which may be below the prevailing market price of our common stock.

Alternatively, the selling stockholders may sell all or any part of the shares of our common stock offered hereby through an underwriter. We have no obligation to obtain or assist the selling stockholders in obtaining a commitment in connection with the sale of shares of our common stock covered by this prospectus. We have been informed by the selling stockholders that there are no existing arrangements between them and any other stockholders, broker, dealer, underwriter or agent relating to the distribution of the shares offered by this prospectus. If the selling stockholders enter into an agreement, after effectiveness of this registration statement, to sell their shares to a broker-dealer as principal and the broker-dealer is acting as an underwriter, then we will file a post-effective amendment to the registration statement identifying the broker-dealer, providing the required information on the plan of distribution and will revise the disclosures in the registration statement, and will file the broker-dealer agreement as an exhibit to the registration statement.

The selling stockholders will act independently of us in making decisions with respect to the form, timing, manner and size of each sale. The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of these shares of our common stock if they deem the purchase price to be unsatisfactory at any particular time. There can be no assurance that all or any of these shares of our common stock offered hereby will be issued to, or sold by, the selling stockholders.

Upon effecting the sale of any of these shares of our common stock offered pursuant to this prospectus, the selling stockholders and any brokers, dealers or agents, hereby, may be deemed “underwriters” as that term is defined under the Securities Act of 1933 or the Securities Exchange Act of 1934, or the rules and regulations thereunder. Any profits realized by the selling stockholders and the compensation of any broker-dealer may be deemed to be underwriting discounts and commissions. We have been advised that none of the selling stockholders are broker-dealers or affiliates of broker-dealers.

The selling stockholders and any other persons participating in the sale or distribution of these shares of our common stock will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder including, without limitation, Regulation M. These provisions may restrict activities of, and limit the timing of purchases and sales of any of these shares of our common stock by, the selling stockholders. Furthermore, pursuant to Regulation M, persons engaged in a distribution of securities are

prohibited from simultaneously engaging in market making and other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. All of the foregoing may affect the marketability of the shares offered in this prospectus.

We are and will continue to be subject to the penny stock rules. Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or listed on the NASDAQ stock market provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The rules require that a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in connection with the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the liquidity of penny stocks.

We will assume no obligation or responsibility whatsoever to determine a method of disposition for our shares of common stock offered by the selling stockholders or to otherwise include such shares within the confines of any registered offering other than the registration statement of which this prospectus is a part.

We have no obligation to assist or cooperate with the selling stockholders in the offering or disposition of our shares of common stock covered by this prospectus other than with respect to the filing of this prospectus and the filing of any amendments hereto pursuant to our agreement with the selling stockholders. We have no agreement with the selling stockholders or any other person requiring us to indemnify or hold harmless the holders of our shares of common stock covered by this prospectus.

We will pay substantially all of the expenses incident to the registration and offering of our common stock pursuant to this prospectus, other than commissions or discounts of underwriters, broker-dealers or agents.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of our common stock being offered for sale by the selling stockholders pursuant to this prospectus. 5,205,000 of these shares, however, will be issued upon the exercise of common stock purchase warrants. If all of these warrants are exercised, then we will receive gross proceeds of $1,301,250 from the holders of the warrants. We will use these proceeds for working capital and general corporate purposes.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Over the period of time from July 2000 to the present, Matzuda Corporation, a Nevada corporation, has loaned up to an aggregate of $2,000,000 to Jill Kelly Productions, Inc. pursuant to a promissory note. Matzuda is controlled by our chairman of the board of directors, chief executive officer and secretary, Robert A. Friedland. Under the terms of the promissory note, interest accrues on the outstanding principal balance at a rate of 15% per annum and the entire balance under the note is due and payable upon the demand of Matzuda. In November 2003, we repaid $1,250,000 of the Matzuda promissory note by the issuance of 12,500 shares of our Series A Preferred Stock and 1,250,000 common stock purchase warrants with an exercise price of $.25 to the Robert A. Friedland Trust, a trust of which Robert A. Friedland is the trustee. Our shares of common stock underlying the Series A Preferred Stock and the warrants are included in this registration statement. We repaid $200,000 of the Matzuda promissory note in April 2004 from part of the proceeds from the sale of our Series B Preferred Stock. As of May 14, 2004, the balance under the note issued to Matzuda was $132,121.45.

From January 1, 2001 to April 30, 2003, we paid Matzuda Corporation $5,000 a month as rental payments on the office space that we rented for our operations.

From January 1, 2001 to July 31, 2003, we paid Matzuda Corporation consulting fees in the amount of $37,500 per month in connection with film production consulting services it provided to us.

Ronald C. Stone, our chief operating officer and chief financial officer, loaned us an aggregate of $435,000 during the period from January 1, 2004 to April 6, 2004. We repaid Mr. Stone this amount in full on April 26, 2004, together with interest in the amount of $4,353.42.

We issued Maximum Ventures, Inc., which owns 10.5% of our common stock, a common stock purchase warrant exercisable for 3,201,213 shares of our common stock on August 8, 2003. We issued this warrant pursuant to an Exclusive Advisory Agreement, dated June 26, 2003 and amended as of July 25, 2003 and January 29, 2004, between Jill Kelly Productions, Inc. and Maximum Ventures, Inc., as partial consideration for the business advisory services Maximum performed in connection with the merger of IDC Acquisition I Corp. and Jill Kelly Productions, Inc. The warrant has an exercise price of $.0001 per share. Maximum Ventures, Inc. exercised the warrant in full on November 12, 2003. We used the exercised price paid by Maximum Ventures, Inc. for working capital purposes.

In addition to the warrant for 3,201,213 shares of our common stock, we paid Maximum Ventures, Inc. a total of $593,500 for business advisory services it rendered in connection the merger of IDC Acquisition I Corp. and Jill Kelly Productions, Inc. and the sale of our Series A Preferred Stock.

We also paid Maximum Ventures, Inc. $228,347.10 on April 21, 2004 for business advisory services it rendered to us in connection with the sale of our Series B Preferred Stock. We expect to pay Maximum Ventures, Inc. an additional fee of approximately $55,000 on or before May 21, 2004, for advisory services it rendered to us in connection with the sale of our Series B Preferred Stock. We will know the exact amount of the fee once we receive the remaining proceeds from the sale of the ordinary shares of Armadillo Investments, PLC that we acquired in connection with the sale of our Series B Preferred Stock.

Under the terms of a Master Agreement, dated March 26, 2004, among Maximum Ventures, Inc., Maximum Media Ventures, LLC and us, we loaned an aggregate of $519,995.88 to Maximum Media Ventures, LLC on April 21, 2004 for use in connection with the operation of its adult nightclub and other businesses. We also received membership interests in Maximum Media Ventures, LLC equal to 12 1/2% of the outstanding membership interests. Maximum Media Ventures, LLC is under common control with Maximum Ventures, Inc.

We believe that the terms of the above transactions are commercially reasonable and no less favorable to us than we could have obtained from an unaffiliated third party on an arm’s

length basis. To the extent we may enter into any agreements with related parties in the future, our board of directors has determined that such agreements must be on similar terms.

Mr. Robert A. Friedland and Ms. Adrianne D. Moore may be deemed to be our “promoters” as that term is defined under the federal securities laws.

DESCRIPTION OF SECURITIES

Our authorized capital stock currently consists of 301,060,000 shares, of which 300,000,000 shares are common stock, with a par value of $0.001 per share, 60,000 shares are Series A Preferred Stock, with a par value of $0.001 per share, 600,000 shares are Series B Preferred Stock, with a par value of $0.001 per share, and 400,000 shares are “blank check” preferred stock, with a par value of $0.001 per share.

As of the date of this prospectus, there are 25,156,180 issued and outstanding shares of our common stock, 50,550 issued and outstanding shares of our Series A Preferred Stock and 600,000 issued and outstanding shares of our Series B Preferred Stock. All outstanding shares of capital stock are duly authorized, validly issued, fully paid, and non-assessable. No material potential liabilities are anticipated to be imposed on shareholders under state statutes.

Common Stock.

Each holder of our common stock is entitled to one vote for each share owned of record on all matters voted upon by our stockholders.

Our common stock has no cumulative voting rights, preemption rights, and no redemption, sinking fund, or conversion privileges. Since the holders of our common stock do not have cumulative voting rights, holders of more than 50% of our total outstanding common shares can elect all of our directors, and holders of the remaining shares, by themselves, cannot elect any of our directors.

Holders of our common stock are entitled to receive dividends if, as, and when declared by our board of directors out of funds legally available for such purpose.

Upon the dissolution, liquidation or winding up of our company, the holders of our common stock are entitled to share equally and ratably our net assets, if any, available to such holders after distributions to holders of our preferred stock.

Series A Preferred Stock.

The shares of our Series A Preferred have no voting rights other than those described below or as required by law.

Each share of Series A Preferred Stock accrues an annual cash dividend equal to $8.00, subject to adjustment in certain circumstances for stock splits and similar transactions. We are obligated to pay the holders of Series A Preferred Stock this dividend before we can declare any dividends on our common stock or any other series of preferred stock that is junior to our Series A Preferred Sock with respect to dividends. At our election, we may pay the holders of Series A

Preferred Stock this dividend in cash or in shares of our common stock valued at the lesser of (i) $0.25 or (ii) the market price for each share of our common stock.

Upon the dissolution, liquidation or winding up of our company, the holders of our Series A Preferred Stock, before any distribution or payment to holders of our common stock or our Series B Preferred Stock, are entitled to be paid out of the available assets of our company an amount per share of Series A Preferred Stock equal to $100, subject to adjustment in certain circumstances for stock splits and similar transactions, plus any accrued and unpaid dividends thereon through the date of such distribution or payment.

Each outstanding share of Series A Preferred Stock will automatically convert into 400 shares of our common stock, subject to adjustment in certain circumstances for stock splits and similar transactions, on the second anniversary date of the date of issuance. Shares were issued at various times from July 30, 2003 to February 25, 2004. Prior to the date of such automatic conversion, each holder of Series A Preferred Stock may elect to convert its shares of Series A Preferred Stock into shares of common stock at the same conversion ratio.

We can only create a class or series of preferred stock with powers, rights and preferences equal or senior to the Series A Preferred Stock with the prior consent of the holders of a majority of our Series A Preferred Stock.

In connection with the issuance of our Series A Preferred Stock, we issued warrants to purchase an aggregate of 5,205,000 shares of our common stock to the purchasers of our Series A Preferred Stock. These warrants are exercisable for five years from the date of their issuance at an exercise price of $.25 per share of our common stock, subject to adjustment in certain circumstances.

We agreed to register on a Form SB-2 registration statement the resale of the shares of our common stock issuable upon the conversion of our Series A Preferred Stock and the exercise of the 5,205,000 warrants that we issued in connection with the sale of our Series A Preferred Stock.

Series B Preferred Stock.

The shares of our Series B Preferred Stock have no voting rights other than those as described below or as required by law.

The shares of our Series B Preferred Stock have no rights to receive dividends.

Upon the dissolution, liquidation or winding up of our company, the holders of our Series B Preferred Stock, before any distributions or payments to holders of our common stock and after any distribution or payment to holders of any senior securities, including our Series A Preferred Stock, are entitled to be paid out of available assets of our company an amount per share of Series B Preferred Stock equal to $10.00, subject to adjustment in certain circumstances for stock splits and similar transactions.

Each holder of shares of Series B Preferred Stock may elect to convert its shares of Series B Preferred Stock into shares of common stock. Notwithstanding the foregoing, however, each

holder of Series B Preferred Stock may only convert its shares of Series B Preferred Stock to the extent that the number of shares of our common stock issuable upon conversion, together with the number of shares of our common stock owned by the holder and its affiliates, would not exceed 4.99% of the issued and outstanding shares of our common stock as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934. A holder of our Series B Preferred Stock, however, may waive this restriction by delivering at least 75 days prior written notice to us of such waiver.

Each share of Series B Preferred Stock is convertible into that number of shares of common stock determined by dividing $10.00 by the conversion price for the Series B Preferred Stock in effect at the time of the conversion. The conversion price for the Series B Preferred Stock is equal to the lesser of (i) $1.25 or (ii) 80% of the lowest closing bid price for the common stock for the ten (10) business days preceding the date of conversion; provided, however, that in no event shall the conversion price be less than $0.50.

The conversion price and number of shares of common stock issuable upon conversion of our Series B Preferred Stock is subject to adjustment under certain circumstances to protect the holders of our Series B Preferred Stock against future dilutive transactions.

In the event of a merger of our company with or into any other entity or upon a person or entity acquiring a majority of our issued and outstanding shares of common stock, we have the right to request each holder of our Series B Preferred Stock to convert their shares into shares of our common stock at the ratio described above. If any of the holders of our Series B Preferred Stock refuses to so convert its shares, we have the right to redeem such shares at a price equal to $10.00 per share, subject to adjustment in certain circumstances for stock splits and similar transactions.

The holders of our Series B Preferred Stock may elect to require us to redeem their shares for $10.00 per share, subject to adjustment in certain circumstances for stock splits and similar transactions, upon the occurrence and continuance of an event of default. An “event of default” occurs if we:

• fail to observe or perform any material covenant, agreement or warranty relating to the adjustment of the conversion price for our Series B Preferred Stock;

• materially breach or default on any of our obligations under the Convertible Preferred Stock Purchase Agreement, dated as of March 26, 2004, between us and Armadillo Investments, PLC or any related agreement entered into by us in connection with such agreement;

• file for bankruptcy or commence any other proceeding for the reorganization, dissolution, insolvency or liquidation of our company;

• have the trading of our shares of common stock suspended, delisted or otherwise ceased and not reinstated within 30 days; or

• issue a press release or otherwise publicly announce that we will not honor conversion requests with respect to our Series B Preferred Stock.

We can only create a class or series of preferred stock with powers, rights and preferences equal or senior to the Series B Preferred Stock with the prior consent of the holders of a majority of our Series B Preferred Stock.

We agreed to register the resale of the shares of our common stock issuable upon the conversion of our Series B Preferred Stock under a registration rights agreement, dated March 26, 2004, between Armadillo Investments, PLC and us. Armadillo has the right, subject to certain restrictions, to require us to register the resale of the shares of our common stock issuable upon conversion of our Series B Stock whenever we register other shares of our common stock. Such registration rights as these are commonly referred to as “piggy back” registration rights. Armadillo has agreed to waive its registration rights with respect to this registration statement.

Blank Check Preferred Stock.

Our board of directors has the authority, without further stockholder approval, to issue up to 400,000 shares of preferred stock in one or more series and to fix the designations, rights, preferences, privileges and restrictions of these shares, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. These shares of preferred stock may have rights senior to our common stock. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of our common stock.

Transfer Agent and Registrar.

Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004 is our transfer agent and the registrar for our common stock. Its telephone number is (212) 509-4000.

Possible Anti-Takeover Effects of Authorized but Unissued Stock.

Our authorized but unissued capital stock consists of 274,843,820 shares of common stock, 7,950 shares of our Series A Preferred Stock and 400,000 shares of blank check preferred. One effect of the existence of authorized but unissued capital stock may be to enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or otherwise, and thereby to protect the continuity of our management. If, in the due exercise of its fiduciary obligations, for example, the board of directors were to determine that a takeover proposal was not in our best interests, such shares could be issued by our board of directors without stockholder approval in one or more private placements or other transactions that might prevent, or render more difficult or costly, completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group, by creating a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board

of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Section 78.7502 of the General Corporation Law of Nevada permits the indemnification of a director, officer, employee or agent of a corporation by the corporation because he or she is a party, or is threatened to be made a party, to any action or proceeding by reason of the fact that the person is or was a director, officer, employee or agent of the corporation or because he or she is a party, or is threatened to be made a party, to any action or proceeding brought by or on behalf of a corporation. If the director, officer, employee or agent is successful on the merits in defense of any action or proceeding, the corporation must indemnity the agent against expenses actually and reasonably incurred by such person in the defense of the action or proceeding.

Article XI of our Amended and Restated Articles of Incorporation provides that to the fullest extent permitted under the General Corporation Law of Nevada, none of our officers or directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as an officer or director.

Article XII of our Amended and Restated Articles of Incorporation permits us, to the maximum extent permitted by the General Corporation Law of Nevada, to indemnify our agents in excess of the indemnification otherwise permitted by law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.

MARKET FOR COMMON EQUITY

Market Information

As of May 14, 2004, we had 25,156,180 shares of common stock outstanding held by 157 stockholders of record. Our common stock is traded in the over-the-counter market and quoted under the symbol “JKXJ.” Prior to August 20, 2003, our common stock traded in the over-the-counter market under the symbol “IDCE.” We trade on the “Pink Sheets,” which is a quotation service operated by Pink Sheets LLC (formerly the National Quotation Bureau, LLC), a quotation service distributed to broker-dealers and available on the Internet. The “Pink Sheets” does not impose listing standards or requirements, does not provide automatic trade executions, and does not maintain relationships with quoted issuers. Issuers whose securities are quoted on the “Pink Sheets” may experience a loss of market makers, a lack of readily available “bid” and “asked” price for their securities, and a general loss of liquidity in their securities.

The following table sets forth, for the periods indicated, the high and low bid information for the common stock. These bid prices were obtained from National Quotation Bureau, reflect interdealer prices, without retail markups, markdowns, or commissions and may not necessarily reflect actual transactions. Based on the very limited public float and trading in our common stock, we believe that such data may bear no relation to the true value of our common stock or the range of prices that would prevail in a liquid market.


Year	Quarter	High Bid		Low Bid
2002	1^st	$	0.35	$	0.35
	2^nd		1.50		1.50
	3^rd		1.01		1.01
	4^th		—		—
2003	1^st	$	—	$	—
	2^nd		0.25		0.25
	3^rd		5.50		0.25
	4^th		5.00		2.05
2004	1^st	$	4.00	$	1.50

992,920 of our 25,156,180 outstanding shares of common stock will be freely tradable without restriction under the Securities Act of 1933 unless held by our “affiliates” as that term is defined in Rule 144 under the Securities Act of 1933. These shares will be eligible for sale in the public market, subject to certain volume limitations and the expiration of applicable holding periods under Rule 144 under the Securities Act of 1933. Non-affiliates currently hold 3,297,787 shares of our outstanding shares common stock, representing 13.1% of our outstanding shares. In general, under Rule 144 as currently in effect, provided that our company is then current with respect to its reporting requirements under the Exchange Act of 1934 and certain other conditions are met with respect to the manner of sale, a person, or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year,

including the holding period of any prior owner or affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of (1) one percent of the number of shares of common stock then outstanding or (2) the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of us at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner except an affiliate), is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

We have 5,863,787 shares of our common stock reserved for issuance upon exercise of outstanding stock purchase warrants. We are registering 5,205,000 of these shares by this prospectus.

23,455,200 share of our common stock are reserved for issuance upon conversion of the outstanding shares of our Series A Preferred Stock and payment of dividends thereon. All of these shares of our common stock are being registered by this prospectus.

In addition, 4,800,000 shares of common stock are reserved for issuance upon conversion of the outstanding shares of our Series B Preferred Stock.

We can offer no assurance that an active public market in our shares will develop. Future sales of substantial amounts of our shares in the public market could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

Dividends

We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. The terms of our Series A Preferred Stock requires that we pay all accrued dividends on the outstanding shares of our Series A Preferred Stock before we can issue any dividends on shares of our common stock. We presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.

EXPERTS

The consolidated financial statements of Jill Kelly Productions Holdings, Inc. as of December 31, 2003 and for the year ended December 31, 2003 have been included herein and in the registration statement in reliance upon the report of Sherb & Co., LLP independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Jill Kelly Productions, Inc. as of December 31, 2002 and for each of the years in the two-year period ended December 31, 2002 have been included herein and in the registration statement in reliance upon the report of Sherb & Co., LLP independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters, including the legality of the issuance of the shares of common stock offered herein, are being passed upon for us by our counsel, Klehr, Harrison, Harvey, Branzburg & Ellers LLP, Philadelphia, Pennsylvania.

WHERE YOU CAN FIND MORE INFORMATION

We have not previously been required to comply with the reporting requirements of the Exchange Act of 1934. However, once this registration statement becomes effective we will be required to file quarterly and annual reports and other information with the Securities and Exchange Commission.

We have filed with the Securities and Exchange Commission a registration statement on Form SB-2 to register the securities offered by this prospectus. The prospectus is part of the registration statement, and, as permitted by the Securities and Exchange Commission’s rules, does not contain all of the information in the registration statement. For future information about us and the securities offered under this prospectus, you may refer to the registration statement and to the exhibits and schedules filed as a part of the registration statement. You can review the registration statement and its exhibits at the public reference facility maintained by the Securities and Exchange Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. The registration statement is also available electronically on the World Wide Web at http://www.sec.gov.

JILL KELLY PRODUCTIONS
HOLDING, INC.

29,266,380 SHARES OF COMMON
STOCK

PROSPECTUS

, 2004

Until [DATE], 2004 [90 days from the date of this prospectus], all dealers that effect transaction in these securities, whether or not participants in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligations to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.

No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer made by this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by Jill Kelly Productions Holding, Inc. This prospectus does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Jill Kelly Productions Holding, Inc. or that information contained herein is correct as of any time subsequent to the date hereof.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Section 78.7502(1) of the General Corporation Law of Nevada, or the “NGCL,” provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he (a) is not liable pursuant to Section 78.138 of the NGCL (relating to intentional misconduct, fraud, or a knowing violation of law) or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 78.7502(2) of the NGCL provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 78.7502(3) of the NGCL provides that to the extent that a director, officer, employee or agent of a Nevada corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 78.7502(1) or (2) of the NGCL, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such

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indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.

Article XI of our Amended and Restated Articles of Incorporation provides that none of our officers or directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as an officer or director to the fullest extent permitted by the NCGL. This provision, however, does not eliminate or limit the liability of a director or officer for any action or omission which involves intentional misconduct, fraud, or a knowing violation of law, or the payment of distributions in violation of Section 78.300 of the NGCL.

Article XII of our Amended and Restated Articles of Incorporation provides that we are authorized, through enactment of a bylaw provision or through agreements with our agents, to indemnify any of our agents that breach a duty to us or our stockholders in excess of the indemnification otherwise permitted by law, subject to any limitations to such indemnification provided by law. Our bylaws currently do not provide for this excess indemnification and we have no current agreements with our agents to so provide this excess indemnification.

Item 25. Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses payable by us in connection with the offer and sale of the shares of our common stock being registered by this registration statement. All amounts are estimates except for the SEC registration fee:


Item	Amount Payable by the Company
SEC Registration Fee	$	4,264.26
Printing and Engraving Expenses		30,000.00
Transfer Agent’s Fee		5,000.00
Legal Fees and Expenses		75,000.00
Accounting Fees and Expenses		15,000.00
Blue Sky Fees and Expenses		5,000.00
Miscellaneous Expenses		5,698.66

Total	$	140,000.00

Item 26. Recent Sales of Unregistered Securities.

On July 30, 2003, we issued 25,000 shares of our common stock to Jackson Steinem, Inc., the beneficial owner of which is Adam S. Gottbetter, managing partner of Gottbetter & Partners, LLP, which previously acted as legal counsel to our company. The shares were issued in exchange for $6,250 worth of non-legal services rendered to us. We valued these shares at $.25 per share. These shares were issued in reliance on Section 4(2) of the Securities Act of 1933.

On August 4, 2003, we issued 25,000 shares of our common stock to Equivest Capital Associates pursuant to the terms of a Settlement and Mutual Release Agreement we entered into with Equivest on July 18, 2003 in consideration of the settlement of certain claims. We valued

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these shares at $6,250, or $.25 per share. These shares were issued in reliance on Section 4(2) of the Securities Act of 1933.

On August 8, 2003, we entered into an Agreement and Plan of Merger with Jill Kelly Productions, Inc. and our wholly owned subsidiary, IDC Acquisition I Corp. On August 11, 2003, we issued 19,000,000 shares of our common stock to the stockholders of Jill Kelly Productions, Inc. in connection with the merger in exchange for all of the capital stock of Jill Kelly Productions, Inc. The shares issued in connection with the merger and the securities issued to Maximum Ventures, Inc. were issued in reliance on Section 4(2) of the Securities Act of 1933.

In consideration of its advisory services in connection with the merger of IDC Acquisition Corp and Jill Kelly Productions, we paid Maximum Ventures, Inc. $10,000 and issued them a warrant for 3,201,213 shares of our common stock at an exercise price of $.0001. Maximum Ventures, Inc. rendered these advisory services to us pursuant to the terms of a Amended and Restated Advisory Agreement, dated as of June 26, 2003, between Jill Kelly Productions, Inc. and Maximum, as amended as of July 25, 2003 and January 29, 2004. On November 12, 2003, we issued Maximum Ventures, Inc. 3,201,213 shares of our common stock in connection with the exercise of this warrant. The warrant and the shares that we issued upon its exercise were issued in reliance on Section 4(2) of the Securities Act of 1933.

On September 21, 2003, we issued 2,500 shares of Series A Preferred Stock and warrants to purchase 250,000 shares of our common stock at a price of $.25 per share until September 20, 2008 to Michael Koretsky pursuant to a Settlement Agreement between us and Mr. Koretsky. We issued these securities in consideration of the forgiveness of a $250,000 note held by Mr. Koretsky. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On September 30, 2003, we issued 1,200 shares of Series A Preferred Stock and warrants to purchase 120,000 shares of our common stock at a price of $.25 per share until September 29, 2008 to James Long pursuant to a Settlement Agreement between us and Mr. Long. We issued these securities in consideration of the forgiveness of a $120,000 note held by Mr. Long. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On October 31, 2003, we issued 1,000 shares of Series A Preferred Stock and warrants to purchase 100,000 shares of our common stock at a price of $.25 per share until October 30, 2008 to William O. Baxter pursuant to a Settlement Agreement between us and Mr. Baxter. We issued these securities in consideration of the forgiveness of a $100,000 note held by Mr. Baxter. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On November 17, 2003, we issued 12,500 shares of our Series A Preferred Stock and warrants to purchase 1,250,000 shares of our common stock at a price of $.25 per share until November 16, 2008 to the Robert A. Friedland Trust, a trust whose trustee is our chief executive officer and secretary, Robert A. Friedland, pursuant to a Settlement Agreement between us and the Robert A. Friedland Trust. We issued these securities in consideration of the forgiveness of

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$1,250,000 under a promissory note held by the Matzuda Corporation, which is owned and controlled by Mr. Friedland. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On November 18, 2003, we issued 500,000 shares of our common stock to Corporate Builders, L.P. pursuant to a Consulting Agreement, dated August 5, 2003, among us, Maximum Ventures, Inc. and Corporate Builders. We issued these shares to Corporate Builders as partial consideration for its business consulting services under this agreement. These shares were issued in reliance on Section 4(2) of the Securities Act of 1933.

On November 19, 2003, we issued 1,000 shares of Series A Preferred Stock and warrants to purchase 100,000 shares of our common stock at a price of $.25 per share until November 18, 2008 to Ronald V. Patterson pursuant to a Settlement Agreement between us and Mr. Patterson. We issued these securities in consideration of the forgiveness of a $100,000 note held by Mr. Patterson. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On November 19, 2003, we issued 1,000 shares of Series A Preferred Stock and warrants to purchase 100,000 shares of our common stock at a price of $.25 per share until November 18, 2008 to Joseph London pursuant to a Settlement Agreement between us and Mr. London. We issued these securities in consideration of the forgiveness of a $100,000 note held by Mr. London. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On November 25, 2003, we issued 250 shares of Series A Preferred Stock and warrants to purchase 25,000 shares of our common stock at a price of $.25 per share until November 24, 2008 to Michael Slipyan pursuant to a Settlement Agreement between us and Mr. Slipyan. We issued these securities in consideration of the forgiveness of a $25,000 note held by Mr. Slipyan. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

During the period from July 30, 2003 to February 25, 2004, we completed a private offering of 32,350 units to the following “accredited investors” at a price of $100 per unit or $3,235,000 in the aggregate:


•	Robert Hollis	•	David A. Hoines, P.A. Pension Plan
•	Stanley Katz	•	Jermoe Bresson
•	John Stewart	•	John Stewart
•	Azriel Nagar and Sheila Nagar	•	Mark Friedman
•	Julian Herkowitz	•	Matthew Smith
•	AMJ Corp.	•	Daniel R. Ice
•	Kings Against 3, LLC	•	Charles Potter
•	Eugine J. Friedman	•	Morris Silver
•	JKL Capital L.P.	•	Gewinner W. Garrison
•	Rosemary Friedman	•	Beryl Weiner
•	Bernard Brown	•	David Boschart

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•	R. Brooke Hollis	•	Alexander R. Ice
•	Emiko Ishioka	•	Charles R. Whalen
•	Morton Berman	•	Mitchell J. and Kathleen W. Birzon
•	Axriel Nagar	•	Grace K. Walls
•	Jack Luchese	•	Victor I. Polakoff
•	Maximum Ventures, Inc.

Each unit consists of 1 share of our Series A Preferred Stock and warrants to purchase 100 share of our common stock at a price of $.25 per share at any time for five years from the date of issuance. The units were issued in reliance on Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933. Maximum Ventures, Inc. received $583,500 in consideration of its advisory services to us in connection with this transaction.

On January 20, 2004, we issued 606,180 shares of our common stock to Maximum Ventures, Inc. upon conversion of 1,500 shares of our Series A Preferred Stock by Maximum Ventures, Inc. and payment of accrued interest on such shares.

On January 23, 2004, we issued 250 shares of Series A Preferred Stock and warrants to purchase 25,000 shares of our common stock at a price of $.25 per share until January 22, 2009 to Kate Edelman Johnson pursuant to a Settlement Agreement between us and Ms. Johnson. We issued these securities in consideration of the forgiveness of a $25,000 note held by Ms. Johnson. These shares and warrants were issued in reliance on Rule 506 of Regulation D of the Securities Act of 1933.

On April 21, 2004, we issued 600,000 shares of our Series B Preferred Stock to Armadillo Investments, PLC in a private placement pursuant to the terms of a Convertible Stock Purchase Agreement, dated as of March 26, 2004, between Armadillo Investments, PLC and us. In consideration of the issuance of these shares of our Series B Preferred Stock, Armadillo issued 3,191,459 shares of its ordinary shares to us. We subsequently sold all of these shares, which resulted in gross proceeds to us of $2,825,000. In order to induce Armadillo to purchase our shares of Series B Preferred Stock, we agreed to issued 800,000 shares of our common stock to Armadillo’s affiliate, Jubilee Investment Trust, PLC. All of these shares were issued in reliance on Regulation S of the Securities Act of 1933.

We paid Maximum Ventures, Inc. $228,347.10 on April 21, 2004 for business advisory services it rendered to us in connection with the sale of our Series B Preferred Stock. We expect to pay Maximum Ventures, Inc. an additional fee of approximately $55,000 on or before May 21, 2004, for advisory services it rendered to us in connection with the sale of our Series B Preferred Stock. We will know the exact amount of the fee once we receive the remaining proceeds from the sale of the ordinary shares of Armadillo Investments, PLC that we acquired in connection with the sale of our Series B Preferred Stock.

We have made the determination that each purchaser of shares of our capital stock in the foregoing transactions had sufficient knowledge and experience in finance and business matters to evaluate the risks and merits of the investment. There was no general solicitation or general

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Item 27. Exhibits.


Exhibit
Number		Description
2.1	—	Stock Purchase Agreement, dated as of February 2002, among Turf Holding Inc., Ming Capital Enterprises Inc., Private Investment Company Ltd. and Alan Schram

2.2	—	Agreement and Plan of Merger, dated as of August 8, 2003, by and among Jill Kelly Productions, Inc., IDC Acquisition I Corp. and IDC Technologies, Inc.

3.1	—	Amended and Restated Articles of Incorporation of Jill Kelly Productions Holding, Inc.

3.2	—	By-Laws of Jill Kelly Productions Holding, Inc.

4.1	—	Specimen Certificate of Common Stock

4.2	—	Form of Common Stock Purchase Warrant issued with Series A Preferred Stock

5.1	—	Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP as to the legality of the shares of common stock being registered (to be filed by amendment)

10.1	—	Promissory Note in the principal amount of $778,414.05 issued to Matzuda Corporation

10.2	—	Settlement Agreement with Michael Koretsky, dated as of September 21, 2003

10.3	—	Settlement Agreement with James Long, dated as of September 21, 2003

10.4	—	Settlement Agreement with William O. Baxter, dated as of October 31, 2003

10.5	—	Settlement Agreement with Robert A. Friedland Trust, dated as of November 17, 2003

10.6	—	Settlement Agreement with Ronald V. Patterson, dated as of November 19, 2003

10.7	—	Settlement Agreement with Joseph London, dated as of November 19, 2003

10.8	—	Settlement Agreement with Michael Slipyan, dated as of November 25, 2003

10.9	—	Settlement Agreement with Kate Edelman Johnson, dated as of January 23, 2004

10.10	—	Form of Subscription Agreement for Series A Preferred Stock

10.11	—	Series B Convertible Preferred Stock Purchase Agreement, dated as of March 26, 2004, by and between Jill Kelly Productions Holding, Inc. and Armadillo Investments, PLC

10.12	—	Registration Rights Agreement, dated as of March 26, 2004, by and between Jill Kelly Productions Holding, Inc. and Armadillo Investments, PLC

10.13	—	Side Letter Agreement, dated as of March 5, 2004, by and among Jill Kelly Productions Holding, Inc. Jubilee Investments Trust, PLC and Armadillo Investments, PLC

10.14	—	Side Letter Agreement, dated as of April 20, 2004, by and among Jill Kelly Productions Holding, Inc. Jubilee Investments Trust, PLC, Armadillo Investments, PLC, Maximum Ventures, Inc. and Maximum Media Ventures, LLC

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Exhibit
Number		Description
10.16	—	Consulting Agreement, dated as of August 5, 2003, among Jill Kelly Productions Holdings, Inc., Maximum Ventures, Inc. and Corporate Builders, L.P.

10.17	—	Factoring Agreement, dated as of March 29, 2001, among Summit Financial Resources, L.P., and J.K. Distribution, Inc. and Jill Kelly Productions, Inc.

10.18	—	Licensing Agreement regarding video rights, dated as of September 23, 2003, between Jill Kelly Productions, Inc. and Global Distributors Netherlands B.V.

10.19	—	Employment Agreement, dated as of September 1, 2003, with Robert A. Friedland (to be filed by amendment)

10.20	—	Employment Agreement, dated as of September 1, 2003, with Adrianne D. Moore (to be filed by amendment)

10.21	—	Employment Agreement, dated as of September 1, 2003, with Ronald C. Stone (to be filed by amendment)

11.1	—	Statement re: Computation of Per Share Earnings (to be filed by amendment)

21.1	—	List of Subsidiaries of Jill Kelly Productions Holding, Inc.

23.1	—	Consent of Sherb & Co. regarding Jill Kelly Productions Holdings, Inc. and Jill Kelly Productions, Inc.

23.2	—	Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP

Item 28. Undertakings.

(a) We shall undertake to:

(1) File, during any period in which we offers or sales securities, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement (or the most recent post-effective amendment thereof).

(iii) Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

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(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at then end of the offering.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of our company pursuant to any provisions contained in our Articles of Incorporation, By-Laws, or otherwise, we have been advised that in the opinion of the Security and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by us is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of West Hollywood, California on May 14, 2004.

JILL KELLY PRODUCTIONS HOLDING, INC.

By: /s/ Robert A. Friedland
Robert A. Friedland
Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, the registration statement was signed by the following persons in the capacities and on the dates stated.


Signature	Title	Dated

/s/ Robert A. Friedland Robert A. Friedland	Chief Executive Officer, Chairman of the Board and Secretary (principal executive officer)	May 14, 2004

/s/ Adrianne D. Moore Adrianne D. Moore	President and Vice Chairman of the Board	May 14, 2004

/s/ Ronald C. Stone Ronald C. Stone	Chief Operating Officer, Chief Financial Officer and Director (principal accounting officer and principal financial officer)	May 14, 2004

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Jill Kelly Productions Holding, Inc.


Exhibit
Number		Description
2.1	—	Stock Purchase Agreement, dated as of February 2002, among Turf Holding Inc., Ming Capital Enterprises Inc., Private Investment Company Ltd. and Alan Schram

2.2	—	Agreement and Plan of Merger, dated as of August 8, 2003, by and among Jill Kelly Productions, Inc., IDC Acquisition I Corp. and IDC Technologies, Inc.

3.1	—	Amended and Restated Articles of Incorporation of Jill Kelly Productions Holding, Inc.

3.2	—	By-Laws of Jill Kelly Productions Holding, Inc.

4.1	—	Specimen Certificate of Common Stock

4.2	—	Form of Common Stock Purchase Warrant issued with Series A Preferred Stock

5.1	—	Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP as to the legality of the shares of common stock being registered (to be filed by amendment)

10.1	—	Promissory Note in the principal amount of $778,414.05 issued to Matzuda Corporation

10.2	—	Settlement Agreement with Michael Koretsky, dated as of September 21, 2003

10.3	—	Settlement Agreement with James Long, dated as of September 21, 2003

10.4	—	Settlement Agreement with William O. Baxter, dated as of October 31, 2003

10.5	—	Settlement Agreement with Robert A. Friedland Trust, dated as of November 17, 2003

10.6	—	Settlement Agreement with Ronald V. Patterson, dated as of November 19, 2003

10.7	—	Settlement Agreement with Joseph London, dated as of November 19, 2003

10.8	—	Settlement Agreement with Michael Slipyan, dated as of November 25, 2003

10.9	—	Settlement Agreement with Kate Edelman Johnson, dated as of January 23, 2004

10.10	—	Form of Subscription Agreement for Series A Preferred Stock

10.11	—	Series B Convertible Preferred Stock Purchase Agreement, dated as of March 26, 2004, by and between Jill Kelly Productions Holding, Inc. and Armadillo Investments, PLC

10.12	—	Registration Rights Agreement, dated as of March 26, 2004, by and between Jill Kelly Productions Holding, Inc. and Armadillo Investments, PLC

10.13	—	Side Letter Agreement, dated as of March 5, 2004, by and among Jill Kelly Productions Holding, Inc. Jubilee Investments Trust, PLC and Armadillo Investments, PLC

10.14	—	Side Letter Agreement, dated as of April 20, 2004, by and among Jill Kelly Productions Holding, Inc. Jubilee Investments Trust, PLC, Armadillo Investments, PLC, Maximum Ventures, Inc. and Maximum Media Ventures, LLC

10.16	—	Consulting Agreement, dated as of August 5, 2003, among Jill Kelly Productions Holdings, Inc., Maximum Ventures, Inc. and Corporate Builders, L.P.

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Exhibit
Number		Description
10.17	—	Factoring Agreement, dated as of March 29, 2001, among Summit Financial Resources, L.P., and J.K. Distribution, Inc. and Jill Kelly Productions, Inc.

10.18	—	Licensing Agreement regarding video rights, dated as of September 23, 2003, between Jill Kelly Productions, Inc. and Global Distributors Netherlands B.V.

10.19	—	Employment Agreement, dated as of September 1, 2003, with Robert A. Friedland (to be filed by amendment)

10.20	—	Employment Agreement, dated as of September 1, 2003, with Adrianne D. Moore (to be filed by amendment)

10.21	—	Employment Agreement, dated as of September 1, 2003, with Ronald C. Stone (to be filed by amendment)

11.1	—	Statement re: Computation of Per Share Earnings (to be filed by amendment)

21.1	—	List of Subsidiaries of Jill Kelly Productions Holding, Inc.

23.1	—	Consent of Sherb & Co. regarding Jill Kelly Productions Holdings, Inc. and Jill Kelly Productions, Inc.

23.2	—	Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP

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We have audited the accompanying consolidated balance sheet of Jill Kelly Productions Holding, Inc. as of December 31, 2003 and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the consolidated financial position of Jill Kelly Productions Holding, Inc. as of December 31, 2003 and 2002 and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying notes are an integral part of the consolidated financial statements.

Jill Kelly Productions, Inc. was incorporated in the State of Delaware in July 2000 to engage in the production and distribution of adult movies.

In August 2003, IDC Technologies, Inc. completed a reverse triangular merger with Jill Kelly Productions, Inc. via its acquisition subsidiary IDC Acquisition I Corp. IDC Acquisition I Corp. merged with and into Jill Kelly Productions, Inc., such that as of the closing of the transaction, Jill Kelly Productions, Inc. was the surviving entity. Pursuant to this merger, IDC Technologies, Inc. acquired 100% of the outstanding capital stock of Jill Kelly Productions, Inc. in exchange for 19,000,000 shares of common stock of IDC Technologies, Inc. that was issued to the former stockholders of Jill Kelly Productions, Inc. Jill Kelly Productions, Inc. became a wholly-owned operating subsidiary of IDC Technologies, Inc. and the former stockholders of Jill Kelly Productions, Inc. owned approximately 95% of the outstanding shares of common stock of IDC Technologies, Inc. In August 2003, IDC Technologies, Inc. changed its name to Jill Kelly Productions Holding, Inc.

The merger with Jill Kelly Productions, Inc. was accounted for as a reverse acquisition. Although IDC Technologies, Inc. was the legal acquirer in the merger, Jill Kelly Productions, Inc. was the accounting acquirer since its stockholders acquired a majority ownership interest in IDC Technologies, Inc. Consequently, the historical financial information included in these financial statements prior to August 8, 2003 is that of Jill Kelly Productions, Inc. Accordingly, the term “Company” used herein refers to (i) Jill Kelly Productions, Inc. prior to August 8, 2003 and (ii) Jill Kelly Productions Holding, Inc. after August 8, 2003.

Prior to February 25, 2004, the Company exclusively distributed it movies through J.K. Distribution, Inc., a Nevada corporation, owned equally by Robert A. Friedland, Ronald C. Stone and Adrianne D. Moore, the Company’s officers and directors. On February 25, 2004, the officers and directors contributed all of the capital stock of J.K. Distribution, Inc. to the capital of the Company.

Accounting Method. The Company’s financial statements are prepared using the accrual method of accounting.

Principles of Consolidation. The consolidated financial statements of the Company include those of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates.

Cash and Cash Equivalents. The Company considers all highly liquid short-term investments, with a remaining maturity of three months or less when purchased, to be cash equivalents.

Accounts Receivable. The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and management’s evaluation of periodic aging of accounts. Accounts receivable are shown net of allowances for doubtful accounts of $32,620 at December 31, 2003. The Company charges off accounts receivable against the allowance for losses when an account is deemed to be uncollectible.

Inventory. Inventories of DVD’s, VHS’s, Boxes and Wraps are stated at the lower of cost, determined by the first-in, first-out method, or market.

Property and Equipment. Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the assets, which range from three to seven years. Expenditures for major renewals and betterments that extend the original estimated economic useful lives of the applicable assets are capitalized. Expenditures for normal repairs and maintenance are charged to expense as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any gain or loss is included in operations.

Income Taxes. Income taxes are accounted for in accordance with the provisions of SFAS No. 109. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized, but no less than quarterly.

Fair Value of Financial Instruments. The carrying amount reported in the balance sheet for cash and cash equivalents, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

Advertising. Advertising costs are expensed as incurred. Advertising expense incurred for the years ended December 31, 2003, and 2002 totaled $231,296 and $259,775 respectively.

SOP 00-2. Effective October 1, 2000, the Company adopted two new accounting pronouncements, AICPA Statement of Position No. 00-2, “Accounting by Producers or Distributors of Films (SOP 00-2) and SFAS 133, subsequently amended by Statement of Financial Accounting Standards No. 138 (SFAS 138).

SOP 00-2 establishes accounting standards for producers and distributors of films, which resulted in changes in revenue recognition and accounting for exploitation costs, including advertising and marketing expenses and development and overhead costs.

Earnings (Loss) Per Common Share. Earnings (loss) per common share is computed using the weighted average number of shares outstanding. Potential common shares includable in the computation of fully diluted per share results are not presented in the financial statements as their effect would be anti-dilutive.

Revenue Recognition. The Company recognizes revenue from VHS and DVD sales when there is an agreement to purchase the product at a fixed or determinable price, shipment of product and assurance of collection within a reasonable period of time. Revenues from licensing of films are recorded when material is available by the licensee and when certain other conditions are met.

Film Production Costs. The capitalized Film Production costs include direct negative costs, production overhead, interest, and development costs and are stated at the lower of cost, less accumulated amortization, or fair value. Marketing, distribution, and general and administrative costs are expensed as incurred.

Estimates of total gross revenues can change significantly due to a variety of factors, including the level of market acceptance of the film. Accordingly, revenue estimates are reviewed periodically and amortization is adjusted, if necessary. Such adjustments could have a material effect on results of operations in future periods.

Stock Based Compensation. Financial Accounting Statement No. 123, Accounting for Stock Based Compensation, encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has adopted the “disclosure only” alternative described in SFAS 123 and SFAS 148, which require pro forma disclosures of net income and earnings per share as if the fair value method of accounting had been applied.

Recent Accounting Pronouncements. In August 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit, or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities. The Company believes the adoption of SFAS 146 will have no significant impact on its financial statements. This statement is effective for exit or disposal activities initiated after December 31, 2002.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for interim periods beginning after December 15, 2002 and for fiscal years ending after December 15, 2002.

In April 2003, the Financial Accounting Standards Board issued SFAS No. 149, “Amendment of FASB Statement No. 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The statement is effective for contracts entered into or modified after June 30, 2003.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The Company believes the adoption of SFAS 150 will have no significant impact on its financial statements. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities.

Certain prior year amounts have been reclassified to conform to current year presentation.

Depreciation expense for the years ended December 31, 2003 and 2002 was $21,992 and $1,193, respectively.

The Company has entered into capital leases for equipment. The leases are for 36 months and contain bargain purchase provisions so that the Company can purchase the equipment at the end of each lease. The following sets forth the minimum future lease payments and present values of the net minimum lease payments under these capital leases:

In the year ended December 31, 2003, the Company paid $16,784 in principal and $2,310 in interest on capital leases.

On December 10, 2002, a customer advanced the Company the sum of $300,000. Upon receipt the Company issued the customer a $360,000 credit against their current account receivable. This credit will be offset against future revenues from this customer. The balance of the credit at December 31, 2003 is $50,642.


(1)	This balance represents a demand loan from an individual at 10% interest per annum.

(2)	This balance represents a demand loan from an officer of the Company at no interest.

(3)	This balance represents a demand loan from a company at no interest. This loan was converted into Series A Preferred Stock in 2004.

(4)	This balance represents the factoring agreement with Summit Financial. The Company pays a base commission of a rate of 2% of the face amount for the first 60 day period, or part thereof, and an additional 1.25% of the face amount for each additional 30 day period until payment in full is received on the account. If in default the Company shall pay a base commission of 10% above the applicable base commission. The Company also pays a daily funds rate of prime plus 2% divided by 360. If in default, the Company pays an additional 10% of the applicable daily funds rate. This balance is collateralized by the Company’s accounts receivable.

The Company had an obligation of $778,414 to the Matzuda Corporation (“Matzuda”) as of December 31, 2003. Matzuda is controlled by Robert A Friedland who is also an officer of the Company. The Company borrows money from Matzuda to finance the production of films. The Company pays interest to Matzuda of 15% per annum and the balance is due on demand. During the year ended December 31, 2003 Matzuda converted $1,250,000 of debt into 12,500 shares of Series A Preferred Stock and 1,250,000 warrants. (see Note 14)

Amount due to Individual per the November 23, 2000 Production and Distribution Agreement for monies advanced to the Company for the production of two films. The outstanding balance at December 31, 2003 is $1,681.

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes (“SFAS No. 109”). SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit

carryforwards. SFAS No. 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

From time to time, the Company is also subject to legal proceedings and claims arising from the conduct of its business operations, including litigation related to personal injury claims, contract matters, and employment claims. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts accrued or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operation of the Company.

On May 29, 2003, Kevin Smith and Canyon Capital Marketing (together, the “Smith Plaintiffs”) filed suit against IDC Technologies Inc., et al. (predecessor entity to Jill Kelly Productions Holding, Inc.) (“IDC Technologies”) in the Superior Court of the State of California for the County of San Diego seeking payment of $165,137.00, plus other expenses, interest and costs of the suit. A first amended complaint was filed with the court on September 2, 2003 and subsequently served on JKXJ. The Smith Plaintiffs claim that they are holders of an alleged promissory note (the “Promissory Note”) in the amount of $165,137.00. According to the Smith Plaintiffs, the Promissory Note was purportedly executed by an officer of a predecessor entity to IDC Technologies on June 1, 1999 and bears interest at eight percent per annum from that date. The Smith Plaintiffs assert causes of action for the alleged breach of the Promissory Note and for judicial foreclosure on their alleged security interest. On October 22, 2003, the Company filed an answer and counterclaim, denying the allegations of the complaint seeking payment on the Promissory Note and seeking payment from the officers of predecessor entities for failing to disclose the purported liability. The Company intends to defend this action and pursue its counterclaim vigorously.

The Company has entered into several agreements to distribute films produced by other Companies. The Company pays a royalty fee based on a percentage of sales from those films ranging anywhere from 37.5 to 90 percent.

The Company has entered into a non-cancelable operating lease for facilities. Rental expense was approximately $76,944 the year ended December 31, 2003. Future minimum lease payments under this operating lease are as follows:

On August 8, 2003, the Company completed a reverse triangular merger (“merger”) with IDC Technologies, Inc. via its acquisition subsidiary IDC Acquisition I Corp. (“IDC”). IDC became the surviving company of the merger which changed its name to Jill Kelly Productions Holding, Inc. As part of the merger, 19,000 shares outstanding of JKP common stock was cancelled and exchanged for IDC common stock at the exchange ratio of 1,000 to 1. As a result the stockholders’ of JKP received 19,000,000 shares of the Company’s common stock on August 13, 2003.

The acquisition of JKP by IDC has been accounted for as a reverse acquisition for financial accounting purposes. The reverse merger is deemed a capital transaction and the net assets of JKP (the accounting acquirer) are carried forward to IDC (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of IDC and the assets and liabilities of JKP are recorded at historical cost. The financial statements of JKP and the Company are being combined for the period from January 1, 2003 through December 31, 2003. In these financial statements, JKP is the operating entity for financial reporting purposes and the financial statements for all periods presented represent JKP’s financial position and results of operations. The equity of JKP is the historical of IDC retroactively restated to reflect the number of shares issued in the transaction.

The Company assumed liabilities of IDC totaling $1,399,372 as a result of the merger. The liabilities included $1,272,031 of notes payable plus accrued interest and $127,341 in accounts payable.

On July 30, 2003, the Company issued 25,000 shares of common stock to Jackson Steinem, Inc., the beneficial owner of which is Adam S. Gottbetter, managing partner of Gottbetter & Partners, LLP, formerly counsel to the Company. The shares were issued in exchange for non legal services rendered. The Company valued the shares at market on the date of issuance which resulted in stock based compensation of $6,250.

On August 4, 2003, the Company issued 25,000 shares of common stock to Equivest Capital Associates (“Equivest”). On January 31, 2001, the Company entered into an Indemnification Agreement (the “Indemnification Agreement”) with Equivest in which it assigned and Equivest agreed to assume certain of the Company’s debts and liabilities in exchange for the Company’s common stock, upon terms and conditions contained in the Indemnification Agreement. Certain of the Company’s shares were not delivered to Equivest. The Company entered into a Settlement and Mutual Release Agreement with Equivest on July 18, 2003 in which the Company agreed to issue Equivest 25,000 shares in consideration of the settlement of certain claims Equivest had against the Company under the Indemnification Agreement. Accordingly, the Company expensed the shares at market on the date of issuance for $6,250.

On August 8, 2003, the entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JKP and its wholly owned subsidiary, IDC Acquisition I Corp. On August 11, 2003, the Company issued 19,000,000 shares of common stock to the shareholders of JKP in connection with the merger (the “Merger”) contemplated in the Merger Agreement. (see Note 11)

On September 21, 2003 we issued 2,500 shares of Series A Preferred Stock and 250,000 common stock purchase warrants to purchase 250,000 shares of common stock at a price of $.25 per share until August 10, 2008 to Michael Koretsky pursuant to a Settlement Agreement between Mr. Koretsky and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $250,000 note held by Mr. Koretsky. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $34,550.

On September 30, 2003, the Company issued 1,200 shares of Series A Preferred Stock and 120,000 common stock purchase warrants to purchase 120,000 shares of common stock at a price of $.25 per share until August 10, 2008 to James Long pursuant to a Settlement Agreement between Mr. Long and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $120,000 note held by Mr. Long. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $16,584.

On October 31, 2003, the Company issued 1,000 shares of Series A Preferred Stock and 100,000 common stock purchase warrants to purchase 100,000 shares of common stock at a price of $.25 per share until August 10, 2008 to William O. Baxter pursuant to a Settlement Agreement between Mr. Baxter and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $100,000 note held by Mr. Baxter. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $278,710.

On November 12, 2003, the Company issued 3,201,213 shares common stock to Maximum Ventures, Inc. (“MVI”) in connection with the exercise of warrants. These warrants were issued at the time of the Merger under the terms of an Amended and Restated Advisory Agreement (the “Advisory Agreement”), dated June 26, 2003 between JKP and MVI, amended by the First Amendment to Amended and Restated Advisory Agreement, dated July 25, 2003. The Advisory Agreement provided that MVI receive the warrants as part of its compensation for its services as a business advisor.

On November 17, 2003, the Company issued 12,500 shares of Series A Preferred Stock and 1,250,000 common stock purchase warrants to purchase 1,250,000 shares of common stock at a price of $.25 per share until August 10, 2008 to the Robert A. Friedland Trust, a trust whose trustee is our chief executive officer and secretary, Robert A. Friedland, pursuant to a Settlement Agreement between the Robert A. Friedland Trust and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $1,250,000 note held by the Robert A. Friedland Trust. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $4,727,875.

On November 18, 2003, the Company issued 500,000 shares of common stock to Corporate Builders, L.P. (“Corporate Builders”). These shares were issued pursuant to a Consulting Agreement (the “Consulting Agreement”), dated August 5, 2003 among the Company, MVI and Corporate Builders. The Consulting Agreement provided that Corporate Builders would receive these shares of common stock in partial consideration for Corporate Builder’s efforts as a business consultant. The shares were recorded at fair market value on the date of issuance and consulting expenses of $2,250,000 were recorded accordingly.

On November 19, 2003, the Company issued 1,000 shares of Series A Preferred Stock and 100,000 common stock purchase warrants to purchase 100,000 shares of common stock at a price of $.25 per share until August 10, 2008 to Ronald V. Patterson pursuant to a Settlement Agreement between Mr. Patterson and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $100,000 note held by Mr. Patterson. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $278,710.

On November 19, 2003, the Company issued 1,000 shares of Series A Preferred Stock and 100,000 common stock purchase warrants to purchase 100,000 shares of common stock at a price of $.25 per share until August 10, 2008 to Joseph London pursuant to a Settlement Agreement between Mr. London and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $100,000 note held by Mr. London. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $278,710.

On November 25, 2003, the Company issued 250 shares of Series A Preferred Stock and 25,000 common stock purchase warrants to purchase 25,000 shares of common stock at a price of $.25 per share until

August 10, 2008 to Michael Slipyan pursuant to a Settlement Agreement between Mr. Slipyan and the Company. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $25,000 note held by Mr. Slipyan. The Company used the Black-Scholes model to value the warrants which resulted in the recognition of interest expense for $69,678.

At December 31, 2003, the Company had raised, as part of a private placement a net of $2,276,500 from the sale of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (the “Series A Preferred Stock”) and warrants to acquire up to 6,710,000 shares of Common Stock (the “Series A Preferred Warrants”). The Series A Preferred Stock has an initial stated value of $100 per share, which stated value increases at the rate of 8% per year (such stated value, as increased from time to time, is referred to as the “Series A Stated Value”). Each Series A Preferred Share is convertible, from and after 1 day following the date of issuance, at the option of the holder, into such number of shares of Common Stock as is determined by multiplying the Series A Stated Value by 100. Any Series A Preferred Stock issued and outstanding two years after the issue date are to automatically be converted into Common Stock at the conversion price then in effect.

In determining the accounting for the beneficial conversion feature, the Company first allocated the net proceeds of $2,276,500 to the preferred stock and the warrants based on their relative fair values at the Issuance Date, resulting in the full amount being assigned to the preferred stock. The Company then allocated $1,567,500 of the Series A net proceeds to additional paid in capital for the beneficial conversion feature. The beneficial conversion feature will be recognized as a deemed dividend to the preferred shareholders over the two year period in which the preferred shareholders can realize that return. Approximately $191,146 of the beneficial conversion was amortized in 2003.

The Company has the right, in its sole discretion, to redeem, from time to time, any or all of the Series A Preferred Stock; provided that certain conditions are met, including the availability of cash, credit or standby underwriting facilities available to fund the redemption at 100% of the original purchase price.

The Series A Preferred Warrants expire five years from the date of issuance and have an exercise price of $0.25 per share, subject to adjustment under certain circumstances.

Since commencement of operations, Matzuda Corporation, a Nevada corporation (“Matzuda”) loaned monies to JKP to finance productions pursuant to a promissory note (the “Note”). Matzuda is controlled by the Company’s chief executive officer and secretary, Robert A. Friedland. At December 31, 2003, the Company owed Matzuda $2,276,447. On November 13, 2003, the Company paid off $1,250,000 of the Note with the issuance of 12,500 shares of Series A Preferred Stock and 1,250,000 common stock purchase warrants with an exercise price of $.25 to the Robert A. Friedland Trust, a trust with our chief executive officer and secretary, Robert A. Friedland, as trustee.

Weighted average shares outstanding used in the earnings per share calculation were 9,056,142 and 998,787 for the years ended December 31, 2003 and 2002, respectively.

On February 25, 2004 the Company completed a private offering of 31,725 units to 33 persons at a price of $100 per unit or $5,245,000 in the aggregate. Each unit consists of 1 share of Series A Preferred Stock and 100 common stock purchase warrant to purchase 100 share of our common stock at a price of $.25 per share until August 10, 2008.

On January 20, 2004, the Company issued 606,180 shares of our common stock to a consultant upon conversion of 150 shares of Series A Preferred Stock including accrued interest.

On January 23, 2004, the Company issued 250 shares of Series A Preferred Stock and 25,000 common stock purchase warrants to purchase 25,000 shares of our common stock at a price of $.25 per share until August 10, 2008 to a Settlement Agreement. This Settlement Agreement provides that the shares and warrants were issued by the Company for the forgiveness of a $25,000 note.

On March 26, 2004, pursuant to a Convertible Preferred Stock Purchase Agreement between the Company and the purchaser named therein (the “Purchaser”) dated as of March 26, 2004 (the “Purchase Agreement”), the Company issued to the Purchaser, in a private placement, 600,000 shares of Series B Preferred Stock. The offering resulted in gross proceeds to the Company, prior to the deduction of fees and commissions, of approximately $2,825,000.

We have audited the accompanying consolidated balance sheet of Jill Kelly Productions, Inc. as of December 31, 2002 and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2002 and 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the consolidated financial position of Jill Kelly Productions, Inc. as of December 31, 2002 and 2001 and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

F-16 EX-2.1 2 w97143exv2w1.txt STOCK PURCHASE AGREEMENT AMONG TURF HOLDING EXHIBIT 2.1 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of February ___, 2002, by and between Turf Holding Inc. ("Turf"), Ming Capital Enterprises Inc. ("Ming") and Private Investment Company Ltd. ("Private") (Turf, Ming and Private hereinafter each a "Buyer" and collectively, "Buyers") and Alan Schram ("Selling Shareholder"). Buyers and Selling Shareholder are referred to severally herein as a "Party" and jointly as the "Parties". BACKGROUND WHEREAS, Selling Shareholder desires to sell to Buyers, and Buyers desire to purchase from Selling Shareholder the number of shares (the "Shares") of common stock, $.001 par value per share, of IDC Technologies Inc., a Nevada corporation (the "Company"), set forth on Schedule A annexed hereto and made a part hereof, under the terms and conditions as set forth herein. WHEREAS, it is intended that the Selling Shareholder shall resign as an officer and director of the Company and appoint one or more successor directors designated by Buyers on or before ________________, 2002. NOW, THEREFORE, in consideration of the respective covenants contained herein and intending to be legally bound hereby, the Parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES 1.1. SALE OF STOCK. Subject to the terms and conditions set forth in this Agreement, Selling Shareholder shall sell to each Buyer and each Buyer shall purchase severally and not jointly from Selling Shareholder the Shares set forth in Schedule A. 1.2 CONSIDERATION. In consideration for the Shares, each Buyer shall pay to Selling Shareholder one-third of the aggregate sum of One Hundred Twenty Five Thousand Dollars ($125,000.00) ("Consideration") pursuant to the terms and conditions set forth in this Agreement. 1.3 CLOSING. (a) The closing of the purchase and sale of the Shares under this Agreement (the "Closing") shall be held at the offices of KGL in New York, New York at such time as the parties shall mutually agree, but in any event on or before __________, 2002, unless the parties mutually agree to extend the closing deadline to a later date. (b) At the Closing (i) Selling Shareholder shall transfer to Escrow Agent as such term is defined in that certain Escrow Agreement dated February ____, 2002, by and between Selling Shareholder and the Escrow Agent, good and marketable title to the Shares, free and clear of any and all liens, claims, encumbrances and adverse interests of any kind, by delivering to the Escrow Agent the certificates for the Shares in negotiable form, duly endorsed in blank, or with stock transfer powers attached thereto; (ii) Selling Shareholder shall provide Escrow Agent with a etter of instruction ("Letter of Instruction") to the stock transfer agent of the Company in substantially the form shown in Exhibit A; (iii) Buyers shall deliver to Selling Shareholder the Consideration; (iv) Selling Shareholder shall deliver his resignation as an officer and director of the Company and his written appointment of one or more persons designated by Buyers as successor directors; (v) Selling Shareholder shall cause to be made available the books and records of the Company, to Buyers; and (vi) Selling Shareholder shall furnish the information delineated in Exhibit B regarding the Company's principal independent accountants. At any time and from time to time after the Closing, the Parties shall duly execute, acknowledge and deliver all such further assignments, conveyances, instruments and documents, and shall take such other action consistent with the terms of this Agreement to carry out the transactions contemplated by this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLING SHAREHOLDER To the best of his knowledge, Selling Shareholder hereby represents and warrants to Buyers as follows: 2.1. CORPORATE. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. The Company is qualified to do business as a foreign corporation in any jurisdiction where it is required to be so qualified. The certificate of incorporation and bylaws of the Company have been duly adopted and are current, correct and complete. The Company has all necessary corporate power and authority to own, lease and operate its assets and to carry on its business as it is now being conducted. The Company has no subsidiaries. 2 2.2 AUTHORIZATION. Selling Shareholder has the requisite power and authority to execute, deliver and perform this Agreement. This Agreement has been duly executed and delivered by Selling Shareholder and constitutes a valid and binding obligation of Selling Shareholder enforceable against Selling Shareholder in accordance with its terms. 2.3 CAPITALIZATION AND STOCK OWNERSHIP. The total authorized capital stock of the Company consists of 51,500,000 shares of which 50,000,000 are shares of common stock par value $.001 per share, and 1,500,000 are shares of preferred stock par value $5.00 per share. The currently issued and outstanding capital stock of the Company consists of 4,993,726 shares of common stock and no shares of preferred stock. There are no existing options, warrants, calls, commitments or other rights of any character (including conversion or preemptive rights) relating to the acquisition of any issued or unissued capital stock or other securities of the Company. All of the issued and outstanding shares of the Company's common stock are validly issued, fully paid and non-assessable. 2.4 OPTION AGREEMENT. Following the consummation of this Stock Purchase Agreement and the cancellation of 3,840,000 Shares, Selling Shareholder shall own 60,000 Shares. Selling Shareholder has entered into an Option Agreement ("Option Agreement") with each Buyer for the sale of these Shares. 2.5 TAXES. The Company (i) has filed with the appropriate governmental agencies all tax returns required to be filed on or before the date hereof and all such tax returns filed were true, correct and complete in all respects, and (ii) has paid, all taxes shown on such tax returns. The Company has (i) duly paid or caused to be paid all taxes and all taxes shown on tax returns that are or were due, and (ii) provided a sufficient reserve on the balance sheet included in the Financial Statements for the payment of all taxes not yet due and payable. No deficiency in respect of any taxes which has been assessed against the Company remains unpaid, except for taxes being contested in good faith, and Selling Shareholder has no knowledge of any unassessed tax deficiencies or of any audits or investigations pending or threatened against the Company with respect to any taxes. The Company has not extended or waived the application of any applicable statute of limitations of any jurisdiction regarding the assessment or collection of any tax or any tax return. 2.6 LEGAL PROCEEDINGS; COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS. (a) There is no litigation that is pending or, to the knowledge of Selling Shareholder, threatened against the Company. To the knowledge of Selling Shareholder, the Company is and has been in compliance with all applicable laws, including applicable securities laws. To the knowledge of Selling Shareholder the Company has not received any written notice and no other communication has been received to the effect that it is not in compliance with any applicable laws. Selling Shareholder has no reason to believe that any presently existing circumstances are likely to result in violations of any applicable laws. 3 (b) The Company has all material consents, permits, franchises, licenses, concessions, registrations, certificates of occupancy, approvals and other authorizations of governmental authorities (collectively, the "Governmental Permits") required in connection with the operation of its business, all of which are in full force and effect. The Company has complied with all of its Governmental Permits. 2.7 OWNERSHIP OF SHARES. Selling Shareholder is the beneficial owner of the Shares specified as pre-acquisition shares in Exhibit C and has sole management power over the disposition of the portion of the Shares to be sold by him. The Shares are free and clear of any liens, claims, encumbrances, and charges. The Shares have not been sold, conveyed, encumbered, hypothecated or otherwise transferred by Selling Shareholder except pursuant to this Agreement. Selling Shareholder has the legal right to enter into and to consummate the transactions contemplated hereby and otherwise to carry out his obligations hereunder. 2.8 NO CONFLICTS. The execution, delivery and performance of this Agreement by Selling Shareholder and the consummation by Selling Shareholder of the transactions contemplated hereby does not and will not (i) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Selling Shareholder is a party, or (ii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which Selling Shareholder or the Company are subject (including federal, state and other applicable securities laws and regulations). 2.9 INDEBTEDNESS. Other than as shown on the Balance Sheet dated ___________ included in Exhibit D fiscal year ended December 31, 2001, the Company has incurred no (i) indebtedness for borrowed money or for the deferred purchase price of property or services, (ii) indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by the Company (even though the rights and remedies of the Company or lender under such agreement in the event of default are limited to repossession or sale of such property), (iii) obligations under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which the Company is liable as lessee. 2.10 BANK ACCOUNTS. Exhibit F sets forth a list of all of the Company's bank accounts and the authorized signatories thereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH BUYER Each Buyer hereby represents and warrants to the Selling Shareholder as follows: 3.1 CORPORATE. Each Buyer is a company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed. 4 3.2 AUTHORIZATION. Each Buyer has the requisite power and authority to execute, deliver and perform this Agreement. Such execution, delivery and performance by each Buyer has been duly authorized by all necessary company action. This Agreement has been duly executed and delivered by each Buyer and constitutes a valid and binding obligation of each Buyer enforceable against each Buyer jointly or severally in accordance with its terms. 3.3 NO CONFLICTS. The execution, delivery and performance of this Agreement by each Buyer and the consummation by each Buyer of the transaction contemplated hereby does not and will not (i) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which each Buyer is a party, or (ii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which any of the Buyers is subject (including federal and state securities laws and regulations). 3.4 INVESTMENT REPRESENTATIONS. (a) None of the Buyers are underwriters. Each Buyer is acquiring the Shares from Selling Shareholder solely for investment and not with a view to, or for, resale in connection with any distribution; (b) Each Buyer understands the speculative nature of the purchase of the Shares and confirms that the Shares are suitable and consistent with each Buyer's investment program and that Buyer's financial position enables it to bear the risk of the investment, and that there may not be any public market for the Shares purchased herein; (c) Each Buyer understands that the Shares constitute "restricted securities" as that term is defined in Rule 144 under the Securities Act of 1933, and understands that the Shares may not be sold in the absence of an effective registration or in reliance upon an exemption from registration, the availability of which is uncertain; (d) Each Buyer has had the opportunity to ask questions of the Company and Selling Shareholder and to receive additional information from the Company and Selling Shareholder to the extent that the Company and Selling Shareholder possessed such information, or could acquire it without unreasonable effort or expense to the extent necessary to evaluate the merits and risks of any investment in the Company. Further, each Buyer has been given: (1) All material books and records of the Company; and (2) all material contracts and documents relating to the proposed transaction. ARTICLE IV INDEMNIFICATION 4.1 INDEMNIFICATION. (a) Selling Shareholder shall indemnify and hold harmless each Buyer, each Buyer's officers, directors, agents and employees to the fullest extent permitted by applicable law, 5 from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to a breach or breaches of any representation, warranty, covenant or agreement by Selling Shareholder, as expressly set forth in this Agreement. For a period of one year from the date hereof, the breach or breaches of any representation, warranty, covenant or agreement by Selling Shareholder shall result in the exercise price of the Option Shares as defined in the Option Agreement being reduced to $.01 per share. (b) Buyers shall indemnify and hold harmless Selling Shareholder, and his agents to the fullest extent permitted by application law, from and against any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by Buyers, as expressly set forth in this Agreement. 4.2 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by an indemnified party of notice of the commencement of any action asserting a claim based on any cause enumerated herein, the indemnified party shall, if it claims the benefits of indemnification pursuant to this Article IV with respect to such action, notify the indemnifying party of the commencement thereof. Upon receipt of such notice, the indemnifying party shall have the option of either assuming the defense of such action (and the cost thereof) with counsel reasonably satisfactory to both the indemnified and the indemnifying parties or participating in the defense of such action at the sole expense of the indemnifying party. In the event of the indemnifying party's assumption of the defense of such action, counsel selected by the indemnified party may at the election of the indemnified party participate in any such defense, at the sole expense of the indemnified party. No settlement or compromise to be paid by the indemnifying party shall be entered into without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. 4.3 REMEDIES NOT EXCLUSIVE. The remedies provided in this Agreement shall not be exclusive of any other rights or remedies available to one party against the other, either at law or in equity. ARTICLE V CONDITIONS PRECEDENT TO CLOSING 5.1 BUYERS' OBLIGATION TO CLOSE. Buyers shall not be obligated to close this transaction unless: (a) Each Buyer is satisfied with the condition of the Company following a due diligence review of the books, records, business and affairs of the Company. The Company agrees to provide each Buyer and their agents complete access to all of the Company's books, records and personnel for purposes of conducting Buyers' investigation. (b) There are no material liabilities on the books of the Company, other than as disclosed in the Company's financial statements for the fiscal year ended December 31, 2001, and there are no undisclosed or contingent liabilities. 6 (c) There have been no changes in the Company's business or capitalization between the date of signing this Agreement and the date of Closing, other than as required herein. (d) All representations, covenants and warranties of Selling Shareholder contained in this Agreement shall be true and correct on and as of the Closing Date with the same effect as though the same had been made on and as of the Closing Date. Any and all schedules and exhibits attached hereto or provided to each Buyer in conjunction with execution of this Agreement shall likewise be true and correct as of the Closing Date, and if there are any changes therein and such changes are approved by each Buyer, the same shall be amended or supplemented as appropriate, so that they shall be true as of the Closing Date. (e) Selling Shareholder shall have performed and satisfied all covenants and conditions required by this Agreement to be performed or satisfied by them on or prior to the Closing Date; and (f) No action or proceedings shall have been instituted or threatened prior to or at the Closing Date before any court or governmental body or authority pertaining to the acquisition by Buyers of the Shares to be transferred hereunder, the result of which could prevent or make illegal the consummation of such transfer. 5.2 SELLING SHAREHOLDER'S OBLIGATION TO CLOSE. Selling Shareholder shall not be obligated to close this transaction unless: (a) Each Buyer shall have delivered the funds required for Closing as required pursuant to Section 1.2 hereof; and (b) Each Buyer shall have caused the Company to execute an anti-dilution agreement in a form which is mutually acceptable to Buyers and to Selling Shareholder, pursuant to which Selling Shareholder will be protected from having his ownership percentage reduced to no less than 1% of the issued and outstanding shares of the Company at any time prior and through the completion by the Company of a merger or business acquisition transaction. Buyers and Selling Shareholder will each be diluted on a pro rata basis for any additional stock issuances after the completion of said merger or business acquisition transaction. ARTICLE VI GENERAL MATTERS 6.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, legal representatives, successors and assigns of the parties. 6.2 GOVERNING LAW/VENUE. This Agreement shall be governed by and construed under the laws of the State of New York as applied to agreements entered into and to be performed entirely within New York. Any dispute or controversy concerning or relating to this Agreement shall be exclusively resolved in the federal or state courts located in the City, County and State of New York, USA. 7 6.3 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. 6.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.5 NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or sent by overnight delivery by a nationally recognized overnight courier upon proof of sending thereof and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by written notice to the other parties. 6.6 EXPENSES. Each of the Parties shall bear his or its own costs and expenses incurred with respect to the negotiation, execution, delivery, and performance of this Agreement. 6.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Buyers and Selling Shareholder. 6.8 ATTORNEY'S FEES. Notwithstanding anything herein to the contrary, in the event of a default by either party of its duties and obligations under this Agreement, the non-defaulting Party shall be entitled to recover from the defaulting Party, in addition to all other damages and relief, all of its reasonable attorney's fees and costs, in addition to the reasonable costs of any expert witnesses. 6.9 ENTIRE AGREEMENT. This Agreement represents and constitutes the entire agreement and understanding between the parties with regard to the subject matter contained herein. All prior agreements, understandings and representations are hereby merged into this Agreement. 6.11 SURVIVAL. The representations and warranties of Selling Shareholder and Buyers and the agreements and covenants of the parties contained in this Agreement, including without limitation the indemnification provisions set forth in Article IV, shall survive the Closing for a period of 12 months. 8 IN WITNESS WHEREOF, this Agreement of nine (9) pages has been executed by the Parties hereto as of the day and year first written above. SELLING SHAREHOLDER: /s/ Alan Schram --------------------- Alan Schram BUYERS: MING CAPITAL ENTERPRISES INC. Turf Holding Inc. By: /s/ Anthony A. McKinney By: /s/ Marco Montanari ---------------------------- ---------------------------- Anthony A. McKinney Marco Montanari President and Director President and Director Private Investment Company Ltd. By: /s/ Martin Christen ---------------------------- Martin Christen President and Director SCHEDULE A

EX-2.2 3 w97143exv2w2.txt AGREEMENT & PLAN OF MERGER DATED AUGUST 8, 2003 EXHIBIT 2.2 ================================================================================ AGREEMENT AND PLAN OF MERGER AMONG IDC TECHNOLOGIES, INC., A NEVADA CORPORATION, IDC ACQUISITION I CORP., A DELAWARE CORPORATION AND JILL KELLY PRODUCTIONS, INC., A DELAWARE CORPORATION ================================================================================ LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT AND PLAN OF MERGER SCHEDULES Schedule 4.1(a) Company and Acquisition Subsidiaries Schedule 4.1(b) Company and Acquisition Conflicts Schedule 4.1(c) Company Capitalization Schedule 4.1(d) Company Financial Statements Schedule 4.1(g) Issuance of Company Securities Schedule 4.1(i) Company Taxes Schedule 4.1(l) Company and Acquisition Legal Proceedings Schedule 4.1(m) Company and Acquisition Changes or Events Schedule 4.2(d) JKP Financial Statements Schedule 4.2(i) JKP Legal Proceedings Schedule 4.2(g) JKP Liabilities Schedule 4.2(m) JKP Compliance with Law EXHIBITS Exhibit 6.1(a) Company Certified Resolutions Exhibit 6.1(a2) Acquisition Certified Resolutions Exhibit 6.1(b) Opinion of Counsel to the Company and Acquisition Exhibit 6.1(d) Company Officer's Certificate Exhibit 6.1(d2) Acquisition Officer's Certificate Exhibit 6.2(a) JKP Certified Resolutions Exhibit 6.2(b) Opinion of JKP counsel Exhibit 6.2(d) JKP Officer's Certificate 2 AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 8, 2003, by and between IDC Technologies, Inc., a Nevada corporation (the "Company"), IDC Acquisition I Corp., a Delaware corporation ("Acquisition") and Jill Kelly Productions, Inc., a Delaware corporation ("JKP"). RECITALS WHEREAS, the Company and JKP desire to merge Acquisition with and into JKP whereby JKP shall be the surviving entity pursuant to the terms and conditions set forth herein and whereby the transaction shall qualify as a tax free exchange pursuant to Section 351 of the Internal Revenue Code (the "IRC"); WHEREAS, in furtherance of such combination, the Boards of Directors of the Company, Acquisition, and JKP have each approved the merger of Acquisition with and into JKP (the "Merger"), upon the terms and subject to the conditions set forth herein, in accordance with the applicable provisions of the Delaware General Corporation Law (the "DGCL"); and WHEREAS, the shareholder of JKP desire to exchange all of its shares of the capital stock of JKP (the "JKP Capital Stock") for shares of the capital stock of the Company (the "Company Capital Stock") as a tax free exchange pursuant to Section 351 of the IRC. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. At the Effective Time (as hereinafter defined) and subject to and upon the terms and conditions of this Agreement and the DGCL Acquisition shall be merged with and into JKP pursuant to the Merger. Following the Merger, JKP shall continue as the surviving corporation (the "Surviving Corporation") and the separate corporate existence of Acquisition shall cease. As part of the Merger and as more fully described in Section 2.1, (i) the 19,000 issued and outstanding shares of the JKP Common Stock shall be exchanged for Company Common Stock at the Exchange Ratio and (ii) each share of Acquisition's issued and outstanding of common stock, par value $.001 per share (the "Acquisition Common Stock"), shall be converted into one validly issued, fully paid and non-assessable share of common stock, $.001, of the Surviving Corporation (the "Surviving Corporation Common Stock"). 1.2 Effective Time. The Merger shall be consummated as promptly as practicable after satisfaction of all conditions to the Merger set forth herein, by filing with the Secretary of State of the State of Delaware a certificate of merger (the "Certificate of Merger"), and all other appropriate documents, executed in accordance with the relevant provisions of the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger. The time of such filing shall be referred to herein as the "Effective Time." 3 1.3 Effects of the Merger. At the Effective Time, all the rights, privileges, immunities, powers and franchises of Acquisition and JKP and all property, real, personal and mixed, and every other interest of, or belonging to or due to each of Acquisition and JKP shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of Acquisition and JKP, shall become the debts, liabilities, obligations and duties of the Surviving Corporation without further act or deed, all in the manner and to the full extent provided by the DGCL. Whenever a conveyance, assignment, transfer, deed or other instrument or act is necessary to vest any property or right in the Surviving Corporation, the directors and officers of the respective constituent corporations shall execute, acknowledge and deliver such instruments and perform such acts, for which purpose the separate existence of the constituent corporations and the authority of their respective directors and officers shall continue, notwithstanding the Merger. 1.4 Certificate of Incorporation. The Certificate of Incorporation of JKP, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation and thereafter may be amended or repealed in accordance with its terms and applicable law. 1.5 By-Laws. At the Effective Time and without any further action on the part of Acquisition and JKP, the By-laws of JKP shall be the By-laws of the Surviving Corporation and thereafter may be amended or repealed in accordance with their terms or the Certificate of Incorporation of the Surviving Corporation and as provided by law. 1.6 Directors. The directors of JKP at the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 1.7 Officers. The officers of JKP at the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly appointed and qualified, as the case may be. 1.8 Tax-Free Reorganization. The parties intend that the Merger shall be treated as a tax-free exchange pursuant to Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"). No party shall take any action or fail to take any action that would adversely affect the treatment of the Merger as a tax-free exchange. ARTICLE II CONVERSION OF JKP SHARES 2.1 Exchange and Cancellation of JKP Common Stock. (a) Subject to the provisions of Sections 2.2 and 2.3, each share of JKP Common Stock (the "JKP Common Stock Shares") issued and outstanding immediately prior to the Effective Time (other than shares canceled in accordance with Section 2.1(b), shall, be converted equal into 1,000 (the "Exchange Ratio") validly issued, fully paid and nonassessable shares of Company Common Stock (the "Company Common Stock Shares"). As of the Effective Time, each 4 JKP Common Stock Share shall no longer be outstanding and shall automatically be canceled and retired, and each holder of a certificate representing any JKP Common Stock Share shall cease to have any rights with respect thereto other than the right to receive Company Common Stock Shares to be issued in consideration therefor upon the surrender of such certificate. (b) Each share of JKP Capital Stock held in the treasury of JKP and each share of JKP Capital Stock owned by Acquisition or Company shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto. (c) Each issued and outstanding share of Acquisition Common Stock shall be converted into one validly issued, fully paid and nonassessable share of Surviving Corporation Common Stock. 2.2 Adjustment of the Exchange Ratio. In the event that, prior to the Effective Time, any stock split, combination, reclassification or stock dividend with respect to the Company Common Stock, any change or conversion of Company Common Stock into other securities or any other dividend or distribution with respect to the Company Common Stock (other than regular quarterly dividends) should occur or, if a record date with respect to any of the foregoing should occur, appropriate and proportionate adjustments shall be made to the Exchange Ratio, and thereafter all references to an Exchange Ratio shall be deemed to be to such Exchange Ratio as so adjusted. 2.3 No Fractional Shares. No certificates or script representing fractional shares of Company Common Stock shall be issued upon the surrender for exchange of certificates and such fractional share shall not entitle the record or beneficial owner thereof to vote or to any other rights as a stockholder of the Company. The number of shares of Company Common Stock to be issued shall be rounded up to the nearest whole share. 2.4 Further Assurances. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either JKP or Acquisition or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either JKP or Acquisition, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of JKP or Acquisition, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of JKP or Acquisition, as applicable, and otherwise to carry out the purposes of this Agreement. 2.5 MVI Warrants. Pursuant to Section 3 of that certain Amended and Restated Exclusive Advisory Agreement (the "Advisory Agreement") by and between JKP and Maximum Ventures Inc. ("MVI"), MVI will receive warrants for the purchase of 20% of the shares of the Company Common Stock held by the former shareholders of JKP immediately following the Effective Time at an exercise price of $0.001 per share. MVI shall be a third party beneficiary of this Agreement. 5 ARTICLE III CLOSING Subject to satisfaction of the conditions to closing set forth in this Agreement and unless this Agreement is otherwise terminated in accordance with the provisions contained herein, the closing of the Merger and the Contemplated Transactions (the "Closing") shall take place at the offices of Gottbetter & Partners, LLP, 630 Third Avenue, New York, New York as promptly as practicable after satisfaction of the conditions set forth in this Agreement, which in no event shall be more than ten days from the date of (the "Closing Date"). ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of the Company and Acquisition. Each of Acquisition and the Company hereby make the following representations and warranties to JKP, all of which shall survive the Closing: (a) Organization and Good Standing. Acquisition is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it owns or uses, and to perform all its obligations under this Agreement and the Applicable Contracts. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it owns or uses, and to perform all its obligations under this Agreement. Company has no subsidiaries other than Acquisition and as set forth on Schedule 4.1(a) hereto (individually, a "Subsidiary" and collectively, the "Subsidiaries"). Acquisition has no Subsidiaries. Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company, Acquisition and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. (b) Authority; No Conflict. i. This Agreement and any agreement executed in connection herewith constitute the legal, valid and binding obligations of the Company and Acquisition, enforceable against the Company and Acquisition in accordance with their respective terms, except as such enforceability is limited by bankruptcy, insolvency and other laws affecting the rights of creditors and by general equitable principles. The Company has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and any agreement executed in connection herewith and to perform its obligations hereunder and thereunder. 6 ii. Except as set forth in Schedule 4.1(b) hereto, neither the execution and delivery of this Agreement by each of the Company and Acquisition, nor the consummation or performance by each of any of its respective obligations contained in this Agreement or in connection with the Contemplated Transactions will directly or indirectly (with or without notice or lapse of time): a. contravene, conflict with or result in a violation of (x) any provision of the Organizational Documents of the Company or Acquisition, as the case may be, or (y) any resolution adopted by the board of directors or the shareholders of the Company or Acquisition, as the case may be; b. contravene, conflict with or result in a violation of, or give any governmental body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or Acquisition or any of the assets owned or used by the Company or Acquisition may be subject; c. contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, this Agreement, or any Applicable Contract; d. result in the imposition or creation of any material encumbrance upon or with respect to any of the material assets owned or used by the Company or Acquisition; e. cause the Company or Acquisition to become subject to, or to become liable for the payment of, any tax; or f. cause any of the assets owned by the Company or Acquisition to be reassessed or revalued by any taxing authority or other governmental body, except in connection with the transfer of real estate pursuant to this Agreement or the Contemplated Transactions. (c) Capitalization. The entire authorized Company Capital Stock consists of 300,000,000 shares of Company Common Stock, of which 1,048,787 shares are issued and outstanding, 30,000 shares of Series A Preferred Stock, par value $.001 per share, of which no shares are issued and outstanding and 1,000,000 shares of blank check preferred stock of which no shares are issued and outstanding. There are no other outstanding equity securities of the Company. No legend or other reference to any purported encumbrance appears upon any certificate representing the Company Capital Stock other than a standard Securities Act legend. All of the issued and outstanding shares of the Company Capital Stock have been duly authorized and validly issued and are fully paid and non-assessable. Except for this Agreement and as disclosed in Schedule 4.1(c) hereto, there are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any 7 shares of the Company Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of the Company Common Stock, or securities or rights convertible or exchangeable into shares of the Company Common Stock. None of the outstanding Company Capital Stock was issued in violation of the Securities Act or any other legal requirement. (d) Assets and Liabilities. The Company has no assets or liabilities that in the aggregate are material to the Surviving Corporation. (e) SEC Filings. The Company has filed all reports required to be filed with the SEC under the rules and regulations of the SEC. (f) Absence of Material Adverse Change. Since the December 31, 2002, there have been no events, changes or occurrences which have had or are reasonably likely to have, individually or in the aggregate, a material adverse effect on the Company's business or financial condition. (g) Issuance of Company Securities. The Company Common Stock Shares when issued in accordance with this Agreement shall be duly authorized, validly issued, fully-paid and nonassessable. Except as set forth in Schedule 4.1(g) hereto, there is no equity line of credit or convertible security or instrument outstanding of the Company; provided, however, that nothing contained in this Section 4.1(g) shall be deemed to permit any equity line of credit or convertible security or instrument of the Company. (h) Undisclosed Liabilities. Except as disclosed in any Schedule to this Agreement, none of the Company, Acquisition or the Subsidiaries has any obligations or liabilities (contingent or otherwise) in an amount in excess of Five Thousand Dollars ($5,000) in the aggregate. (i) Taxes. i. The Company has filed or caused to be filed on a timely basis all tax returns that are or were required to be filed by it pursuant to applicable Legal Requirements. The Company has paid, or made provision for the payment of, all taxes that have or may have become due pursuant to those tax returns or otherwise, or pursuant to any assessment received by the Company, except such taxes, if any, as are listed in Schedule 4.1(i) hereto and are being contested in good faith. ii. All tax returns filed by the Company are true, correct and complete in all material respects. (j) Employee Benefits. The Company does not sponsor or otherwise maintain a "pension plan" within the meaning of Section 3(2) of ERISA or any other retirement plan other than the Company Profit Sharing and 401(k) Plan and Trust that is intended to qualify under Section 401 of the Code, nor do any unfunded liabilities exist with respect to any employee benefit plan, past or present. No employee benefit plan, any trust created thereunder or any trustee or administrator thereof has engaged in a "prohibited transaction," as defined in Section 4975 of the Code, which may have a material adverse effect on the condition, financial or otherwise, of the Company. 8 (k) Governmental Authorizations. The Company, Acquisition and the Subsidiaries have all permits that are or will be legally required to enable them to conduct their business in all material respects as now conducted. (l) Legal Proceedings; Orders. i. Except as set forth in Schedule 4.1(l) hereto, there is no material pending Proceeding: a. that has been commenced by or against the Company, Acquisition or the Subsidiaries, or any of the assets owned or used by, the Company, Acquisition or the Subsidiaries; or b. that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any Contemplated Transactions. ii. Except as set forth in Schedule 4.1(l) hereto: a. there is no material Order to which the Company or the Subsidiaries, or any of the assets owned or used by the Company, Acquisition or the Subsidiaries, is subject; and b. no officer, director, agent, or employee of the Company or Acquisition is subject to any material Order that prohibits such offer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to the business of the Company or Acquisition, as the case may be. (m) Absence of Certain Changes and Events. Except as set forth in Schedule 4.1(m) hereto, since December 31, 2002, the Company and the Subsidiaries and Acquisition, since the date of its inception, have conducted their business only in the Ordinary Course of Business, there has not been any material adverse effect on the Company's, Acquisition's or the Subsidiaries' business or operations, and there has not been any: i. change in the authorized or issued Company Capital Stock or the authorized or issued capital stock of Acquisition and the Subsidiaries; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any equity lines of credit, security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition or payment of any dividend or other distribution or payment in respect of shares of capital stock; ii. amendment to the Organizational Documents of the Company, Acquisition or the Subsidiaries; iii. damage to or destruction or loss of any material asset or property of the Company, Acquisition or the Subsidiaries, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Company, Acquisition or the Subsidiaries; 9 iv. receipt of notice that any of their substantial customers have terminated or intends to terminate their relationship, which termination would have a material adverse effect on their financial condition, results or operations, business assets or properties; v. entry into any transaction other than in the Ordinary Course of Business; vi. entry into, termination of, or receipt of written notice of termination of any material (i) license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) contract or transaction; vii. sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company, Acquisition or the Subsidiaries or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, Acquisition or the Subsidiaries; viii. cancellation or waiver of any claims or rights with a value to the Company in excess of $10,000; ix. material change in the accounting methods used by the Company, Acquisition or the Subsidiaries; or x. agreement, whether oral or written, by the Company, Acquisition or the Subsidiaries to do any of the foregoing. (n) No Default or Violation. The Company, Acquisition and the Subsidiaries (i) are in material compliance with all applicable terms and requirements of each material contract under which they have or had any obligation or liability or by which they or any of the assets owned or used by them is or was bound and (ii) is not in material violation of any Legal Requirement. (o) Certain Payments. Since December 31, 2002 neither the Company, Acquisition or the Subsidiaries, nor any director, officer, agent or employee of the Company or the Subsidiaries has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the Company, Acquisition or the Subsidiaries or (iv) in violation of any Legal Requirement, or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company, Acquisition or the Subsidiaries. (p) Brokers or Finders. Except for the fees referenced in the Advisory Agreement, the Company and Acquisition have not incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 4.2 Representations and Warranties of JKP. JKP hereby makes the following representations and warranties to the Company, all of which shall survive the Closing: 10 (a) Organization and Good Standing. JKP is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full power and authority to conduct its businesses as it is now being conducted, to own or use the properties and assets that it owns or uses, and to perform all of its obligations under this Agreement. (b) Authority; No Conflict. i. This Agreement and any agreement executed in connection herewith have been duly authorized by all required action of JKP and constitute the legal, valid and binding obligations of JKP, enforceable against JKP in accordance with their respective terms. JKP has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and such other agreements and to perform its obligations hereunder and thereunder. ii Neither the execution and delivery of this Agreement by JKP, nor the consummation or performance by it of any of its obligations contained in this Agreement or in connection with the Contemplated Transactions by the Company will, directly or indirectly (with or without notice or lapse of time): a. contravene, conflict with or result in a violation of (x) any provision of the Organizational Documents of JKP or (y) any resolution adopted by the board of directors or the shareholders of JKP; b. contravene, conflict with or result in a violation of, or give any governmental body or other Person the right to challenge any of the t Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which JKP or any of the assets owned or used by JKP may be subject; c. contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, this Agreement or any Applicable Contract; d. result in the imposition or creation of any material encumbrance upon or with respect to any of the material assets owned or used by JKP; e. cause JKP to become subject to, or to become liable for the payment of, any tax; or f. cause any of the assets owned by JKP to be reassessed or revalued by any taxing authority or other governmental body, except in connection with the transfer of real estate pursuant to this Agreement or the Contemplated Transactions. iii. JKP is not required to obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 11 (c) Capitalization. The entire authorized JKP Capital Stock consists of 20,000 shares of JKP Common Stock, of which 19,000 shares are issued and outstanding. With the exception of the JKP Common Stock Shares, there are no other outstanding equity securities of the Company. No legend or other reference to any purported encumbrance appears upon any certificate representing the JKP Common Stock Shares. The JKP Common Stock Shares have been duly authorized and validly issued and are fully paid and non-assessable. There are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, or, securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of JKP Common Stock, or contracts, commitments, understandings, or arrangements by which JKP is or may become bound to issue additional shares of JKP Common Stock, or securities or rights convertible or exchangeable into shares of JKP Common Stock. To the knowledge of JKP, none of the outstanding JKP Common Stock Shares were issued in violation of the Securities Act or any other legal requirement. JKP does not own, and has no contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. (d) Financial Statements. JKP has delivered to the Company a balance sheet of JKP as at December 31, 2002 (the "JKP Balance Sheet"), and a statement of operations for the period from inception to December 31, 2002. Such financial statements are set forth in Schedule 4.2(d) hereto and fairly present the financial condition and the results of operations of JKP as at December 31, 2002 of and for the period then ended. (e) Absence of Material Adverse Change. Since the date of the most recent JKP Balance Sheet provided under Section 4.2(d) hereof, there have been no events, changes or occurrences which have had or are reasonably likely to have, individually or in the aggregate, a material adverse effect on JKP. (f) Books and Records. The books of account, minute books, stock record books, and other records of JKP, all of which have been made available to the Company, are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of JKP contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders, the Board of Directors, and any committees of the Board of Directors of JKP. (g) No Undisclosed Liabilities. There are no material liabilities of JKP, whether absolute, accrued, contingent, or otherwise, other than: i. Liabilities set forth on, reserved against or reflected in the JKP Balance Sheet; ii. Liabilities disclosed in this Agreement, the Exhibits attached hereto, and in Schedule 4.2(g) or lists furnished pursuant hereto; or iii. Liabilities incurred in the Ordinary Course of Business since the JKP Balance Sheet date, none of which had or is likely to have a material adverse effect on the business, financial condition or results of operations of JKP, and none of which is required to be recorded 12 under GAAP in respect of any period prior to the JKP Balance Sheet date, and none of which is in respect of a material claim for damages, fines or other legal relief. (h) Title to Properties; Encumbrances. JKP has good and marketable title to all the properties, interest in such properties and assets, real and personal, reflected in the JKP Balance Sheet or acquired after the date of such balance sheet (except properties, interests and assets sold or otherwise disposed of since such date, in the Ordinary Course of Business), free and clear of all mortgages, liens, pledges, charges or encumbrances except (i) mortgages and other encumbrances referred to in such balance sheet, (ii) a factor's lien on JKP's accounts receivable held by Summit Financial Resources, (iii) liens for current taxes not yet due and payable and (iv) such imperfections of title and easements as do not materially detract from or interfere with the present use of the properties subject thereto or affected thereby, or otherwise materially impair the value of such properties or the present business operations at such properties. (i) Legal Proceedings; Orders. i. Except as set forth in Schedule 4.2(i) hereto, there is no material pending Proceeding: a. that has been commenced or threatened by or against JKP or any of its officers and directors as such or that otherwise relates to or may affect the business of, or any of the assets owned or used by, JKP; or b. that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any Contemplated Transactions. ii. Except as set forth in Schedule 4.2(i) hereto: a. there is no material Order to which JKP, or any of the assets owned or used by JKP, is subject; and b. no officer, director, agent, or employee of JKP is subject to any material Order that prohibits such offer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to the business of JKP. (j) Brokers or Finders. Except for the fees referenced in the Advisory Agreement, JKP has incurred no liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. (k) No Default or Violation. To the knowledge of JKP, JKP (i) is in material compliance with all applicable terms and requirements of each contract under which JKP has or had any obligation or liability or by which JKP or any of the assets owned or used by JKP is or was bound and (ii) is not in violation of any Legal Requirement. 13 (l) Taxes. i. JKP has filed or caused to be filed on a timely basis all tax returns that are or were required to be filed by it pursuant to applicable Legal Requirements. JKP has paid, or made provision for the payment of, all taxes that have or may have become due pursuant to those tax returns or otherwise, or pursuant to any assessment received by JKP, except such taxes, if any, as are listed in Schedule 4.2(l) hereto and are being contested in good faith as to which adequate reserves have been provided in the JKP Balance Sheets. ii. All tax returns filed by JKP are true, correct and complete in all material respects. (m) Absence of Certain Changes and Events. Except as set forth in Schedule 4.2(m) hereto, since the date of the JKP Balance Sheet, JKP has conducted its business only in the Ordinary Course of Business, there has not been any material adverse effect on JKP's business or operations, and there has not been any: i. grant of any stock option or right to purchase shares of capital stock of JKP; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition or payment of any dividend or other distribution or payment in respect of shares of capital stock; ii. amendment to the Organizational Documents of JKP; iii. damage to or destruction or loss of any asset or property of JKP, whether or not covered by insurance or any other event or circumstance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of JKP; iv. receipt of notice that any of its substantial customers have terminated or intends to terminate their relationship, which termination would have a material adverse effect on its financial condition, results or operations, business assets or properties; v. entry into any transaction other than in the Ordinary Course of Business; vi. entry into, termination of, or receipt of written notice of termination of any material (i) license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) contract or transaction; vii. sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of JKP or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of JKP; viii. cancellation or waiver of any claims or rights with a value to JKP in excess of $10,000; ix. material change in the accounting methods used by JKP; 14 x. increase in salaries or bonuses or retention of any new consultant, except for MVI, or executive; or xi. agreement, whether oral or written, by JKP to do any of the foregoing. (n) Compliance with Law. Except as set forth in Schedule 4.2(m) hereto: (a) JKP has complied in all material respects with, and is not in violation of, in any material respect, any Law to which it or its business is subject; and (b) JKP has obtained all licenses, permits, certificates or other governmental authorizations (collectively "Authorizations") necessary for the ownership or use of its assets and properties or the conduct of its business other than Authorizations (i) which are ministerial in nature and which JKP has no reason to believe would not be issued in due course and (ii) which, the failure of JKP to possess, would not subject JKP to penalties other than fines not to exceed $20,000 in the aggregate ("Immaterial Authorizations"); and (c) JKP has not received written notice of violation of, or knows of any material violation of, any Laws to which it or its business is subject or any Authorization necessary for the ownership or use of its assets and properties or the conduct of its business (other than Immaterial Authorizations). (d) Environmental Laws. JKP has not received any notice or claim (and is not aware of any facts that would form a reasonable basis for any claim), or entered into any negotiations or agreements with any other Person, and, to the best knowledge of JKP, JKP is not the subject of any investigation by any governmental or regulatory authority, domestic or foreign, relating to any material or potentially material liability or remedial action under any Environmental Laws. There are no pending or, to the knowledge of JKP, threatened, actions, suits or proceedings against JKP or any of its properties, assets or operations asserting any such material liability or seeking any material remedial action in connection with any Environmental Laws. (e) Intellectual Property. (i) JKP owns, or is validly licensed or otherwise has the right to use, all patents, and patent rights ("Patents") and all trademarks, trade secrets, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (the "Intellectual Property Rights"), in each case, which are material to the conduct of the business of JKP. (ii) To the best knowledge of JKP, JKP has not interfered with, infringed upon (without license to infringe), misappropriated or otherwise come into conflict with any Patent of any other Person. JKP has not interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property Rights of any other Person. JKP has not received any written charge, complaint, claim, demand or notice alleging any such interference, infringement, is appropriation or violation (including any claim that JKP must license or refrain from using any Patents or Intellectual Property Rights of any other Person) which has not been 15 settled or otherwise fully resolved. To the best knowledge of JKP, no other Person has interfered with, infringed upon (without license to infringe), misappropriated or otherwise come into conflict with any Patents or Intellectual Property Rights of JKP. (f) Employees. (a) To the knowledge of JKP, JKP has complied in all respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages and hours, other than instances of non-compliance which, individually or in the aggregate, could not reasonably be expected to result in penalties other than fines in an amount not exceeding $50,000 in the aggregate, and JKP is not liable for any arrears of wages or any taxes or penalties for failure to comply with any such Laws; (b) JKP believes that JKP's relations with its employees is satisfactory; (c) there are no controversies pending or, to the best knowledge of JKP, threatened between JKP and any of its employees, which controversies have or could reasonably be expected to have a material adverse effect; (d) JKP is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by JKP, nor, to the best knowledge of JKP, are there any activities or proceedings of any labor union to organize any such employees; (e) to the knowledge of JKP, there are no unfair labor practice complaints pending against JKP before the National Labor Relations Board or any current union representation questions involving employees of JKP; (f) there is no strike, slowdown, work stoppage or lockout existing, or, to the best knowledge of JKP, threatened, by or with respect to any employees of JKP; (g) to the knowledge of JKP, no charges are pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices with respect to JKP; (h) there are no claims pending against JKP before any workers' compensation board; and (i) JKP has not received notice that any Federal, state, local or foreign agency responsible for the enforcement of labor or employment laws intends to conduct an investigation of or relating to JKP and, to the best knowledge of JKP, no such investigation is in progress. (g) Employee Benefit Plans. There no "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or "employee welfare benefit plans" (as defined in Section 3(1)of ERISA) maintained, or contributed to, by JKP for the benefit of any current or any former employees, officers or directors of JKP. ARTICLE V COVENANTS 5.1 Covenants of the Company and Acquisition. (a) Conduct of Business. Prior to and through the Closing Date, each of the Company and Acquisition shall: i. conduct its business only in the Ordinary Course of Business; ii. use its commercially reasonable efforts to preserve intact the current business organization of the Company and Acquisition, as the case may be, keep available the 16 services of the current officers, employees and agents of the Company and Acquisition, as the case may be, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with the Company and Acquisition, as the case may be; iii. not pay, incur or declare any dividends or distributions with respect to its shareholders or amend its Certificate of Incorporation or By-Laws, without the prior written consent of JKP and MVI; iv. not authorize, issue, sell, purchase or redeem any shares of its capital stock or any options or other rights to acquire ownerships interests without the prior written consent of JKP and MVI; v. not incur any indebtedness for money borrowed or issue and debt securities, or incur or suffer to be incurred any liability or obligation of any nature whatsoever, except those incurred in the Ordinary Course of Business, or cause or permit any material lien, encumbrance or security interest to be created or arise on or in respect of any material portion of its properties or assets; vi. not make any investment of a capital nature either by purchased stock or securities, contribution to capital, property transfer or otherwise, or by the purchase of any property or assets of any other Person; vii. not do any other act which would cause representation or warranty of the Company in this Agreement to be or become untrue in any material respect or that is not in the ordinary course of business consistent with past practice; viii. report periodically to JKP and MVI concerning the status of the business and operations of the Company; and ix. confer with JKP and MVI concerning operational matters of a material nature. (b) Proposals; Other Offers. Commencing on the date of execution of this Agreement through the Closing Date, each of the Company and Acquisition shall not, directly or indirectly (whether through an employee, a representative, an agent or otherwise), solicit or encourage any inquiries or proposals, engage in negotiations for or consent to or enter into any agreement providing for the acquisition of its business. Each of the Company and Acquisition shall not, directly or indirectly (whether through an employee, a representative, an agent or otherwise) disclose any nonpublic information relating to the Company and Acquisition or afford access to any of the books, records or other properties of the Company and Acquisition to any person or entity that is considering, has considered or is making any such acquisition inquiry or proposal relating to the Company's and Acquisition's business. (c) Further Assurances. Prior to the Closing Date, with the cooperation of JKP where appropriate, each of the Company and Acquisition shall use commercially reasonable efforts to: 17 i. promptly comply with all filing requirements which federal, state or local law may impose on the Company or Acquisition, as the case may be, with respect to the Contemplated Transactions by this Agreement; and ii. take all actions necessary to be taken, make any filing and obtain any consent, authorization or approval of or exemption by any governmental authority, regulatory agency or any other third party (including without limitation, any landlord or lessor of the Company and any party to whom notification is required to be delivered or from whom any form of consent is required) which is required to be filed or obtained by the Company or Acquisition in connection with the Contemplated Transactions by this Agreement. (d) Access to Additional Agreements and Information. Prior to the Closing Date, the Company and Acquisition shall make available to JKP and MVI (as well as its shareholders, counsel, accountants and other representatives) any and all agreements, contracts, documents, other instruments and personnel material of the Company's and Acquisition's business, including without limitation, those contracts to which the Company or Acquisition is a party and those by which each of its business or any of the Company's or Acquisition's assets are bound. 5.2 Covenants of JKP. (a) Conduct of Business. Prior to and through the Closing Date, JKP shall: i. conduct its business only in the Ordinary Course of Business; ii. use its commercially reasonable efforts to preserve intact the current business organization of JKP, keep available the services of the current officers, employees and agents of JKP, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with JKP; iii. not pay, incur or declare any dividends or distributions with respect to its shareholders or amend its Certificate of Incorporation or By-Laws, without the prior written consent of the Company and MVI; iv. not authorize, issue, sell, purchase or redeem any shares of its capital stock or any options or other rights to acquire ownerships interests without the prior written consent of the Company and MVI; v. not incur any indebtedness for money borrowed or issue and debt securities, or incur or suffer to be incurred any liability or obligation of any nature whatsoever, except those incurred in the Ordinary Course of Business, or cause or permit any material lien, encumbrance or security interest to be created or arise on or in respect of any material portion of its properties or assets; vi. not make any investment of a capital nature either by purchased stock or securities, contribution to capital, property transfer or otherwise, or by the purchase of any property or assets of any other Person; 18 vii. not do any other act which would cause representation or warranty of JKP in this Agreement to be or become untrue in any material respect or that is not in the Ordinary Course of Business consistent with past practice; viii. report periodically to the Company and MVI concerning the status of the business and operations of JKP; and ix. confer with the Company and MVI concerning operational matters of a material nature. (b) Proposals; Other Offers. Commencing on the date of execution of this Agreement through the Closing Date, JKP shall not, directly or indirectly (whether through an employee, a representative, an agent or otherwise), solicit or encourage any inquiries or proposals, engage in negotiations for or consent to or enter into any agreement providing for the acquisition of its business. JKP shall not, directly or indirectly (whether through an employee, a representative, an agent or otherwise) disclose any nonpublic information relating to JKP or afford access to any of the books, records or other properties of JKP to any person or entity that is considering, has considered or is making any such acquisition inquiry or proposal relating to the JKP's business. (c) Further Assurances. Prior to the Closing Date, with the cooperation of the Company where appropriate, JKP shall: i. promptly comply with all filing requirements which federal, state or local law may impose on JKP with respect to the Contemplated Transactions by this Agreement; and ii. take all actions necessary to be taken, make any filing and obtain any consent, authorization or approval of or exemption by any governmental authority, regulatory agency or any other third party (including without limitation, any landlord or lessor of the Company and any party to whom notification is required to be delivered or from whom any form of consent is required) which is required to be filed or obtained by JKP in connection with the Contemplated Transactions by this Agreement. (d) Actions by JKP. JKP shall take no action or enter into any agreements or arrangements except in the Ordinary Course of Business and as may be required by this Agreement. (e) No Change in Capital Stock. Prior to the Effective Time, no change will be made in the authorized, issued or outstanding capital stock of JKP, and no subscriptions, options, rights, warrants, calls, commitments or agreements relating to the authorized, issued or outstanding capital stock of JKP will be entered into, issued, granted or created. (f) Access to Additional Agreements and Information. Prior to the Closing Date, JKP shall make available to the Company and MVI (as well as its shareholders, counsel, accountants and other representatives) any and all agreements, contracts, documents, other instruments and personnel material of JKP's business, including without limitation, those contracts to which JKP is a party and those by which its business or any of JKP's assets are bound. 19 (g) Further Assurances. Prior to the Closing Date, with the cooperation of the Company and Acquisition where appropriate, JKP shall use commercially reasonable efforts to: i. promptly comply with all filing requirements which federal, state or local law may impose on JKP with respect to the Contemplated Transactions by this Agreement; and ii. take all actions necessary to be taken, make any filing and obtain any consent, authorization or approval of or exemption by any governmental authority, regulatory agency or any other third party (including without limitation, any landlord or lessor of JKP and any party to whom notification is required to be delivered or from whom any form of consent is required) which is required to be filed or obtained by JKP in connection with the Contemplated Transactions by this Agreement. 5.3 Governmental Filings and Consents. The Company, Acquisition and JKP shall cooperate with one another in filing any necessary applications, reports or other documents with any federal or state agencies, authorities or bodies having jurisdiction with respect to the business of the Company, or Acquisition or the by this Agreement and in seeking any necessary approval, consultation or prompt favorable action of, with or by any of such agencies, authorities or bodies. 5.4 Publicity. Any public announcement or press release relating to this Agreement or the Contemplated Transactions must be approved by MVI, JKP and the Company in writing before being made or released. ARTICLE VI CONDITIONS 6.1 Conditions to Obligations of JKP. The obligation of JKP to consummate the Contemplated Transactions is subject to the fulfillment of each of the following conditions: (a) Copies of Resolutions. At the Closing (i) the Company shall have furnished JKP with a certificate of its Chief Executive Officer in the form of EXHIBIT 6.1(a) annexed hereto, certifying that attached thereto are copies of resolutions duly adopted by the board of directors of the Company authorizing the execution, delivery and performance of this Agreement and all other necessary or proper corporate action to enable the Company to comply with the terms of this Agreement and (ii) Acquisition shall have furnished JKP with a certificate of its Chief Executive Officer in the form of EXHIBIT 6.1(a2) annexed hereto, certifying that attached thereto are copies of resolutions duly adopted by the board of directors of Acquisition authorizing the execution, delivery and performance of this Agreement and all other necessary or proper corporate action to enable Acquisition to comply with the terms of this Agreement. (b) Opinion of Company's Counsel. The Company shall have furnished to JKP, at the Closing, with an opinion of its legal counsel, dated as of the Closing Date, substantially in the form of EXHIBIT 6.1(b) annexed hereto. 20 (c) Accuracy of Representations and Warranties; Performance of Covenants. Each of the representations and warranties of the Company and Acquisition set forth in this Agreement was true, correct and complete in all material respects when made and shall also be true, correct and complete in all material respects at and as of the Closing Date, with the same force and effect as if made at and as of the Closing Date. The Company shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed by the Company and Acquisition at or prior to the Closing Date. (d) Delivery of Certificate. (A) The Company shall have delivered to JKP a certificate, in the form of EXHIBIT 6.1(d) annexed hereto, dated the Closing Date, and signed by the Chief Executive Officer of the Company affirming that the representations and warranties as set forth in Section 4.1 were and are true, correct and complete as required by Section 6.1(c) and (B) Acquisition shall have delivered to JKP a certificate, in the form of EXHIBIT 6.1(d2) annexed hereto, dated the Closing Date, and signed by the Chief Executive Officer of Acquisition affirming that the representations and warranties as set forth in Section 4.1 were and are true, correct and complete as required by Section 6.1(c). (e) Consents and Waivers. At the Closing, any and all necessary consents, authorizations, orders or approvals shall have been obtained, except as the same shall have been waived by JKP. (f) Litigation. On the Closing Date, there shall be no effective injunction, writ or preliminary restraining order or any order of any kind whatsoever with respect to the Company issued by a court or governmental agency (or other governmental or regulatory authority) of competent jurisdiction restraining or prohibiting the consummation of the Contemplated Transactions or making consummation thereof unduly burdensome to JKP. On the Closing Date and immediately prior to consummation of the Contemplated Transactions, no proceeding or lawsuit shall have been commenced, be pending or have been threatened by any governmental or regulatory agency or authority or any other Person with respect to the Contemplated Transactions. (g) Delivery of Documents and Other Information. Prior to the Closing Date, the Company and Acquisition shall have made available or delivered to JKP all of the agreements, contracts, documents and other instruments required to be delivered pursuant to the provisions of this Agreement. 6.2 Conditions to Obligations of the Company and Acquisition. The obligations of the Company and Acquisition to consummate the Contemplated Transactions are subject to the fulfillment of each of the following conditions: (a) Copies of Resolutions. At the Closing, JKP shall have furnished the Company with a certificate of its Chief Executive Officer, in the form of EXHIBIT 6.2(a) annexed hereto, certifying that attached thereto are copies of resolutions duly adopted by the board of directors of JKP authorizing the execution, delivery and performance of the terms of this Agreement and all other necessary or proper corporate action to enable JKP to comply with the terms of this Agreement. 21 (b) Opinion of JKP's Counsel. JKP shall have furnished to the Company, at the Closing, with an opinion of counsel to JKP, dated as of the Closing Date, substantially in the form of EXHIBIT 6.2(b) annexed hereto. (c) Accuracy of Representations and Warranties; Performance of Covenants. Each of the representations and warranties of JKP was true, correct and complete in all material respects when made and shall also be true, correct and complete in all material respects at and as of the Closing Date, with the same force and effect as if made at and as of the Closing Date. JKP shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed by JKP at or prior to the Closing Date. (d) Delivery of Certificate. JKP shall have delivered to the Company a certificate, in the form of EXHIBIT 6.2(d) annexed hereto, dated the Closing Date and signed by the Chief Executive Officer of JKP, affirming that the representations and warranties of JKP as set forth in Section 4.2 were and are true, correct and complete and JKP's agreements and covenants have been performed as required by Section 6.2(d). (e) Consents and Waivers. On or prior to the Closing Date, any and all necessary consents, authorizations, orders or approvals shall have been obtained, except as the same shall have been waived by the Company. (f) Litigation. On the Closing Date, there shall be no effective injunction, writ or preliminary restraining order or any order of any kind whatsoever with respect to JKP issued by a court or governmental agency (or other governmental or regulatory authority) of competent jurisdiction restraining or prohibiting the consummation of the Contemplated Transactions or making the consummation thereof unduly burdensome to the Company or JKP. On the Closing Date, no proceeding or lawsuit shall have been commenced, threatened or be pending or by any governmental or regulatory agency or authority or any other person with respect to the Contemplated Transactions. (g) Delivery of Documents and Other Information. Prior to the Closing Date, JKP shall have made available or delivered to the Company all of the agreements, contracts, documents and other instruments required to be delivered pursuant to the provisions of this Agreement. ARTICLE VII TERMINATION 7.1 Termination by Mutual Agreement. This Agreement may be terminated at any time by mutual consent of the parties hereto, provided that such consent to terminate is in writing and is signed by each of the parties hereto. 7.2 Termination for Failure to Close. This Agreement shall be automatically terminated if the Closing shall not have occurred within ten (10) days of the date hereof (except if such 10th day is not a Business Day, then the next Business Day). 22 7.3 Termination by Operation of Law. This Agreement may be terminated by any party hereto if there shall be any statute, rule or regulation that renders consummation of the Contemplated Transactions illegal or otherwise prohibited, or a court of competent jurisdiction or any government (or governmental authority) shall have issued an order, decree or ruling, or has taken any other action restraining, enjoining or otherwise prohibiting the consummation of such transactions and such order, decree, ruling or other action shall have become final and nonappealable. 7.4 Termination for Failure to Perform Covenants or Conditions. This Agreement may be terminated prior to the Closing Date: (a) by JKP if: (i) any of the representations and warranties made in this Agreement by the Company or Acquisition shall not be materially true and correct, when made or at any time prior to consummation of the Contemplated Transactions as if made at and as of such time; (ii) any of the conditions set forth in Section 6.1 hereof have not been fulfilled in all material respects by the Closing Date; (iii) the Company or Acquisition shall have failed to observe or perform any of its material obligations under this Agreement; or (iv) as otherwise set forth herein; or (b) by the Company or Acquisition if: (i) any of the representations and warranties of JKP shall not be materially true and correct when made or at any time prior to consummation of the Contemplated Transactions as if made at and as of such time; (ii) any of the conditions set forth in Section 6.2 hereof have not been fulfilled in all material respects by the Closing Date; (iii) JKP shall have failed to observe or perform any of their material respective obligations under this Agreement; or (iv) as otherwise set forth herein. 7.5 Effect of Termination or Default; Remedies. In the event of termination of this Agreement as set forth above, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto, provided that such party is a Non-Defaulting Party (as defined below). The foregoing shall not relieve any party from liability for damages actually incurred as a result of such party's breach of any term or provision of this Agreement. 7.6 Remedies; Specific Performance. In the event that any party shall fail or refuse to consummate the Contemplated Transactions or if any default under or beach of any representation, warranty, covenant or condition of this Agreement on the part of any party (the "Defaulting Party") shall have occurred that results in the failure to consummate the Contemplated Transactions, then in addition to the other remedies provided herein, the non-defaulting party (the "Non-Defaulting Party") shall be entitled to seek and obtain money damages from the Defaulting Party, or may seek to obtain an order of specific performance thereof against the Defaulting Party from a court of competent jurisdiction, provided that the Non-Defaulting Party seeking such protection must file its request with such court within forty-five (45) days after it becomes aware of the Defaulting Party's failure, refusal, default or breach. In addition, the Non-Defaulting Party shall be entitled to obtain from the Defaulting Party court costs and reasonable attorneys' fees incurred in connection with or in pursuit of enforcing the rights and remedies provided hereunder. 23 ARTICLE VIII SURVIVAL; INDEMNIFICATION 8.1 Survival of Representations and Warranties of the Company. All representations and warranties of the Company shall survive the execution and delivery of this Agreement and the Closing hereunder and shall thereafter continue in full force and effect until the the second anniversary of the Closing Date and shall then terminate except to the extent that notice of the Company's or Acquisition liability in respect of any inaccuracy in or breach of any representation or warranty shall have been given on or prior to such second anniversary. 8.2 Survival of Representations and Warranties of JKP. All representations and warranties of JKP shall terminate upon the Closing except to the extent that notice of JKP's liability in respect of any inaccuracy in or breach of any representation or warranty shall have been given on or prior to Closing. 8.3 Obligation of the Company to Indemnify. (a) The Company agrees to indemnify, defend and hold harmless JKP (and its directors, officers, employees, affiliates, shareholders, debenture holders, agents, attorneys, successors and assigns) from and against all losses, liabilities, damages, deficiencies, costs or expenses (including interest, penalties and reasonable attorneys' and consultants' fees and disbursements) (collectively, "Losses") based upon, arising out of or otherwise in respect of any (i) inaccuracy in any representation or warranty of the Company contained in this Agreement or in the Schedules and Exhibits hereto or (ii) breach by the Company of any covenant or agreement contained in this Agreement. Losses specifically does not include economic loss from the decrease in the per Share Market Value of the Company Common Stock. 8.4 Obligation of JKP to Indemnify. JKP agrees to indemnify, defend and hold harmless the Company (and its directors, officers, employees, affiliates, shareholders, agents, attorneys, successors and assigns) from and against any Losses based upon, arising out of or otherwise in respect of any (i) inaccuracy in any representation or warranty of JKP contained in this Agreement or (ii) breach by JKP of any covenant or agreement contained in this Agreement. 8.5 Notice and Opportunity to Defend. (a) Promptly after receipt by any Person entitled to indemnity under this Agreement (an "Indemnitee") of notice of any demand, claim or circumstances which, with the lapse of time, would or might give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an "Asserted Liability") that may result in a Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to any other party (or parties) who is or may be obligated to provide indemnification pursuant to Section 8.3 or 8.4 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted Liability in reasonable detail and shall indicate the amount (estimated, if necessary and to the extent feasible) of the Loss that has been or may be suffered by the Indemnitee. (b) The Indemnifying Party may elect to compromise or defend, at its own expense and by its own counsel, any Asserted Liability. If the Indemnifying Party elects to compromise or defend such Asserted Liability, it shall within 30 days after the date the Claims 24 Notice is given (or sooner, if the nature of the Asserted Liability so requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the compromise of, or defense against, such Asserted Liability. If the Indemnifying Party elects not to compromise or defend the Asserted Liability, fails to notify the Indemnitee of its election as herein provided or contests its obligation to indemnify under this Agreement, the Indemnitee may pay, compromise or defend such Asserted Liability and all reasonable expenses incurred by the Indemnitee in defending or compromising such Asserted Liability, all amounts required to be paid in connection with any such Asserted Liability pursuant to the determination of any court, governmental or regulatory body or arbitrator, and amounts required to be paid in connection with any compromise or settlement consented to by the Indemnitee, shall be borne by the Indemnifying Party. Except as otherwise provided in the immediately preceding sentence, the Indemnitee may not settle or compromise any claim over the objection of the Indemnifying Party. In any event, the Indemnitee and the Indemnifying Party may participate, at their own expense, in (but the Indemnitee may not control) the defense of such Asserted Liability. If the Indemnifying Party chooses to defend any claim, the Indemnitee shall make available to the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for such defense. 8.6 Losses. The sole remedy for recovering Losses due to JKP or the Company, as the case may be, under this Article 8 shall be the additional issuance of the number of shares of Company Common Stock equal to the dollar value of such Loss divided by the per Share Market Value. ARTICLE IX DEFINITIONS The following terms, which are capitalized in this Agreement, shall have the meanings set forth below for the purpose of this Agreement. "Applicable Contract" means any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company or JKP, as the case may be, has or may become subject to any obligation or liability or (c) by which the Company or JKP, as the case may be, or any of the assets owned or used by it is or may become bound. "Contemplated Transactions" means all of the transactions contemplated by this Agreement, including, without limitation: (1) the Merger; and (2) the performance by the parties of their respective covenants and obligations under this Agreement. "Environmental Laws" means all applicable federal, state, local or foreign laws, rules and regulations, orders, decrees, judgments, permits, filings and licenses relating (i) to protection and clean-up of the environment and activities or conditions related thereto, including those relating to the generation, handling, disposal, transportation or release of hazardous 25 substances and (ii) the health or safety of employees in the workplace environment, all as amended from time to time, and shall also include any common law theory based on nuisance, trespass, negligence or other tortious conduct. "ERISA" means the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to such law or any successor law. "Law" means all applicable laws, statutes, ordinances, rules, regulations, orders, writs, injunctions, judgments or decrees entered, enacted, promulgated, enforced or issued by any court or other governmental or regulatory authority, domestic or foreign. "Legal Requirement" means any federal, state, local, municipal, foreign, international, multinational or other administrative law, ordinance, principle of common law, regulation, statute, treaty, court or arbitrator. "Order" means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other governmental body or by any arbitrator. "Ordinary Course of Business" means an action taken by a Person where: (1) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; (2) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority); and (3) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person. "Organizational Documents" means the articles or certificate of incorporation and the by-laws of a corporation and any amendment thereto. "per Share Market Value" of the Company Common Stock means on any particular date (a) the last sale price of shares of Company Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Company Common Stock is then listed or admitted to trading, or (b) if the Company Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq Stock Market, Inc. (the "Nasdaq"), or (c) if the Company Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Company Common Stock on such date as reported on the National Association of Securities Dealers, Inc. over-the counter Bulletin Board (the "OTCBB") or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Company Common Stock is not quoted on the OTCBB, the closing bid price for a share of Company Common Stock on such date in the over-the- 26 counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Company Common Stock is not publicly traded, the fair market value of a share of the Company Common Stock as determined by an appraiser selected in good faith by JKP and MVI. "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or governmental body. "Proceeding" means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental body or arbitrator. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. ARTICLE X MISCELLANEOUS 10.1 Fees and Expenses. Except as otherwise provided in this Agreement, each party hereto will bear its own legal, accounting and other fees and expenses incident to the Contemplated Transactions herein. Any fees and expenses required to be paid by any party hereunder shall be limited to reasonable and necessary fees and expenses 10.2 Modification, Amendments and Waiver. The parties hereto may amend, modify or otherwise waive any provision of this Agreement by mutual consent, provided that such consent and any amendment, modification or waiver is in writing and is signed by each of the parties hereto. 10.3 Assignment. Neither the Company nor JKP shall have the authority to assign its respective rights or obligations under this Agreement without the prior written consent of the other party. 10.4 Successors. This Agreement shall be binding upon and, to the extent permitted in this Agreement, shall inure to the benefit of the parties and their respective successors and permitted assigns. 10.5 Entire Agreement. This Agreement and the exhibits, schedules and other documents referred to herein contain the entire agreement among the parties hereto with respect to the Contemplated Transactions and supersede all prior agreements with respect thereto, whether written or oral. 10.6 Governing Law. This Agreement and the exhibits hereto shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to 27 principles of conflicts or choice of laws thereof. Any action to enforce the terms of this Agreement or any of its exhibits shall be brought exclusively in the state and/or federal courts situated in the County of Los Angeles in the State of California. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at its principal address set forth in this Agreement. 10.7 Notices. Any notice, request, demand, waiver, consent, approval, or other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed given only if delivered to the party personally or sent to the party by telecopy (promptly followed by a hard-copy delivered in accordance with this Section 10.7) or by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, addressed to the party at its address set forth below: If to JKP: Jill Kelly Productions, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn: Robert Friedland Tel: (310) 360-7900 Fax: (310) 360-7933 If to Acquisition: IDC Acquisition I Corp. 100 Europa Drive, Suite 421 Chapel Hill, NC 27517 Attn.: Michael Hillerbrand Tel: (919) 933-2720 Fax: (919) 933-2730 If to the Company: IDC Technologies, Inc. 100 Europa Drive, Suite 421 Chapel Hill, NC 27517 Attn.: Michael Hillerbrand Tel: (919) 933-2720 Fax: (919) 933-2730 with copies to: Gottbetter & Partners, LLP 630 Third Avenue New York, New York 10017 Attn.: Adam S. Gottbetter, Esq. Tel: (212) 983-6900 Fax: (212) 983-9210 or to such other persons or addresses as may be designated in writing by the party to receive such notice. If mailed as aforesaid, the day of mailing or transmission shall be the date any such notice shall be deemed to have been delivered. 28 10.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute but one agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 10.9 Rights Cumulative. All rights, powers and privileges conferred hereunder upon the parties, unless otherwise provided, shall be cumulative and shall not be restricted to those given by law. Failure to exercise any power given any party hereunder or to insist upon strict compliance by any other party shall not constitute a waiver of any party's right to demand exact compliance with any of the terms or provisions hereof. 10.10 Severability of Provisions. The provisions of this Agreement shall be considered severable in the event that any of such provisions are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable. Such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are valid and enforceable and which are as similar as possible in term and intent to those provisions deemed to be invalid, void or otherwise unenforceable. Notwithstanding the foregoing, the remaining provisions hereof shall remain enforceable to the fullest extent permitted by law. 10.11 Headings. The headings set forth in the articles and sections of this Agreement and in the exhibits and the schedules to this Agreement are inserted for convenience of reference only and shall not be deemed to constitute a part hereof. [SIGNATURE PAGE FOLLOWS] 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the date and year first above written. IDC TECHNOLOGIES, INC. By: /s/ Michael Hillerbrand ----------------------------------- Michael Hillerbrand, CEO IDC ACQUISITION I CORP. By: /s/ Michael Hillerbrand ----------------------------------- Michael Hillerbrand, CEO JILL KELLY PRODUCTIONS, INC. By: /s/ Robert A. Friedland ---------------------------------- Robert Friedland, Chairman and CEO The undersigned, Secretary of Jill Kelly Productions, Inc., hereby certifies on the date and year first above written that this Agreement and Plan of Merger has been adopted pursuant to Section 251(c) of the Delaware General Corporation Law and that the conditions specified in the first sentence of said section have been satisfied. JILL KELLY PRODUCTIONS, INC. By: /s/ Robert A. Friedland ---------------------------------- Name: Robert Friedland Title: Secretary 30 EX-3.1 4 w97143exv3w1.txt AMENDED & RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF JILL KELLY PRODUCTIONS HOLDING, INC. Pursuant to the provisions of Nevada Revised Statutes Title 7, Chapter 78, it is hereby certified that: FIRST: The name of the corporation is Jill Kelly Productions Holding, Inc. SECOND: The Articles of Incorporation of this corporation are hereby Amended and Restated to read in their entirety as set forth on Exhibit A hereto. THIRD: The total number of outstanding shares having voting power of the corporation is 23,750,000, and the total number of votes entitled to be cast by the holders of all of said outstanding shares is 23,750,000. FOURTH: The holders of at least a majority of the aforesaid total number of outstanding shares having voting power, to wit, 17,251,000 shares, dispensed with the holding of a meeting of stockholders and adopted the amendment herein certified by a consent in writing signed by such majority in accordance with the provisions of Nevada Revised Statutes, Title 7, Section 78.320. IN WITNESS WHEREOF the undersigned Chief Operating Officer of Jill Kelly Productions Holding, Inc. has executed this certificate on this 17th day of March 2004. /s/ Ronald Stone ------------------------------ Ronald Stone Chief Operating Officer Exhibit A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF JILL KELLY PRODUCTIONS HOLDING, INC. The undersigned natural person of the age of 21 or more acting as incorporator of a corporation under the Nevada Business Corporation Act, adopts the following Articles of Incorporation for such a corporation. ARTICLE I The name of the corporation hereby formed shall be Jill Kelly Productions Holding, Inc. ARTICLE II The period of its duration shall be perpetual. ARTICLE III The purposes for which the Corporation is organized are to engage in any business, investment, or other pursuit or activity, whether retail or wholesale, whether commercial or industrial, and to perform any and all other lawful acts or purposes as are or may be granted to corporate entities under the laws of the state of Nevada and by any other state or foreign country. The Corporation may conduct its business anywhere within the states of the United States or in any foreign country, without in any way limiting the foregoing powers. It is hereby provided that the corporation shall have the power to do any and all acts and things that may be reasonably necessary or appropriate to accomplish any of the foregoing purposes for which the Corporation is formed. ARTICLE IV (a) Authorized Shares. The aggregate number of shares that the Corporation will have authority to issue is Three Hundred One Million Sixty Thousand (301,060,000), of which Three Hundred Million (300,000,000) shares will be common stock, with a par value of $0.001 per share, One Million (1,000,000) shares will be blank check preferred stock, with a par value of $0.001 per share and Sixty Thousand (60,000) shares will be Series A Preferred Stock with a par value of $0.001 per share. (b) Blank Check Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed in this Article 4, to provide for the issuance of the shares of blank check Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Nevada, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board with respect to each series will include but not be limited to, the right to determine the following: (i) The number of shares constituting that series and the distinctive designation of that series, which may be a distinguishing number, letter or title; (ii) The dividend rate on the shares of that series, whether dividends will be cumulative, and if so, from which date(s), and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) Whether that series will have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) Whether that series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors determines; (v) Whether or not the shares of that series will be redeemable, and , if so, the terms and conditions of such redemption, including the date or date upon or after which they are redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) Whether that series will have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (vii) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; (viii) Any other relative rights, preferences and limitations of that series. (c) Series A Preferred Stock (1) Voting Rights. The shares of Series A Preferred contain no voting rights. Holder of Series A Preferred Stock will not be entitled to vote on may matter, question or proposition that may properly come before the stockholders of the Corporation at a meeting of stockholders of the Corporation at a meeting of stockholders of this Corporation at which holders of this Corporation's common stock are entitled to vote or with respect to any circumstances in which a stockholder of common stock is entitled to vote or consent. (2) Dividends. (i) The holders of shares of Series A Preferred Stock as they appear on the stock records of the Corporation ("Holder" or "Holders") shall be entitled to receive, the Board of Directors shall be obligated to declare and the Corporation shall be obligated to pay, out of funds legally available for the payment of dividends, dividends at the rate of eight percent (8%) per annum (computed on the basis of a 360-day year) (the "Dividend Rate") on the stated value ("Stated Value") of each share of Series A Preferred Stock. The Stated Value for each share of Series A Preferred Stock shall be $100. Dividends on the Series A Preferred Stock shall be cumulative from the date of issuance. (ii) At the option of the Corporation, the dividend shall be paid in cash or through the issuance of duly and validly authorized and issued, fully paid and non-assessable, shares of the Corporation's common stock valued at the lesser of $.25 per share or the market price per share. (iii) So long as any shares of the Series A Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on Pari Passu Securities (as defined herein) for any period unless full cumulative dividends required to be paid in cash have been or contemporaneously are declared and paid or undeclared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series A Preferred Stock and all dividends declared upon any other class or series of Pari Passu Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Stock and accumulated and unpaid on such Pari Passu Securities. (iv) So long as any shares of the Series A Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on Pari Passu Securities (as defined herein) for any period unless full cumulative dividends required to be paid in cash have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of the dividend on such class or series of Pari Passu Securities. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series A Preferred Stock and all dividends declared upon any other class or series of Pari Passu Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Stock and accumulated and unpaid on such Pari Passu Securities. (3) Conversion. The outstanding shares of Series A Preferred Stock shall be automatically converted into shares of common stock of the Corporation on the second anniversary of the date of issuance of the Series A Preferred Stock (the "Automatic Conversion Date"). The holder of the Series A Preferred Stock may, at the holder's option, convert the Series A Preferred Stock into shares of common stock of the Corporation at any time prior to the Automatic Conversion Date. For purposes of conversion, each share of common stock of the Corporation shall be valued at $.25 per share subject to increase or decrease, as the case may be, in the event of stock splits and similar transaction. Each share of Series A Preferred Stock shall be valued at stated value. (4) Rank. The Series A Preferred Stock shall rank (i) prior to the Corporation's Common Stock; (ii) prior to any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks junior to the Series A Preferred Stock ("Junior Securities"); (iii) junior to any class or series of capital stock of the Corporation hereafter created (with the consent of the Holders of a majority of the outstanding Series A Preferred Stock) specifically ranking, by its terms, senior to the Series A Preferred Stock ("Senior Securities"); and (iv) Pari Passu with any class or series of capital stock of the Corporation hereafter created (with the consent of the Holders of a majority of the outstanding Series A Preferred Stock specifically ranking by its terms on parity with the Series A Preferred Stock ("Pari Passu Securities"), in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. (5) Liquidation Preference. If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation's assets in one transaction or in a series of related transactions (a "Liquidation Event"), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series A Preferred Stock shall have received the Liquidation Preference with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series A Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series A Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. The "Liquidation Preference" with respect to a share of Series A Preferred Stock means an amount equal to the Stated Value thereof, plus the accrued but unpaid dividends thereon through the date of final distribution. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof. (6) Miscellaneous. (i) If any shares of Series A Preferred Stock are converted pursuant to this Article 4, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Corporation as Series A Preferred Stock. (ii) Upon receipt by the Corporation of (i)evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Corporation shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Corporation to convert such Series A Preferred Stock. (iii) Upon submission of a Notice of Conversion by a Holder of Series A Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder's rights as a Holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth business day after the expiration of the Delivery Period with respect to a conversion of Series A Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five business days after the expiration of such 10 business day period) the Holder shall regain the rights of a Holder of Series A Preferred Stock with respect to such unconverted shares of Series A Preferred Stock and the Corporation shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Corporation's failure to convert Series A Preferred Stock. (d) Series B Preferred Stock. (1) Certain Definitions. For purposes of this Article 4, Section (d), capitalized terms are defined in this Section (d) or shall have the following meanings: "Change of Control" means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company. "Common Stock" means the common stock of the Company, par value $.0001 per share. "Issuance Date" means the date of the Closing under the Convertible Preferred Stock Purchase Agreement with respect to the initial issuance of the Series B Preferred Stock. "Per Share Market Value" of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser (as defined in Article IV, Section (d)) selected in good faith by the holders of a majority of the Series B Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Purchase Agreement" means the Convertible Preferred Stock Purchase Agreement dated March 5, 2004, by and between the Company and the purchaser set forth in Schedule 1 thereto (the "Purchaser"). "Redemption Price" means the Stated Value of any share of Series B Preferred Stock that is subject to redemption. "Trading Day" means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. ("NASD"), or (c) if the Common Stock is not quoted on the NASD, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices). (2) Designation and Amount. The designation of this series, which consists of six hundred thousand (600,000) shares of Preferred Stock, is the Series B 0% Convertible Preferred Stock (the "Series B Preferred Stock") and the stated value shall be U.S. ten dollars ($10.00) per share (the "Stated Value"). (3) Dividends. The holder of the shares of Series B Preferred Stock as they appear on the stock records of the Company ("Holder" or "Holders") shall not be entitled to receive any dividends. (4) Conversion. (a) Each outstanding share of Series B Preferred Stock shall be convertible into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price as defined below, and subject to the Limitation on Conversion in Section 4.13 of the Purchase Agreement, at the option of the Holder in whole or in part, at any time commencing on or after the Issuance Date; provided that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $10,000.00 of Series B Preferred Stock. The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the "Notice of Conversion") in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series B Preferred Stock to be converted. The date on which such conversion is to be effected (the "Conversion Date") shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. If the Holder is converting less than all of the shares represented by a certificate for the Series B Preferred Stock tendered by the Holder in the Notice of Conversion, the Company shall deliver to the Holder a new Series B Preferred Stock certificate for such number of shares as has not been converted within five (5) Business Days of the Company's receipt of the original certificate of Series B Preferred Stock and Notice of Conversion. Upon the entire conversion of the Series B Preferred Stock or the redemption of the Series B Preferred Stock, the certificates for such Series B Preferred Stock shall be returned to the Company for cancellation. (b) Not later than ten (10) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series B Preferred Stock and (ii) once received from the Company, the Series B Preferred Stock in principal amount equal to the principal amount of the Series B Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series B Preferred Stock until the Series B Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series B Preferred Stock or Common Stock, or the Holder notifies the Company that such Series B Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series B Preferred Stock tendered for conversion. (c) Intentionally omitted. (d) (i) The Conversion Price for each share of Series B Preferred Stock in effect on any Conversion Date shall be the LESSER of (a) one dollar and twenty-five cents ($1.25) (the "Fixed Conversion Price") or (b) eighty percent (80%) of the lowest closing bid price for the Common Stock in the ten (10) business days preceding the date of conversion, but in no event less than forty percent (40%) of the Fixed Conversion Price (the "Floating Conversion Price"). For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices). (ii) If the Company, at any time while any Series B Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Fixed Conversion Price designated in Section IV(d)(i) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d)(ii) 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, combination or reclassification. (iii) If, at any time while any of the Series B Preferred Stock is outstanding, the Company issues or sells shares of Common Stock (excluding shares issued upon the conversion or exercise of securities outstanding on the date hereof), or options, warrants or other rights to subscribe for or purchase shares of Common Stock at a price per share that is less than forty percent (40%) of the Fixed Conversion Price (the "Floor Conversion Price"), then the Floor Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such shares, options, warrants or rights plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Floor Conversion Price, and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such options, rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase. There will be no adjustment if Common Stock is issued due to the exercise of (x) employee stock options that were issued to such employee, or (y) other options, warrants or rights to subscribe for or purchase that, in any case, are issued at an exercise or subscription price that is equal to or greater than the Floor Conversion Price. (iv) If the Company, at any time while Series B Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series B Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security then in each such case the Conversion Price at which each Series B Preferred Stock shall thereafter be convertible shall be determined by multiplying the Fixed Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the Holders of a majority of the principal amount of the Series B Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series B Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (v) All calculations under this Section (d), paragraph 4 shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any calculation over .005 shall be rounded up to the next cent or share and any calculation less than .005 shall be rounded down to the previous cent or share. (vi) In the event the Fixed Conversion Price is not adjusted pursuant to Section IV(d)(ii), (iii), (iv), or (v), within ten (10) Business Days following the occurrence of an event described therein, and is still not adjusted following thirty (30) days notice from the Holder to the Company requesting that such adjustment be made, then the Holder shall have the right to require the Company to redeem all of the Holder's Series B Preferred Stock at the Stated Value of such Holder's Series B Preferred Stock, and the Company shall pay such amount to the Holder pursuant to the written instructions provided by the Holder. (vii) Whenever the Fixed Conversion Price is adjusted pursuant to Section IV(d)(ii), (iii), (iv) or (v), the Company shall within two (2) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series B Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (viii) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series B Preferred Stock then outstanding shall have the right thereafter to convert such Series B Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series B Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series B Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(viii) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. Notwithstanding the foregoing, in the event of any merger, consolidation or change of control of the Company, then as provided in the Purchase Agreement, the Company shall have the right to demand that the Holder convert all Series B Preferred Stock then held by the Purchaser into Common Stock upon the terms and conditions set forth in this Article IV, Section (d) of the Amended and Restated Articles of Incorporation. If the Holder does not comply with such demand, the Company may redeem all Series B Preferred Stock held by the Purchaser at their Stated Value. (ix) If: (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 (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share 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 Series B Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series B Preferred Stock at their last addresses as it shall appear upon the Series B Preferred stock register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on 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, share exchange, dissolution, liquidation or winding-up is expected to become effective, 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 or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (e) If at any time conditions shall arise by reason of action or inaction taken by the Company which in the opinion of the Board of Directors are not adequately covered by the other provisions hereof and which might materially and adversely affect the rights of the Holders of Series B Preferred Stock (in a manner different than or distinguished from the effect generally on rights of holders of any class of the Company's capital stock), the Company shall, at least thirty (30) calendar days prior to the effective date of such action, mail and fax a written notice to each Holder of Series B Preferred Stock briefly describing the action contemplated and the material adverse effects of such action on the rights of such Holders and an Appraiser selected by the Holders of majority of the outstanding Series B Preferred Stock shall give its opinion as to the adjustment, if any (not inconsistent with the standards established in this Section (d), paragraph 4), of the Fixed Conversion Price (including, if necessary, any adjustment as to the securities into which Series B Preferred Stock may thereafter be convertible) and any distribution which is or would be required to preserve without diluting the rights of the Holders of Series B Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case the adjustment shall be equal to the average of the adjustments recommended by each such Appraiser. The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or opinions or the taking of any such action contemplated, as the case may be; provided, however, that no such adjustment of the Fixed Conversion Price shall be made which in the opinion of the Appraiser(s) giving the aforesaid opinion or opinions would result in an increase of the Fixed Conversion Price. (f) 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 Series B Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series B Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) and Section IV(e) hereof) upon the conversion of all outstanding shares of Series B Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable. (g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock. (h) The issuance of certificates for shares of Common Stock on conversion of Series B Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (i) Series B Preferred Stock converted into Common Stock shall be canceled upon conversion. (j) Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 pm New York time. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in the Purchase Agreement. In the event that the Company receives the Notice of Conversion after 4:00 p.m. New York time, the Conversion Date shall be deemed to be the next Business Day. In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day. (5) Events of Default and Remedies. (a) "Event of Default", wherever used herein, means any one of the following events: (i) the Company shall fail to observe or perform any material covenant, agreement or warranty contained in Article IV, Section (d) of this Amended and Restated Articles of Incorporation, and such failure shall not have been remedied within ten (10) Business Days after the date on which written notice of such failure shall have been given; (ii) the occurrence of any material breach or event of default by the Company under the Purchase Agreement or any other Transaction Document (as defined in the Purchase Agreement) and such failure or breach shall not have been remedied within the applicable cure period provided for therein, if any; (iii) the Company or any of its subsidiaries shall commence a voluntary case under the United States Bankruptcy Code as now or hereafter in effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Company under the Bankruptcy Code and the Company fails to pursue dismissal of the case within sixty (60) days after commencement of the case; or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such proceeding and the Company fails to pursue dismissal of the case within sixty (60) days after commencement of the case; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property and the Company fails to pursue dismissal of the custodian within sixty (60) days after the appointment; or the Company makes a general assignment for the benefit of creditors; or any corporate or other action is taken by the Company for the purpose of effecting any of the foregoing; (iv) trading in the common stock of the Company shall have been suspended, delisted, or otherwise ceased by the Securities and Exchange Commission or the NASD or other exchange or the Nasdaq (whether the National Market or otherwise), and trading is not reinstated within thirty (30) Trading Days, except for (i) any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company, and trading is reinstated promptly after such dissemination and (ii) any general suspension of trading for all companies trading on such exchange or market or OTCBB, provided that if the Company's shares are quoted on the Pink Sheets, LLC then it will not be considered to be a delisting; or (v) the Company shall issue a press release, or otherwise make publicly known, that it is not honoring properly executed Notice of Conversions for any reason whatsoever. (b) If any Event of Default occurs and continues, beyond any cure period, if any, then so long as such Event of Default shall then be continuing any Holder may, by notice to the Company, demand redemption of the shares of Series B Preferred Stock held by such Holder at the Redemption Price (as defined herein), and such Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by such Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. This shall include, but not be limited to the right to temporary, preliminary and permanent injunctive relief without the requirement of posting any bond or undertaking. (c) Such Holder may thereupon proceed to protect and enforce its rights either by suit in equity, or by action at law, or by other appropriate proceedings whether for the specific performance (to the extent permitted by law) of any covenant or agreement contained in Article IV, Section (d) of this Amended and Restated Article of Incorporation, or in aid of the exercise of any power granted in Article IV, Section (d) of this Amended and Restated Article of Incorporation, and proceed to enforce the redemption of any of the Series B Preferred Stock held by it, and to enforce any other legal or equitable right of such Holder. (d) To effectuate the terms and provisions of Article IV, Section (d) of this Amended and Restated Article of Incorporation, the Holder may send notice of any default to the Attorney-in-Fact (as defined in the Purchase Agreement) and send a copy of such notice to the Company and its counsel, simultaneously, and request the Attorney-in-Fact, to comply with the terms of Article IV, Section (d) of this Amended and Restated Article of Incorporation, and the Purchase Agreement and all agreements entered into pursuant to the Purchase Agreement on behalf of the Company. (6) Redemption. (a) Except as provided in this section VI (a), neither the holder nor the Company may demand that the Series B Preferred Stock be redeemed. Until all of the Series B Preferred Stock has been converted, in the event that the Company engages in a single transaction or a series of related transactions that cause it to (i) consolidate with or merge with or into any other Person, (ii) permit any other Person to consolidate with or merge into it, or (iii) undergo a Change in Control, then at the option of the Company exercisable by giving thirty (30) days written notice to the Holder, the Company may request that the Holder convert all shares of Series B Preferred Stock then held by the Holder into Common Stock upon the terms and conditions set forth in Article IV, Section (d) of this Amended and Restated Article of Incorporation. If the Holder does not comply with such request, the Company may redeem all Series B Preferred Stock held by the Purchaser at their Stated Value (the "Redemption Price"). The Company is not obligated to provide for redemption of the Series B Preferred Stock through a sinking fund. (b) Shares of Series B Preferred Stock which have been redeemed or converted shall be deemed retired pursuant to the NGCA and shall thereafter resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series, and may be redesignated and reissued as part of any new series of Preferred Stock other than Series B Preferred Stock. (c) No redemption shall be made and no sum set aside for such redemption at any time that the terms or provisions of any indenture or agreement of the Company, including any agreement relating to indebtedness, specifically prohibits such redemption or setting aside or provides that such redemption or setting aside would constitute a breach or default thereunder (after notice or lapse of time or both), except with the written consent of the lender or other parties to said agreement as the case may be. (f) If any redemption shall at any time be prohibited by the NGCA, the same shall be deferred until such time as the redemption can occur in full compliance with such statute. (g) In the event the Company shall redeem shares of Series B Preferred Stock as provided herein, notice of such redemption shall be given by first class mail, postage prepaid, or by confirmed facsimile transmission, not less than thirty (30) business days prior to the date fixed by the Board for redemption to each holder of Series B Preferred Stock at the address that appears on the Company's stock record books; provided, however, that no failure to provide such notice nor any defect therein shall affect the validity of the redemption proceeding except as to the holder to whom the Company has failed to send such notice or whose notice was defective. Each notice shall state (i) the redemption date, (ii) the number of shares of Series B Preferred Stock to be redeemed; (iii) the Redemption Price; and (iv) the place or places where certificates for shares of Series B Preferred Stock are to be surrendered for payment. When notice has been provided as aforesaid then from and after the redemption date (unless default shall be made by the Company in providing money for the payment of the Redemption Price of the shares called for redemption) said shares shall no longer be deemed to be outstanding and all rights of the holders thereof shall cease (other than the right to receive the Redemption Price or common Stock with respect to converted Series B Preferred Stock). Upon surrender of the certificates for Series B Preferred Stock accompanied by appropriate stock powers, the shares shall be redeemed by the Company at the Redemption Price. (7) Rank. The Series B Preferred Stock shall, as to redemptions and the distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company's Common Stock; (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series B Preferred Stock ("Junior Securities"); (iii) junior to any class or series of capital stock of the Company hereafter created (with the consent of the holders of a majority of the outstanding Series B Preferred Stock) which by its terms ranks senior to the Series B Preferred Stock ("Senior Securities"); and (iv) pari passu with any other series of preferred stock of the Company hereafter created (with the consent of the holders of a majority of the outstanding Series B Preferred Stock) which by its terms ranks on a parity ("Pari Passu Securities") with the Series B Preferred Stock. (8) Liquidation Preference. If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company's assets in one transaction or in a series of related transactions (a "Liquidation Event"), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series B Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series B Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series B Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. The "Liquidation Preference" with respect to a share of Series B Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof. (9) Voting Rights. The Holders of the Series B Preferred Stock have no voting power whatsoever, except as provided by the NGCA. To the extent that under the NGCA the vote of the Holders of the Series B Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series B Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series B Preferred Stock (except as otherwise may be required under the NGCA) shall constitute the approval of such action by the class. To the extent that under the NGCA Holders of the Series B Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Section (d), paragraph 4) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated. (10) Miscellaneous. (a) If any shares of Series B Preferred Stock are converted pursuant to Section (d), paragraph 4, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series. (b) Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series B Preferred Stock. (c) Upon submission of a Notice of Conversion by a Holder of Series B Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder's rights as a Holder of such converted shares of Series B Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of Article IV, Section (d) of the Amended and Restated Article of Incorporation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series B Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) business days after the expiration of such ten (10) business day period) the Holder shall regain the rights of a Holder of Series B Preferred Stock with respect to such unconverted shares of Series B Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Company's failure to convert Series B Preferred Stock. (d) The remedies provided in this Amended and Restated Article of Incorporation shall be cumulative and in addition to all other remedies available under this Amended and Restated Article of Incorporation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Amended and Restated Article of Incorporation. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series B Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series B Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (e) Whenever the Company is obligated to purchase or redeem a Holder's Series B Preferred Stock, and the Redemption Price is not paid to the Holder by the tenth (10th) day after the Redemption Price is due and payable to such Holder, the Company shall thereafter pay interest to such Holder on the unpaid portion of the Redemption Price at the rate of ten percent (10%) per annum, compounded annually, until the Redemption Price is paid in full. ARTICLE V The Corporation shall not commence business until at least $50,000.00 has been received by it as consideration for the issuance of shares. ARTICLE VI The principal place of business and the principal office of the Corporation shall be 8923 Sunset Blvd., Los Angeles, CA 90069. Branch offices or other places of business may be established elsewhere in the state of Nevada or without the state of Nevada and in the United States or without the United States as the Board of Directors may determine. ARTICLE VII Provisions for the regulations of the internal affairs of the Corporation will be contained in Bylaws appropriately by the Board of Directors. ARTICLE VIII The governing Board shall be known as Directors. The number of Directors may from time to time be increased or decreased in such manner as shall be provided by the Bylaws, provided that there shall be at least one Director. ARTICLE IX The address of the initial registered office of the Corporation is 3914 Seaton Place, Las Vegas, NV 89121, and the name of its initial resident agent is Business Concepts, Inc. ARTICLE X The name and post office address of the incorporator and one Director signing the Articles of Incorporation is as follows: Janet F. Gallison, P.O. Box 2623, La Jolla, California 92038. ARTICLE XI To the fullest extent permitted by Chapter 78 of the Nevada Revised Statutes as the same exists or may hereafter be amended, an officer or director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages due to breach of fiduciary duty as such officer or director. ARTICLE XII The Corporation is authorized to provide indemnification of agents for breach of duty to the Corporation and its stockholders through bylaw provisions or through agreements with agents, or both, in excess of the indemnification otherwise permitted by law, subject to any limits on such excess indemnification as set forth therein. EX-3.2 5 w97143exv3w2.txt BY-LAWS EXHIBIT 3.2 BYLAWS ARTICLE I OFFICES The registered office of the Corporation in the State of Nevada shall be located in the city and state designated in the Articles of Incorporation. The Corporation may also maintain offices at such other places within or without the State of Nevada as the Board of Directors may, from time to time, determine. ARTICLE II MEETING OF SHAREHOLDERS Section 1 - Annual Meetings: (Chapter 78.310) The annual meeting of the shareholders of the Corporation shall be held at the time fixed, from time to time, by the Directors. Section 2 - Special Meetings: (Chapter 78.310) Special meetings of the shareholders may be called by the Board of Directors or such person or persons authorized by the Board of Directors and shall be held within or without the State of Nevada. Section 3 - Place of Meetings: (Chapter 78.310) Meetings of shareholders shall be held at the registered office of the Corporation, or at such other places, within or without the State of Nevada as the Directors may from time to time fix. If no designation is made, the meeting shall be held at the Corporation's registered office in the state of Nevada. Section 4 - Notice of Meetings: (Section 78.370) (a) Written or printed notice of each meeting of shareholders, whether annual or special, signed by the President, Vice President or Secretary, stating the time when and place where it is to be held, as well as the purpose or purposes for which the meeting is called, shall be served either personally or by mail, by or at the direction of the President, the Secretary, or the Officer or the person calling the meeting, not less than ten or more than sixty days before the date of the meeting, unless the lapse of the prescribed time shall have been waived before or after the taking of such action, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. If mailed, such notice shall be deemed to be given when deposited in the United States mail, addressed to the shareholder as it appears on the share transfer records of the Corporation or to the current address, which a shareholder has delivered to the Corporation in a written notice. (b) Further notice to a shareholder is not required when notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to him or her during the period between those two consecutive annual meetings; or all, and at least two payments sent by first-class mail of dividends or interest on securities during a 12-month period have been mailed addressed to him or her at his or her address as shown on the records of the Corporation and have been returned undelivered. Section 5 -- Quorum: (Section 78.320) (a) Except as otherwise provided herein, or by law, or in the Articles of Incorporation (such Articles and any amendments thereof being hereinafter collectively referred to as the "Articles of Incorporation"), a quorum shall be present at all meetings of shareholders of the Corporation, if the holders of a majority of the shares entitled to vote on that matter are represented at the meeting in person or by proxy. (b) The subsequent withdrawal of any shareholder from the meeting, after the commencement of a meeting, or the refusal of any shareholder represented in person or by proxy to vote, shall have no effect on the existence of a quorum, has been established at such meeting. (c) Despite the absence of a quorum at any meeting of shareholders, the shareholders present may adjourn the meeting. Section 6 -- Voting and Acting: (Section 78.320 & 78.350) (a) Except as otherwise provided by law, the Articles of Incorporation, or these Bylaws, any corporate action, the affirmative vote of the majority of shares entitled to vote on that matter and represented either in person or by proxy at a meeting of shareholders at which a quorum is present, shall be the act of the shareholders of the Corporation. (b) Except as otherwise provided by statue, the Certificate of Incorporation, or these Bylaws, at each meeting of shareholders, each shareholder of the Corporation entitled to vote thereat, shall be entitled to one vote for each share registered in his name on the books of the Corporation. (c) Where appropriate communication facilities are reasonably available, any or all shareholders shall have the right to participate in any shareholders' meeting, by means of conference telephone or any means of communications by which all persons participating in the meeting are able to hear each other. Section 7 -- Proxies: (Section 78.355) Each shareholder entitled to vote or to express consent or dissent without a meeting, may do so either in person or by proxy, so long as such proxy is executed in writing by the shareholder himself, his authorized officer, director, employee or agent or by causing the signature of the stockholder to be affixed to the writing by any reasonable means, including, but not limited to, a facsimile signature, or by his attorney-in-fact there unto duly authorized in writing. Every proxy shall be revocable at will unless the proxy conspicuously states that it is irrevocable and the proxy is coupled with an interest. A telegram, telex, cablegram, or similar transmission by the shareholder, or a photographic, photo static, facsimile, shall be treated as a valid proxy, and treated as a substitution of the original proxy, so long as such transmission is a complete reproduction executed by the shareholder. If it is determined that the telegram, cablegram or other electronic transmission is valid, the persons appointed by the Corporation to count the votes of shareholders and determine the validity of proxies and ballots or other persons making those determinations must specify the information upon which they relied. No proxy shall be valid after the expiration of six months from the date of its execution, unless otherwise provided in the proxy. Such instruments shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. If any shareholder designates two or more persons to act as proxies, a majority of those persons present at the meeting, or, if one is present, then that one has and may exercise all of the powers conferred by the shareholder upon all of the persons so designated unless the shareholder provides otherwise. Section 8 -- Action Without A Meeting: (Section 78.320) Unless otherwise provided for in the Articles of Incorporation of the Corporation, any action to be taken at any annual or special shareholders' meeting, may be taken without a meeting, without prior notice and without a vote if written consents are signed by a majority of the shareholders of the Corporation, except however if a different proportion of voting power is required by law, the Articles of Incorporation or these Bylaws, than that proportion of written consents is required. Such written consents must be filed with the minutes of the proceedings of the shareholders of the Corporation. ARTICLE III BOARD OF DIRECTORS Section 1 -- Number, Term, Election & Qualifications: (Section 78.115, 78.330) (a) The first Board of Directors and all subsequent Boards of the Corporation shall consist of one, unless and until otherwise determined by vote of a majority of the entire Board of Directors. The Board of Directors or shareholders all have the power, in the interim between annual and special meetings of the shareholders, to increase or decrease the number of Directors of the Corporation. A Director need not be a shareholder of the Corporation unless the Certificate of Incorporation of the Corporation or these Bylaws so require. (b) Except as may otherwise be provided herein or in the Articles of Incorporation, the members of the Board of Directors shall be elected at the first annual shareholders' meeting and at each annual meeting thereafter, unless their terms are staggered in the Articles of Incorporation of the Corporation or these Bylaws, by a plurality of the votes cast at a meeting of shareholders, by the holders of shares entitled to vote in the election. (c) The first Board of Directors shall hold office until the first annual meeting of shareholders and until their successors have been duly elected and qualified or until there is a decrease in the number of Directors. Thereinafter, directors will be elected at the annual meeting of shareholders and shall hold office until the annual meeting of the shareholders next succeeding his election, unless their terms are staggered in the Articles of Incorporation (so long as at least one - fourth in number of the Directors of the Corporation are elected at each annual shareholders' meetings) or these Bylaws, or until his prior death, resignation or removal. Any Director may resign at any time upon written notice of such resignation to the Corporation. (d) All Directors of the Corporation shall have equal voting power unless the Articles of Incorporation of the Corporation provide that the voting power of individual Directors or classes of Directors are greater than or less than that of any other individual Directors or classes of Directors, and the different voting powers may be stated in the Articles of Incorporation or any be dependent upon any fact or event that may be ascertained outside the Articles of Incorporation if the manner in which the fact or event may operate on those voting powers is stated in the Articles of Incorporation. If the Articles of Incorporation provide that any Directors have voting power greater than or less than other Directors of the Corporation, every reference in these Bylaws to a majority or other proportion of Directors shall be deemed to refer to majority or other proportion of the voting power of all the Directors or classes of Directors, as may be required by the Articles of Incorporation. Section 2 -- Duties and Powers: (Section 78.120) The Board of Directors shall be responsible for the control and management of the business and affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except such as those stated under Nevada state law, are in the Articles of Incorporation or by these Bylaws, expressly conferred upon or reserved to the shareholders or any other person or persons named therein. Section 3 -- Regular Meetings; Notice: (Section 78.310) (a) A regular meeting of the Board of Directors shall be held either within or without the State of Nevada at such time and at such place as the Board shall fix. (b) No notice shall be required of any regular meeting of the Board of Directors and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting when such time and place was fixed before such change, notice of such action shall be given to each Director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in these Bylaws with respect to special meetings, unless notice shall be waived in the manner set forth in these Bylaws. Section 4 - Special Meetings; Notice: (Section 78.310) (a) Special meetings of the Board of Directors shall be held at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required statute, written notice of special meetings shall be mailed directly to each Director, addressed to him at his residence or usual place of business, or delivered orally, with sufficient time for the convenient assembly of Directors thereat, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meetings is to be held. If mailed, the notice of any special meeting shall be deemed to be delivered on the second day after it is deposited in the United States, so addressed, with postage prepaid. If notice is given by telegram, it shall be deemed to be delivered when the telegram is delivered to the telegraph company. A notice, or waiver of notice, except as required by these Bylaws, need not specify the business to be transacted at or the purpose or purposes of the meeting. (c) Notice of any special meeting shall not be required to be given to any Director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairperson: The Chairperson of the Board, if any and if present, shall preside at all meetings of the Board of Directors. If there shall be no Chairperson, or he or she shall be absent, then the President shall preside, and in his absence, any other Directors chosen by the Board of Directors shall preside. Section 6 - Quorum and Adjournments: (Section 78.315) (a) At all meetings of the Board of Directors, or any committee thereof, the presence of a majority of the entire Board, or such committee thereof, shall constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or these Bylaws. (b) A majority of the Directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, whether or not a quorum exists. Notice of such adjourned meeting shall be given to Directors not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors who were present at the adjourned meeting. Section 7 - Manner of Acting: (Section 78.315) (a) At all meetings of the Board of Directors, each Director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by law, by the Articles of Incorporation, or these Bylaws, action approved by a majority of the votes of the Directors present at any meeting of the Board or any committee thereof, at which a quorum is present shall be the act of the Board of Directors or any committee thereof. (c) Any action authorized in writing made prior or subsequent to such action, by all of the Directors entitled to vote thereon and filed with the minutes of the Corporation shall be the act of the Board of Directors, or any committee thereof, and have the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board or committee for all purposes. (d) Where appropriate communications facilities are reasonably available, any of all Directors shall have the right to participate in any Board of Directors meeting, or a committee of the Board of Directors meeting, by means of conference telephone or any means of communications by which all persons participating in the meeting are able to hear each other. Section 8 - Vacancies: (Section 78.355) (a) Unless otherwise provided for by the Articles of Incorporation of the Corporation, any vacancy in the Board of Directors occurring by reason of an increase in the number of Directors, or by reason of the death, resignation, disqualification, removal or inability to act of any Director, or other cause, shall be filled by an affirmative vote of a majority of the remaining Directors, though less than a quorum of the Board or by sole remaining Director, at any regular meeting or special meeting of the Board of Directors called for that purpose except whenever the shareholders of any class or classes or series thereof are entitled to elect one or more Directors by the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by a sole remaining Director so elected. (b) Unless otherwise provided for by law, the Articles of Incorporation or these Bylaws, when one or more Directors shall resign from the Board and such resignation is effective at a future date, a majority of the Directors, then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote otherwise to take effect when such resignation or resignations shall become effective. Section 9 - Resignation: (Section 78.355) A Director may resign at any time by giving written notice of such resignation to the Corporation. Section 10 - Removal: (Section 78.355) Unless otherwise provided for by the Articles of Incorporation, one or more or all the Directors of the Corporation may be removed with or without cause at any time by a vote of two-thirds of the shareholders entitled to vote thereon, at a special meeting of the shareholders called for that purpose, unless the Articles of Incorporation provide that Directors may only be removed for cause, provided however, such Director shall not be removed if the Corporation states in its Articles of Incorporation that its Directors shall be elected by cumulative voting and there are a sufficient number of shares cast against his or her removal, which if cumulatively voted at an election of Directors would be sufficient to elect him or her. If a Director was elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that Director. Section 11 - Compensation: (Section 78.140) The Board of Directors may authorize and establish reasonable compensation of the Directors for services to the Corporation as Directors, including, but not limited to attendance at any annual or special meeting of the Board. Section 12 - Committee: (Section 78.125) Unless otherwise provided for by the Articles of Incorporation of the Corporation, the Board of Directors, may from time to time designate from its members one or more committees, and alternative members thereof, as they deem desirable, each consisting of one or more members, with such powers and authority (to the extent permitted by law and these Bylaws) as may be provided in such resolution. Unless the Articles of Incorporation or Bylaws state otherwise, the Board of Directors may appoint natural persons who are not Directors to serve on such committees authorize herein. Each such committee shall serve at the pleasure of the Board and, unless otherwise, stated by law, the Certificate of Incorporation of the Corporation or these Bylaws, shall be governed by the rules and regulations state herein regarding the Board of Directors. ARTICLE IV OFFICERS Section 1 - Number, Qualifications, Election and Term of Office: (Section 78.130) (a) The Corporation's officers shall have such titles and duties as shall be stated in these Bylaws or in a resolution of the Board of Directors which is not inconsistent with these Bylaws. The officers of the Corporation shall consist of a President, Secretary and Treasurer, and also may have one or more Vice Presidents, assistant secretaries and assistant treasurers and such other officers as the Board of Directors may from time to time deem advisable. Any officer may hold two or more offices in the Corporation. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meetings of the Board following the annual meeting of shareholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal. Section 2 - Resignation: Any officer may resign at any time by giving written notice of such resignation to the Corporation. Section 3 - Removal: Any officer elected by the Board of Directors may be removed, either with or without cause, and a successor elected by the Board at any time, and any officer or assistant officer, if appointed by another officer, may likewise be removed by such officer. Section 4 - Vacancies: A vacancy, however caused, occurring in the Board and any newly created Directorships resulting from an increase in the authorized number of Directors may be filled by the Board of Directors. Section 5 - Bonds: The Corporation may require any or all of its officers or Agents to post a bond, or otherwise, to the Corporation for the faithful performance of their positions or duties. Section 6 - Compensation: The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors. ARTICLE V SHARES OF STOCK Section 1 - Certificate of Stock: (Section 78.235) (a) The shares of the Corporation shall be represented by certificates or shall be uncertified shares. (b) Certified shares of the Corporation shall be signed, (either manually or facsimile), by officers or agents designated by the Corporation for such purposes, and shall certify the number of shares owned by him in the Corporation. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the Corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If the Corporation uses facsimile signatures of its officers and agents on its stock certificates, it cannot act as registrar of its stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities. If any officer who has signed or whose facsimile signature has been placed upon such certificate, shall have ceased to be such officer before such certificates is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (c) If the Corporation issues uncertificated shares as provided for in these Bylaws, within a reasonable time after the issuance or transfer of such uncertificated shares, and at least annually thereafter, the Corporation shall send the shareholder a written statement certifying the number of shares owned by such shareholder in the Corporation. (d) Except as otherwise provided by law, the rights and obligations of the holders of uncertified shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. Section 2 - Lost or Destroyed Certificates: (Section 104.8405) The Board of Directors may direct a new certificate to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed if the owner: (a) so requests before the Corporation has notice that the shares have been acquired by a bona fide purchaser, (b) files with the Corporation a sufficient indemnity bond; and (c) satisfies such other requirements, including evidence of such loss, theft or destruction, as may be imposed by the Corporation. Section 3 - Transfers of Shares: (Section 104.8401, 104.8406 & 104.8416) (a) Transfers or registration of transfer of shares of the Corporation shall be made on the stock transfer books of the Corporation by the registered holder thereof, or by his attorney duly authorized by a written power of attorney; and in the case of shares represented by certificates, only after the surrender to the Corporation of the certificates representing such shares with such shares properly endorsed, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and the payment of all stock transfer taxes due thereon. (b) The Corporation shall be entitled to treat the holder of record of any shares or shares as the absolute owner thereof for all purposes, and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: (Section 78.215 & 78.350) (a) The Board of Directors may fix, in advance, which shall not be more than sixty days before the meeting or action requiring a determination of shareholders, as the record date for the determination of shareholders entitled to receive notice of, or to vote at, any meeting of shareholders, entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for shareholders entitled to notice of meeting shall be at the close of business on the day preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held, or if notice is waived, at the close of business on the day before the day on which the meeting is held. (b) The Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted for shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights of shareholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. (c) A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjournment meeting. Section 5 - Fractions of Shares/Scrip: (Section 78.205) The Board of Directors may authorize the issuance of certificates or payment of money for fractions of a share, either represented by a certificate or uncertificated, which shall entitle the holder to exercise voting rights, receive dividends and participate in any assets of the Corporation in the event of liquidation, in proportion to the fractional holdings; or it may authorize the payment in case of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the manual or facsimile signature of an officer or agent of the Corporation or its agents for that purpose, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of shareholder, except as therein provided. The scrip may contain any provisions or conditions that the Corporation deems advisable. If a script ceases to be exchangeable for full share certificates, the shares that would otherwise have been issuable as provided on the scrip are deemed to be treasury shares unless the scrip contains other provisions for their disposition. ARTICLE VI DIVIDENDS (Section 78.215 & 78.288) (a) Dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time as the Board of Directors may determine and shares may be issued pro rata and without consideration to the Corporation's shareholders or to the shareholders of one or more classes or series. (b) Shares of one class or series may not be issued as a share dividend to shareholders of another class or series unless: (i) so authorized by the Articles of Incorporation; (ii) a majority of the shareholders of the class or series to be issued approve the issue; or (iii) there are no outstanding shares of the class or series of shares that are authorized to be issued. ARTICLE VII FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII CORPORATE SEAL (Section 78.065) The corporate seal, if any, shall be in such form as shall be prescribed and altered, from time to time, by the Board of Directors. The use of a seal or stamp by the Corporation on corporate documents is not necessary and the lack thereof shall not in any way affect the legality of a corporate document. ARTICLE IX AMENDMENTS Section 1 - By Shareholders: All Bylaws of the Corporation shall be subject to alteration or repeal, and new Bylaws may be made, by a majority vote of the shareholders at the time entitled to vote in the election of Directors even though these Bylaws may also be altered, amended or repealed by the Board of Directors. Section 2 - By Directors: (Section 78.120) The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, Bylaws of the Corporation. ARTICLE X WAIVER OF NOTICE: (Section 78.375) Whenever any notice is required to be given by law, the Articles of Incorporation or these Bylaws, a written waiver signed by the person or persons entitled to such notice, whether before or after the meeting by any person, shall constitute a waiver of notice of such meeting. ARTICLE XI INTERESTED Directors: (Section 78.140) No contract or transaction shall be voided or avoidable if such contract or transaction is between the Corporation and one or more of its Directors or Officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors or Officers, are directors or officers, of have a financial interest, when such director or Officer is present at or participates in the meeting of the Board, or the committee of the shareholders which authorizes the contract or transaction or his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and are noted in the minutes of such meeting, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even the disinterested Directors be less than a quorum; or (b) the material facts as to his, her or their relationship or relationships or interest or interests and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the shareholders; or (d) the fact of the common directorship, office or financial interest is not disclosed or known to the Director or Officer at the time the transaction is brought before the Board of Directors of the Corporation for such action. Such interested Directors may be counted when determining the presence of a quorum at the Board of Directors' or committee meeting authorizing the contract or transaction. ARTICLE XII ANNUAL LIST OF OFFICERS, DIRECTORS AND REGISTERED AGENT: (Section 78.150 & 78.165) The Corporation shall, within sixty days after the filing of its Articles of Incorporation with the Secretary of State, and annually thereafter on or before the last day of the month in which the anniversary date of incorporation occurs each year, file with the Secretary of State a list of its President, Secretary and Treasurer and all of its Directors, along with the post office box or street address, either residence or business, and a designation or its resident agent in the state of Nevada. Such list shall be certified by an officer of the Corporation. *Unless otherwise stated herein all references to "Sections" in these Bylaws refer to those sections contained in Title 78 of the Nevada Private Corporations Law. EX-4.1 6 w97143exv4w1.txt SPECIMEN CERTIFICATE OF COMMON STOCK Exhibit 4.1 [JILL KELLY PRODUCTIONS LOGO] NUMBER JKP JILL KELLY PRODUCTIONS HOLDING, INC. A NEVADA CORPORATION COMMON STOCK SHARES CUSIP 47741U 10 8 SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the owner of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE PER SHARE, OF JILL KELLY PRODUCTIONS HOLDING, INC. CERTIFICATE OF STOCK (the "Company") transferable in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. The holder hereof accepts said shares of common stock with notice of and subject to, the provisions of the Company's Certificate of Incorporation and Bylaws and all amendments thereto. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrant. WITNESS the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Dated: 10-2-03 10-2-03 [JILL KELLY PRODUCTIONS HOLDING, INC. CORPORATE SEAL 1998 NEVADA] /s/ Robert Friedland /s/ Robert Friedland SECRETARY PRESIDENT COUNTERSIGNED AND REGISTERED: CONTINENTAL STOCK TRANSFER & TRUST COMPANY (JERSEY CITY, NJ) BY TRANSFER AGENT AND REGISTRAR AUTHORIZED OFFICER EX-4.2 7 w97143exv4w2.txt FORM OF WARRANT EXHIBIT 4.2 VOID AFTER 5:00 P.M., NEW YORK TIME ON THE EXPIRATION DATE WARRANT TO PURCHASE _________________ SHARES OF COMMON STOCK WARRANT TO PURCHASE COMMON STOCK OF JILL KELLY PRODUCTIONS HOLDING, INC. NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER RULE 506 OF REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. FOR VALUE RECEIVED, Jill Kelly Productions Holding, Inc., a Nevada corporation (the "Company"), grants the following rights to ______________, with its address at ________________________________and/or its assigns (the "Holder"): ARTICLE 1. DEFINITIONS. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Subscription Agreement and entered into on or about August 4, 2003 (the "Subscription Agreement"). As used in this Agreement, the following terms shall have the following meanings: "Exercise Date" shall mean any date on which the Holder gives the Company a Notice of Exercise attached hereto as Appendix I. "Exercise Price" shall mean the Fixed Price per share of Common Stock, subject to adjustment as provided herein. "Expiration Date" shall mean 5:00 p.m. (New York time) on August 10, 2008. "Fixed Price" shall mean US$0.25. 1 "Warrant Shares" shall mean the shares of the Common Stock issuable upon exercise of this Warrant. ARTICLE 2. EXERCISE AND AGREEMENTS. 2.1 Exercise of Warrant. This Warrant shall entitle the Holder to purcahse, at the Exercise Price, ______________ shares of Common Stock. This Warrant shall be exercisable at any time and from time to time from the Closing Date to the Expiration Date (the "Exercise Period"). This Warrant and the right to purchase Warrant Shares hereunder shall expire and become void on the Expiration Date. 2.2 Manner of Exercise. The Holder may exercise this Warrant at any time and from time to time during the Exercise Period, in whole or in part (but not in denominations of fewer than 5,000 Warrant Shares, except upon an exercise of this Warrant with respect to the remaining balance of Warrant Shares purchasable hereunder at the time of exercise), by delivering to the Company at (i) a duly executed Notice of Exercise in substantially the form attached as Appendix I hereto, (ii) the certificate representing the Warrants and (iii) a bank cashier's or certified check for the aggregate Exercise Price of the Warrant Shares being purchased. 2.3 Termination. All rights of the Holder in this Warrant, to the extent they have not been exercised, shall terminate on the Expiration Date. 2.4 No Rights Prior to Exercise. This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company. 2.5 Fractional Shares. No fractional shares shall be issuable upon exercise of this Warrant, and the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. If, upon exercise of this Warrant, the Holder hereof would be entitled to receive any fractional share, the Company shall issue to the Holder one additional share of Common Stock in lieu of such fractional share. 2.6 Adjustments to Exercise Price and Number of Securities. (a) Subdivision and Combination. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of combination. (b) Adjustment in Number of Securities. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 2.6, the number of Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest whole number by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. 2 (c) Merger or Consolidation. In case of any consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification or change of the outstanding Common Stock), the corporation formed by such consolidation or merger shall execute and deliver to the Holder a supplemental warrant agreement providing that the Holder of each Warrant then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrant) to receive, upon exercise of such Warrant, the kind and amount of shares of stock and other securities and property (except in the event the property is cash, then the Holder shall have the right to exercise the Warrant and receive cash in the same manner as other stockholders) receivable upon such consolidation or merger, by a holder of the number of shares of Common Stock of the Company for which such warrant might have been exercised immediately prior to such consolidation, merger, sale or transfer. Such supplemental warrant agreement shall provide for adjustments which shall be identical to the adjustments provided in Section 2.6. The foregoing provisions of this paragraph (e) shall similarly apply to successive consolidations or mergers. ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY 3.1 Representations and Warranties. In addition to the representations and warranties contained in Section 2 of the Subscription Agreement, the Company hereby represents and warrants to the Holder as follows: (a) All shares which may be issued upon the exercise of the purchase right represented by this Warrant shall, upon issuance, (i) be duly authorized, validly issued, fully-paid and non-assessable, (iii) free and clear of all liens, claims and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws, and (iii) not be subject to any pre-emptive rights. (b) The Company is a corporation duly organized and validly existing under the laws of the State of Nevada, and has the full power and authority to issue this Warrant and to comply with the terms hereof. The execution, delivery and performance by the Company of its obligations under this Warrant, including, without limitation, the issuance of the Warrant Shares upon any exercise of the Warrant, have been duly authorized by all necessary corporate action. This Warrant has been duly executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable in accordance with its terms, except (i) as enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting enforceability of creditors' rights generally and (ii) as the availability of the remedy of specific enforcement, injunctive relief or other equitable relief may be subject to the discretion of any court before which any proceeding therefor may be brought. (c) The Company is not subject to or bound by any provision of any certificate or articles of incorporation or by-laws, mortgage, deed of trust, lease, note, 3 bond, indenture, other instrument or agreement, license, permit, trust, custodianship, other restriction or any applicable provision of any law, statute, rule, regulation, judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator which could prevent or be violated by or under which there would be a default (or right of termination) as a result of the execution, delivery and performance by the Company of this Warrant. (d) The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act and is current in the filing of all reports required to be filed thereunder. The Company is eligible to issue the Warrants and the Warrant Shares pursuant to Rule 506 of Regulation D promulgated under the Securities Act. ARTICLE 4. MISCELLANEOUS 4.1 Transfer. This Warrant may not be offered, sold, transferred, pledged, assigned, hypothecated or otherwise disposed of, in whole or in part, at any time, except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of an investment representation letter and a legal opinion reasonably satisfactory to the Company); provided further, that this Warrant may not be transferred or assigned such that either the Holder or any transferee will, following such transfer or assignment, hold a Warrant for the right to purchase less than 5,000 Warrant Shares. 4.2 Transfer Procedure. Subject to the provisions of Section 4.1, the Holder may transfer or assign this Warrant by giving the Company notice setting forth the name, address and taxpayer identification number of the transferee or assignee, if applicable (the "Transferee"), and surrendering this Warrant to the Company for reissuance to the Transferee and, in the event of a transfer or assignment of this Warrant in part, the Holder. (Each of the persons or entities in whose name any such new Warrant shall be issued are herein referred to as a "Holder"). 4.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall become mutilated or defaced or be destroyed, lost or stolen, the Company shall execute and deliver a new Warrant in exchange for and upon surrender and cancellation of such mutilated or defaced Warrant or, in lieu of and in substitution for such Warrant so destroyed, lost or stolen, upon the Holder filing with the Company an affidavit that such Warrant has been so mutilated, defaced, destroyed, lost or stolen. However, the Company shall be entitled, as a condition to the execution and delivery of such new Warrant, to demand reasonably acceptable indemnity to it and payment of the expenses and charges incurred in connection with the delivery of such new Warrant. Any Warrant so surrendered to the Company shall be canceled. 4.4 Notices. All notices and other communications from the Company to the Holder or vice versa shall be deemed delivered and effective when given personally, by facsimile transmission with confirmation sheet at such address and/or facsimile number 4 as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or the Holder from time to time. 4.5 Waiver. This Warrant and any term hereof may be changed, waived, or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. 4.6 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles regarding conflicts of law. Any action to enforce the terms of this Warrant shall be exclusively heard in the county, state and federal Courts of New York and Country of the United States of America. 4.7 Signature. In the event that any signature on this Warrant is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same, with the same force and effect as if such facsimile signature page were an original thereof. 4.8 Legal Fees. In the event any Person commences a legal action or proceeding to enforce its rights under this Warrant, the non-prevailing party to such action or proceeding shall pay all reasonable costs and expenses (including reasonable attorney's fees) incurred in enforcing such rights. Dated: August 11, 2003 JILL KELLY PRODUCTIONS HOLDING, INC. By:_____________________________ Name: Robert Friedland Title: CEO Attest: ________________________________ Name: Ronald Stone Title: COO/CFO 5 APPENDIX I NOTICE OF EXERCISE 1. The undersigned hereby elects to purchase ______ shares of Common Stock, par value $.001 per share, of Jill Kelly Productions Holding, Inc. at $0.25 per share for a total of $______ and pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate Exercise Price of such Warrant Shares in full. 2. Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: Dated: _____________________________ By: ______________________________ Name:_____________________________ Title:____________________________ 6 EX-10.1 8 w97143exv10w1.txt PROMISSORY NOTE FOR $778,414.05 Exhibit 10.1 PROMISSORY NOTE $778,414.05 December 30, 2003 FOR VALUE RECEIVED, the undersigned, Jill Kelly Productions, Inc. the "Obligor"), hereby promises to pay to The Matzuda Corporation (the "Holder"), the principal sum of Seven Hundred Seventy Eight Thousand, Four Hundred Fourteen and 15/100 Dollars ($778,414.05) payable as set forth below. The outstanding balance of principal shall bear interest at the rate of fifteen percent (15%) per annum. Any amount of principal and interest not paid when due shall thereafter bear interest at the rate of eighteen percent (18%) per annum until paid. The payments of principal and interest hereunder shall be made in currency of the United States of America which at the time of payment shall be legal tender therein for the payment of public and private debts. This Note shall be subject to the following additional terms and conditions: 1. Payments. Interest on the principal balance outstanding from time to time shall be by March 31, 2005 (Maturity Date). In the event that any payment to be made hereunder shall be or become due on Saturday, Sunday or any other day which is a legal bank holiday under the laws of the California, such payment shall be or become due on the next succeeding business day. 2. Prepayment. The Holder and the Obligor agree and understand that the entire principal amount, or any portion thereof, of this Note outstanding may be prepaid at any time prior to the Maturity Date. 3. No Waiver. No failure or delay by the Holder in exercising any right, power or privilege under this Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. No course of dealing between the Obligor and the Holder shall operate as a waiver of any rights by the Holder. 4. Place of Payment. All payments of principal of this Note and the interest due hereon shall be made at such place as the Holder may from time to time designate in writing. 5. Events of Default: Remedies. The term "EVENT OF DEFAULT" hereunder shall mean the occurrence of one or more of the following: (a) The nonpayment, when due, of any amount payable under this Note or any other instrument, agreement or document by or between Holder and Obligor; (b) Obligor shall become insolvent, make an assignment for the benefit of creditors or file or have filed against it any petition, actions, or case or proceeding, voluntarily or 1 involuntarily under any law or statute regarding bankruptcy, insolvency, reorganization, receivership or dissolution; (c) Any material breach of the representations, warranties, covenants or agreements contained in that certain Master Agreement dated as of the date hereof by and between Obligor and Holder, the Operating Agreement of Obligor or any document or instrument entered into or issued in connection therewith. 5. Severability. In the event that one or more of the provisions of this Note shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 6. Governing Law and Jurisdiction. This Note and the right and obligations of the Obligor and the Holder shall be governed by and construed in accordance with the laws of the State of California. The obligor consents to the jurisdiction of the federal and state courts located in California in any action commenced to enforce this Note. 7. Notice. Any notice given pursuant to this Note shall be in writing and shall be delivered by hand, or by certified or registered mail, postage prepaid, or by telex or telecopy, or by Federal Express, DHL or other similar courier, addressed to the party to whom intended at the address set forth above, or such other address as such party may designate by appropriate notice, and such notice shall be deemed given when personally delivered, mailed, sent or deposited with a courier, as the case may be. IN WITNESS WHEREOF, the OBLIGOR and HOLDER has signed this Note as of this 30th day of December, 2003. OBLIGOR: JILL KELLY PRODUCTIONS, INC. By: /s/ ---------------------------- Ronald C. Stone, Chief Financial Officer THE MATZUDA CORPORATION By: /s/ Robert A. Friedland ---------------------------- Name: Robert A. Friedland Title: President 2 EX-10.2 9 w97143exv10w2.txt KORETSKY SETTLEMENT AGREEMENT EXHIBIT 10.2 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 21st day of September, 2003, by and between Michael Koretsky whose address is 1064 Buck Creek Circle, Yardley, PA 19067, phone number (609) 209-1592 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $250,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder Two Hundred Fifty Thousand Dollars ($250,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 2,500 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 250,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland ------------------------------- Robert Friedland /s/ Michael Koretsky ------------------------------- Michael Koretsky EX-10.3 10 w97143exv10w3.txt LONG SETTLEMENT AGREEMENT EXHIBIT 10.3 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 30th day of September, 2003, by and between James L. Long, whose address is 3845 Saint James Court, Boca Raton, FL 33434-3368, phone number: (561) 483-7440, fax number: (561) 483-7443 ("Long") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, and Long entered into four separate Production and Distribution Agreements, each dated August 4, 2000 (the "Production and Distribution Agreements"), each attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, the Production and Distribution Agreements provide that Long would contribute capital for the completion of each production and that Long would be repaid his capital contribution by JKP and receive forty percent (40%) of the net profit; WHEREAS, it is the desire of JKXJ and Long to amend certain terms of the Production and Distribution Agreements; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Capital Contributions. The Production and Distribution Agreements provide in Section 4 that "[t]he investor will be paid his capital contribution first and then the capital contribution of JKP will be returned. Following the full repayment of the capital contributions, the net profit will be distributed 40% to the Investor and 60% to JKP." Long is owed a total of $130,000 (the "Obligation") under the Production and Distribution Agreements of which $10,000 has been paid to Long in cash from JKP. 2. Series A Preferred Shares. The Obligation shall be paid in the form of 1,200 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 120,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, Long must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. Such payment of the Obligation shall discharge in full Long's obligation to pay for the Preferred Shares and Warrants notwithstanding the payment obligation of Long under the Subscription Agreement referred to below. 3. Royalties. Long will continue to be entitled to 40% of the net profit under the Production and Distribution Agreements. 4. Full Force and Effect. Besides for Section 4, the remaining sections and portions of the Production and Distribution Agreements remain in full force and effect. 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by Long or JKXJ to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to JKXJ and Long, respectively, at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to Long: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland ----------------------------- Robert Friedland, President /s/ James Long ----------------------------- Name: James Long EX-10.4 11 w97143exv10w4.txt BAXTER SETTLEMENT AGREEMENT EXHIBIT 10.4 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 31st day of October, 2003, by and between William O. Baxter whose address is 30460 Hasley Canyon Road, Castiac, CA 91340, ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $100,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder One Hundred Thousand Dollars ($100,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 1,000 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 100,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 1 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 2 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] 3 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland ------------------------------- Robert Friedland, CEO /s/ William O. Baxter ------------------------------- William O. Baxter 4 EX-10.5 12 w97143exv10w5.txt FRIEDLAND SETTLEMENT AGREEMENT EXHIBIT 10.5 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 17th day of November, 2003, by and between Robert A. Friedland Trust, a [ ], whose address is P.O. Box 691447, Los Angeles, California 90069, phone number: (310) 360-7900, fax number: (310) 360-7933 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $1,250,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder One Million Two Hundred Fifty Thousand Dollars ($1,250,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 12,500 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 1,250,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, $1,250,000 of the Note shall be satisfied (the "Satisfied Portion"). 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder, with respect to the Satisfied Portion, releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Ronald Stone ------------------------------ Ronald Stone, COO Robert A. Friedland Trust By: /s/ Robert A. Friedland -------------------------------- Robert A. Friedland, Trustee EX-10.6 13 w97143exv10w6.txt PATTERSON SETTLEMENT AGREEMENT EXHIBIT 10.6 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 19th day of November, 2003, by and between Ronald V. Patterson whose address is 436 Orange Grove Ave., Los Angeles, CA 90024, phone number (818) 361-3046 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $100,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder One Hundred Thousand Dollars ($100,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 1,000 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 100,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland ------------------------------- Robert Friedland, CEO /s/ Ronald V. Patterson ------------------------------ Ronald V. Patterson EX-10.7 14 w97143exv10w7.txt LONDON SETTLEMENT AGREEMENT EXHIBIT 10.7 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 19th day of November, 2003, by and between Joseph London whose address is 21800 Oxnard Street, Suite 1190, Woodland Hills, CA 91367, phone number (818) 593-2266 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $100,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder One Hundred Thousand Dollars ($100,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 1,000 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 100,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 1 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 2 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] 3 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland -------------------------------- Robert Friedland, CEO /s/ Joseph London -------------------------------- Joseph London 4 EX-10.8 15 w97143exv10w8.txt SLIPYAN SETTLEMENT AGREEMENT EXHIBIT 10.8 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 25th day of November, 2003, by and between Michael Slipyan whose address is 1703 Kelton Ave., Los Angeles, CA 90024, phone number (310) 479-6183 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $25,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder Twenty Five Thousand Dollars ($25,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 250 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 25,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 1 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 2 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] 3 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland -------------------------------- Robert Friedland, CEO /s/ Michael Slipyan ------------------------------- Michael Slipyan 4 EX-10.9 16 w97143exv10w9.txt JOHNSON SETTLEMENT AGREEMENT EXHIBIT 10.9 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into this 23rd day of January, 2004, by and between Kate Edleman Johnson whose address is 1017 Ridgedale Drive, Beverly Hills, CA 90210, phone number (310) 276-6565 ("Holder") and Jill Kelly Productions Holding, Inc., a Nevada corporation ("JKXJ"), for mutual consideration and the purposes expressed herein. RECITALS WHEREAS, Jill Kelly Productions, Inc. ("JKP"), a Delaware corporation and a wholly owned subsidiary of JKXJ, issued a certain promissory note (the "Promissory Note") for $25,000 to the Holder attached hereto as Exhibit A and incorporated herein by reference; WHEREAS, it is the desire of JKXJ and the Holder to satisfy the Promissory Note with the issuance of certain shares of JKXJ to the Holders; NOW THEREFORE, in exchange for the mutual premises and consideration contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows: 1. Acknowledgement of Debt. JKXJ acknowledges that it owes the Holder Twenty Five Thousand Dollars ($25,000) plus applicable interest pursuant to the Note (the "Obligation"). 2. Series A Preferred Shares. The Obligation shall be paid in the form of 250 Series A Preferred Shares of JKXJ (the "Preferred Shares") and 25,000 warrants (the "Warrants") to purchase common stock of JKXJ. Each Warrant entitles the holder to purchase one share of the JKXJ's common stock at an exercise price of $0.25 per Warrant for a period of five years from issuance. In order to receive the Preferred Shares and the Warrants, the Holder must complete the Subscription Agreement attached hereto at Exhibit B and the Investor Questionnaire attached hereto as Exhibit C. 3. Satisfaction of Note. Once the Preferred Shares and the Warrants are issued to the Holder, the Note shall be satisfied in full and there shall be no further obligations of JKXJ related to the Note. 4. Release. Upon receipt of the Preferred Shares and the Warrants, Holder releases and discharges JKXJ, and its members, affiliates, principals, partners, employees, officers, directors, attorneys, agents, and their heirs, executors, administrators, successors, and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, known or unknown, which Holder, its heirs, executors, administrators, successors, and assigns, ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world though the date hereof. 5. Miscellaneous. (a) Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, then such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. (b) This Agreement may be executed in separate counterparts, each of which is deemed to be an original hereof, and all of which taken together shall constitute one and the same agreement. (c) Descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or affect the meaning or interpretation of this Agreement. (d) The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the state of New York. This Agreement shall be enforced in accordance with, and all questions regarding the construction, validity, interpretation and purpose of this Agreement shall be governed by, the internal laws of the state of New York, without giving effect to provisions thereof regarding conflict of laws. Any action to enforce the terms of this Agreement shall be brought exclusively in the state and/or federal courts situate in the county and state of New York. Service of process in any action by either party to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the other party at the address set forth in this Agreement. (f) Except as otherwise provided herein, any notice provided for in this Agreement must be in writing and must be either (a) hand delivered, (b) mailed by registered or certified first class mail, postage prepaid with return receipt requested, (c) sent by reputable overnight courier service for next business morning delivery, or (d) sent by telecopy to the recipient at the address/telecopy number below indicated: If to JKXJ: Jill Kelly Productions Holdings, Inc. P.O. Box 691447 Los Angeles, CA 90069 Attn.: Robert Friedland Telephone: (310) 360-7900 Facsimile: (310) 360-7933 With a copy to: Gottbetter & Partners, LLP 488 Madison Avenue New York, New York 10022 Attn.: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901 If to the Holder: to the address in the preamble or such other address/telecopy number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given (i) on the date such notice is hand delivered, (ii) three (3) days after the date of mailing if mailed by certified or registered mail, (iii) on the business day next following the day notice is sent via overnight courier service, or (iv) as of the beginning of the next day if such notice is sent by telecopy. (g) This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements and/or representations by or between the parties, written or oral, related to the subject matter hereof in any way. (h) No waiver of any of the provisions hereof shall be effective unless in writing and signed by the party to be charged with such waiver. No waiver shall be deemed a continuing waiver or waiver in respect of any subsequent breach or default, whether of similar or different nature, unless expressly so stated in writing. (i) Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (j) Notwithstanding any rule of law or custom to the contrary, neither this Agreement nor any other agreement or document collateral to or otherwise relating to this Agreement shall be interpreted or construed against any party merely by reason of the fact that such agreement or document was prepared by or at the direction of such party or that such party caused this Agreement to be drafted. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert Friedland ---------------------------------- Robert Friedland, CEO /s/ Kate Edleman Johnson --------------------------------- Kate Edleman Johnson EX-10.10 17 w97143exv10w10.txt FORM OF SUBSCRIPTION AGREEMENT EXHIBIT 10.10 [FORM OF] SUBSCRIPTION AGREEMENT IDC Technologies, Inc. 100 Europa Drive, Suite 421 Chapel Hill, N.C. 27517 Gentlemen: 1. Pursuant to the terms of the offer made by IDC Technologies, Inc. (the "Company"), the undersigned hereby tenders this subscription and applies for the purchase of the number of units ("Units") of the Company set forth on the signature page hereto, at a purchase price of US$100 per Unit, each Unit consisting of (a) one share ("Shares") of Series A Preferred Stock, $.001 par value per share (the "Preferred Stock") with a stated value of $100 per share (the "Stated Value"), and (b) one hundred common stock purchase warrants (the "Warrants"). Each Warrant entitles the holder to purchase one share of the Company's common stock ("Warrant Shares") at an exercise price of US$.25 per Warrant Share for a period of five years from issuance (the "Exercise Period"). The form of Warrant is annexed hereto as Exhibit A. The Company is offering a minimum of 5,000 units ($500,000) and a maximum of 30,000 units ($3,000,000) (the "Offering") at $100 per Unit. The subscriber is sending: (1) an executed copy of this Subscription Agreement, (2) a completed copy of the appropriate Confidential Purchaser Questionnaire (for U.S. Individuals or Organizations), and (3) EITHER A CHECK IN US FUNDS made out to "Gottbetter & Partners, LLP, as Escrow Agent" for the full amount of the purchase price for the Units for which the undersigned is subscribing to: Gottbetter & Partners, LLP 630 Third Avenue, 5th Floor New York, New York 10017 Attn: Adam S. Gottbetter, Esq. OR The subscriber may WIRE TRANSFER immediately available U.S. funds for the full amount of the purchase price of the Units for which the undersigned is subscribing plus all wire transfer fees to: Gottbetter & Partners, LLP Iola Account Citibank N.A. 330 Madison Avenue New York,N.Y. 10017 ABA Routing No.: 021000089 Account No.: 49061322 Reference: (Your Name) for IDC Technologies, Inc. 1 2. Representations and Warranties. In order to induce the Company to accept this subscription, the undersigned hereby represents and warrants to, and covenants with, the Company as follows: (a) The undersigned has received and carefully reviewed such information and documentation relating to the Company that the undersigned has requested, and has also had full and complete access to the business plan and financial statements of Jill Kelly Productions, Inc., a Delaware corporation. (b) The undersigned has had a reasonable opportunity to ask questions of and receive answers from the Company concerning the Company and the Offering, and all such questions, if any, have been answered to the full satisfaction of the undersigned; (c) The undersigned has such knowledge and expertise in financial and business matters that the undersigned is capable of evaluating the merits and risks involved in an investment in the Units; (d) The undersigned understands that the Company has determined that the exemption from the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"), provided by Rule 506 of Regulation D is applicable to the offer and sale of the Units, based, in part, upon the representations, warranties and agreements made by the undersigned herein, and in the Confidential Purchaser Questionnaire referred to above. (e) Except as set forth herein, no representations or warranties have been made to the undersigned by the Company or any agent, employee or affiliate of the Company and in entering into this transaction the undersigned is not relying upon any information, other than the results of independent investigation by the undersigned; (f) The undersigned has full power and authority to execute and deliver this Subscription Agreement and to perform the obligations of the undersigned hereunder and this Subscription Agreement is a legally binding obligation of the undersigned in accordance with its terms; (g) Regulation D (i) The undersigned understands and acknowledges that (A) none of the shares of Preferred Stock, the shares of common stock issuable upon conversion of the Preferred Stock or the Warrant shares (collectively the "Securities") have been registered under the Securities Act or the securities laws of any state, based upon an exemption from such registration requirements for non-public offerings pursuant to Rule 506 of Regulation D under the Securities Act; (B) the Securities are and will be "restricted securities", as said term is defined in Rule 144 of the Rules and Regulations promulgated under the Securities Act; (C) the Securities may not be sold or otherwise transferred unless they have been first registered under the Securities Act and/or all applicable state securities laws, or unless exemptions from such registration provisions are available with respect to said resale or transfer; and (D) other than as set forth in this Subscription Agreement between the Company and the undersigned, the Company is under no obligation to register the Securities under 2 the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available. (ii) The undersigned will not sell or otherwise transfer any of the Securities, or any interest therein, unless and until (A) said Securities shall have first been registered under the Securities Act and/or all applicable state securities laws; or (B) the undersigned shall have first delivered to the Company a written opinion of counsel (which counsel and opinion (in form and substance) shall be reasonably satisfactory to the Company), to the effect that the proposed sale or transfer is exempt from the registration provisions of the Securities Act and all applicable state securities laws. (iii) The undersigned is acquiring the Securities for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof or interest therein, without prejudice, however, to the undersigned's right, subject to the provisions of this Subscription Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act and in compliance with applicable federal and state securities laws or under an exemption from such registration. (iv) At the time the undersigned was offered the Securities, it was, and at the date hereof it is, and it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (v) The undersigned has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. (vi) The undersigned is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. (vii) The undersigned understands that no federal or state agency has approved or disapproved the Securities, passed upon or endorsed the merits of the Offering thereof, or made any finding or determination as to the appropriateness of the Securities for investment. (viii) The undersigned understands that the certificates representing the Securities will bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR (II) AN OPINION OF COMPANY COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. 3 3. The Company has agreed to file, as soon as practicable following the closing of the Offering, a registration statement on Form SB-2 (the "Registration Statement") or such other form as shall be available registering the Warrant Shares and the common shares issuable upon conversion of the Preferred Stock. 4. The Company has represented that at all times while any shares of the Preferred Stock are issued and outstanding, it shall own tangible, unencumbered assets with a value equal to or greater than the aggregate stated value of all such outstanding shares of Preferred Stock. 5. The Preferred Stock pays an 8% cumulative dividend, ranks senior to the Company's common stock as to distribution of assets upon liquidation, dissolution or winding up of the Company and automatically converts after 2 years into the Company's common stock at the rate of $.25 of Stated Value per share. The holder of the Preferred Stock can convert all or part of the holder's Preferred Stock at the same rate at any time prior to the automatic conversion date. 6. The undersigned understands that this subscription is not binding upon the Company until the Company accepts it, which acceptance is at the sole discretion of the Company and is to be evidenced by the Company's execution of this Subscription Agreement where indicated. This Subscription Agreement shall be null and void if the Company does not accept it as aforesaid. Notwithstanding the foregoing, the Company may not accept any subscriptions unless and until it has completed and closed a merger agreement with Jill Kelly Productions, Inc. in the form annexed hereto as Exhibit B. The undersigned further understands that the first $500,000 of offering proceeds will be placed in escrow with Gottbetter & Partners, LLP, the escrow agent. In the event the Company does not receive offering proceeds of at least $500,000 within the 90 day offering period, the offering will not be completed and all offering proceeds will thereafter be (promptly returned to investors without interest or deduction. 7. In conjunction with the Offering, an existing holder of $1,000,000 of Jill Kelly Productions, Inc. debt will convert all of such debt into Company units that are identical to the Units, at the same price paid by subscribers in the offering. 8. The undersigned understands that the Company may, in its sole discretion, reject this subscription, in whole or in part, and/or reduce this subscription in any amount and to any extent, whether or not pro rata reductions are made of any other investor's subscription. 9. The undersigned agrees to indemnify the Company and hold it harmless from and against any and all losses, damages, liabilities, costs and expenses which it may sustain or incur in connection with the breach by the undersigned of any representation, warranty or covenant made by the undersigned. 10. Neither this Subscription Agreement nor any of the rights of the undersigned hereunder may be transferred or assigned by the undersigned. 11. Except as otherwise provided herein, this Subscription Agreement (i) may only be modified by a written instrument executed by the undersigned and the Company; (ii) sets forth the entire agreement of the undersigned and the Company with respect to the subject matter hereof; (iii) shall be governed by the laws of the State of New York applicable to contracts made and to be wholly performed therein; and (iv) shall inure to the benefit of, and be binding upon the Company 4 and the undersigned and their respective heirs, legal representatives, successors and permitted assigns. 12. Unless the context otherwise requires, all personal pronouns used in this Subscription Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. 13. All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or mailed by certified or registered mail, return receipt requested, postage prepaid, as follows: if to the undersigned, to the address set forth on the signature page hereto; and if to the Company, to IDC Technologies, Inc., 100 Europa Drive Suite 421, Chapel Hill, North Carolina 27517, Attention: President or to such other address as the Company or the undersigned shall have designated to the other by like notice. 5 SIGNATURE PAGE IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement this ______ day of _________________ 2003. Number of Units Subscribed for _________________________________ - ORGANIZATION SIGNATURE: INDIVIDUAL SIGNATURE: __________________________________ ______________________________________ Print name of Organization Signature By: _______________________________ ______________________________________ Name: Print Name Title: ______________________________________ Additional Signature of Joint Owner _______________________________________ Print Name (ALLSUBSCRIBERS SHOULD PLEASE PRINT INFORMATION BELOW EXACTLY AS YOU WISH IT TO APPEAR IN THE RECORDS OF THE COMPANY) ____________________________________ ______________________________________ Name Social Security Number of Individual or other Taxpayer I.D. Number Address: Address for notices if different: ____________________________________ ______________________________________ Number and Street Number and Street ____________________________________ ______________________________________ City State Zip Code City State Zip Code Please check the box to indicate form of ownership (if applicable): TENANTS-IN-COMMON JOINT TENANTS WITH RIGHT OF COMMUNITY PROPERTY (Both Parties must SURVIVORSHIP (Both Parties must sign sign above) (Both Parties must sign above) above) 6 ACCEPTANCE OF SUBSCRIPTION The foregoing subscription is hereby accepted by IDC Technologies, Inc. this ____ day of __________________, 2003, for __________________________ Units. IDC TECHNOLOGIES, INC. By: _____________________________ Name: Title: 7 EX-10.11 18 w97143exv10w11.txt CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT EXHIBIT 10.11 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT BETWEEN JILL KELLY PRODUCTIONS HOLDING, INC. AND THE PURCHASER(S) LISTED ON SCHEDULE 1 HERETO ------------------- MARCH 26, 2004 ------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I CERTAIN DEFINITIONS........................................................... 1 1.1 Certain Definitions............................................................. 1 ARTICLE II PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES............................. 4 2.1 Purchase and Sale; Purchase Price............................................... 4 2.2 Execution and Delivery of Documents; The Closing................................ 5 ARTICLE III REPRESENTATIONS AND WARRANTIES................................................ 6 3.1 Representations, Warranties and Agreements of the Company....................... 6 3.2 Representations and Warranties of the Purchaser................................. 9 ARTICLE IV OTHER AGREEMENTS OF THE PARTIES............................................... 12 4.1 Manner of Offering.............................................................. 12 4.2 Notice of Certain Events........................................................ 12 4.3 Blue Sky Laws................................................................... 13 4.4 Integration..................................................................... 13 4.5 Furnishing of Rule 144(c) Materials............................................. 13 4.6 Solicitation Materials.......................................................... 13 4.7 Listing of Common Stock......................................................... 13 4.8 Attorney-in-Fact................................................................ 13 4.9 Indemnification................................................................. 14 4.10 Notice and Consultation Before Securities Issuances............................. 16 4.11 Purchaser's Ownership of Common Stock........................................... 16 4.12 No Violation of Applicable Law.................................................. 17 4.13 Redemption Restrictions......................................................... 17 4.14 Option for Additional Company Shares............................................ 17 ARTICLE V MISCELLANEOUS................................................................. 16 5.1 Fees and Expenses............................................................... 18 5.2 Entire Agreement................................................................ 18 5.3 Notices......................................................................... 18 5.4 Amendments; Waivers............................................................. 19 5.5 Headings........................................................................ 19 5.6 Successors and Assigns.......................................................... 19 5.7 No Third Party Beneficiaries.................................................... 19 5.8 Governing Law; Venue; Service of Process........................................ 19 5.9 Survival........................................................................ 20 5.10 Counterpart Signatures.......................................................... 20 5.11 Publicity....................................................................... 20 5.12 Severability.................................................................... 20 5.13 Limitation of Remedies.......................................................... 20 5.14 Successors and Assigns.......................................................... 20 5.15 Legal Fees and Interest Default Rate............................................ 209

LIST OF SCHEDULES: Schedule 1 Purchaser(s) Schedule 3.1(a) Subsidiaries Schedule 3.1(c) Capitalization and Registration Rights Schedule 3.1(d) Equity and Equity Equivalent Securities Schedule 3.1(e) Conflicts Schedule 3.1(f) Consents and Approvals Schedule 3.1(g) Litigation Schedule 3.1(h) Defaults and Violations LIST OF EXHIBITS: Exhibit A Certificate of Designation Exhibit G Power of Attorney Exhibit I Officer's Certificate Exhibit J Registration Rights Agreement Exhibit K Opinion of Counsel Exhibit M Escrow Agreement i THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of March 26, 2004, between Jill Kelly Productions Holding, Inc., a corporation organized and existing under the laws of the State of Nevada (the "Company"), and the purchaser(s) listed on SCHEDULE 1 hereto (the "Purchaser"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchaser and the Purchaser desires to acquire from the Company six hundred thousand (600,000) shares of the Company's Series B 0 % Convertible Preferred Stock, $.001 par value per share (the "Series B Preferred Stock"), with a Stated Value of ten dollars ($10) per share, and an aggregate Stated Value of six million dollars ($6,000,000), for an aggregate purchase price of six million dollars ($6,000,000). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and each Purchaser agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 Certain Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Agreement" shall have the meaning set forth in the introductory paragraph of this Agreement. "Armadillo Shares" means 3,191,489 of the Ordinary Shares of Armadillo Investments, Plc. "Attorney-in-Fact" means Gottbetter & Partners, LLP, 488 Madison Avenue, 12 Floor, New York, NY 10022; Tel: 212-400-6900; Fax: 212-400-6901. "Business Day" means any day except Saturday, Sunday and pay which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close. "Certificate of Designation" means the Certificate of Designation of the Series B Preferred Stock annexed as EXHIBIT A hereto. 1 "Change of Control" means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company. "Closing" shall have the meaning set forth in Section 2.2(a). "Closing Date" shall have the meaning set forth in Section 2.2(a). "Common Stock" means shares now or hereafter authorized of the class of common stock, $0.0001 par value, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. "Company" shall have the meaning set forth in the introductory paragraph. "Control Person" shall have the meaning set forth in Section 4.11(a) hereof. "Conversion Date" shall have the meaning set forth in the Certificate of Designation. "Conversion Price" shall have the meaning set forth in the Certificate of Designation. "Default" means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosure Documents" means the Company's reports filed under the Exchange Act with the SEC. "Escrow Agent" means Gottbetter & Partners, LLP, 488 Madison Avenue, 12 Floor, New York, NY 10022; Tel: 212-400-6900; Fax: 212-400-6901. "Event of Default" shall have the meaning set forth in Section 5. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Execution Date" means the date of this Agreement first written above. "Indemnified Party" shall have the meaning set forth in Section 4.11(b) hereof. "Indemnifying Party" shall have the meaning set forth in Section 4.11(b) hereof. "G&P" means Gottbetter & Partners, LLP. "Limitation on Conversion" shall have the meaning set forth in Section 4.13 hereof. "Losses" shall have the meaning set forth in Section 4.11(a) hereof. 2 "Material" shall mean having a financial consequence in excess of $25,000. "Material Adverse Effect" shall have the meaning set forth in Section 3.1(a). "NASD" means the National Association of Securities Dealers, Inc. "Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R) "Original Issue Date," shall have the meaning set forth in the Certificate of Designation. "OTCBB" shall mean the NASD over-the counter Bulletin Board(R). "Per Share Market Value" of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser (as defined in the Certificate of Designation) selected in good faith by the holders of a majority of the Series B Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Power of Attorney" means the power of attorney in the form of EXHIBIT G annexed hereto. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Purchase Price" shall have the meaning set forth in Section 2.1(b). "Purchaser" shall have the meaning set forth in the introductory paragraph. 3 "Redemption Price" shall mean an amount equal to the Stated Value of the Shares outstanding that are subject to redemption. "Registration Rights Agreement" means the Registration Rights Agreement in the form of EXHIBIT J annexed hereto. "Reporting Issuer" means a company that is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. "Required Approvals" shall have the meaning set forth in Section 3.1(f). "Securities" means the Shares, the Underlying Shares and the Option Shares. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series B Preferred Stock" shall have the meaning set forth in the recital. "Shares" shall have the meaning set forth in Section 2.1(a). "Stated Value" means the sum of ten dollars ($10) per Share or six million dollars ($6,000,000) for all of the Shares. "Subsidiaries" shall have the meaning set forth in Section 3.1(a). "Trading Day" means (a) a day on which the Common Stock is quoted on Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices). "Transaction Documents" means this Agreement and all exhibits and schedules hereto and all other documents, instruments and writings required pursuant to this Agreement. "Underlying Shares" means the shares of the Company's Common Stock into which the Shares are convertible as provided in the Certificate of Designation. ARTICLE II PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES 2.1 Purchase and Sale; Purchase Price. 4 (a) Subject to the terms and conditions set forth herein, the Company shall issue and sell and the Purchaser shall purchase six hundred thousand (600,000) shares of the Company's Series B 0 % Convertible Preferred Stock, $ .001 par value per share (the "Shares"). The Series B Preferred Stock shall have the respective rights, preferences and privileges as set forth in the Certificate of Designation to be filed by the Company with the Secretary of State of Nevada prior to the Execution Date. (b) The purchase price for each Share shall be Ten Dollars ($10) (the "Per Share Consideration"). The Per Share Consideration multiplied by the number of Shares to be purchased by the Purchaser is referred to as the "Purchase Price." (c) The Purchase Price shall be paid by delivery to the Company of Three Million One Hundred Ninety One Thousand Four Hundred Eighty Nine (3,191,489) Ordinary Shares (the "Armadillo Shares") of Armadillo Investments, Plc. The number of Ordinary Shares to be issued will be based on the conversion rate in effect as of the close of business on the day preceding the closing of the transaction. For example, if the effective conversion rate is $1.88/(pound) 1, then Armadillo will issue $6,000,000/$1.88, or 3,191,489 Ordinary Shares. (d) Notwithstanding anything to the contrary contained in this Agreement, the Company's obligations hereunder shall be expressly contingent upon the Company selling the Armadillo Shares to a purchaser to be located by Purchaser simultaneously with receipt of the Armadillo Shares for a price not less than (pound) .50 per share. 2.2 Execution and Delivery of Documents; The Closing. (a) The Closing of the purchase and sale of the Shares (the "Closing") shall take place simultaneously with the execution and delivery of this Agreement (the "Closing Date"). On the Closing Date, (i) the Company shall execute and deliver to the Purchaser the certificates representing the Shares, which Shares shall have the respective rights, preferences and privileges as set forth in the Certificate of Designation annexed as EXHIBIT A hereto and the Power of Attorney; (ii) the Company shall execute and deliver to the Purchaser a certificate of its President, in the form of EXHIBIT I annexed hereto, certifying that attached thereto is a copy of resolutions duly adopted by the Board of Directors of the Company authorizing the Company to execute and deliver the Transaction Documents and to enter into the transactions contemplated thereby; (iii) the Company shall execute and deliver to Purchaser an executed Power of Attorney in the form annexed hereto as EXHIBIT G; (iv) the Company and the Purchaser shall execute and deliver to each other an executed Registration Rights Agreement in the form annexed hereto as EXHIBIT J: 5 (v) counsel for the Company shall execute and deliver to the Purchaser an executed copy of the opinion of counsel annexed hereto as EXHIBIT K; (vi) the Company, the Escrow Agent and the Purchaser shall execute and deliver to each other an executed Escrow Agreement in the form annexed hereto as EXHIBIT M: (vi) the Purchaser shall deliver to the Company the Armadillo Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser, all of which shall survive the Closing: (a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth on SCHEDULE 3.1(a) attached hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect"). (b) Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and by each other Transaction Document and to otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of the Company. Each of this Agreement and each of the other Transaction Documents has been or will be duly executed by the Company and when delivered in accordance with the terms hereof or thereof will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. 6 (c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth on SCHEDULE 3.1(c). No shares of the Series B Preferred Stock have been issued as of the date hereof. No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of this Agreement. Except as disclosed in SCHEDULE 3.1(c), there are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Series B Preferred Stock hereunder, securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, bylaws or other charter documents. (d) Issuance of Securities. The Shares have been duly and validly authorized for issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided hereunder against payment in accordance with the terms hereof, shall be valid and binding obligations of the Company enforceable in accordance with their respective terms. The Company has and at all times while the Shares are outstanding will continue to maintain an adequate reserve of shares of Common Stock to enable it to perform its obligations under this Agreement and the Certificate of Designation. When issued in accordance with the terms hereof, the Underlying Shares and the Option Shares will be duly authorized, validly issued, fully paid and non-assessable. Except as set forth in SCHEDULE 3.1(d) hereto, there is no equity or equity equivalent security outstanding that is substantially similar to the Shares, including any security having a floating conversion price substantially similar to the Shares. (e) No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or bylaws (each as amended through the date hereof) or (ii) be subject to obtaining any consents except those referred to in Section 3.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or its Subsidiaries is subject (including, but not limited to, those of other countries and the federal and state securities laws and regulations), or by which any property or asset of the Company or its Subsidiaries is bound or affected, except in the case of clause (ii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any law, ordinance or regulation of any governmental authority. 7 (f) Consents and Approvals. Except as specifically set forth in SCHEDULE 3.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents, except for the filing of the Certificate of Designation with respect to the Series B Preferred Stock with the Secretary of State of the State of Nevada, which filing shall be effected prior to the Closing Date (together with the consents, waivers, authorizations, orders, notices and filings referred to in SCHEDULE 3.1(f), the "Required Approvals"). (g) Litigation; Proceedings. Except as specifically disclosed in SCHEDULE 3.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of any of the Transaction Documents, the Shares or the Underlying Shares, (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair the ability of the Company to perform fully on a timely basis its obligations under the Transaction Documents. (h) No Default or Violation. Except as set forth in SCHEDULE 3.1(h) hereto, neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (x) adversely affect the legality, validity or enforceability of this Agreement, (y) have a Material Adverse Effect or (z) adversely impair the Company's ability or obligation to perform fully on a timely basis its obligations under this Agreement. (i) Intentionally omitted. (j) Disclosure Documents. The Disclosure Documents are accurate in all material respects and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (k) Non-Registered Offering. Neither the Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act. 8 (l) Placing Agent. The Company accepts and agrees that Dungarvon Associates, Inc. ("Dungarvon") is acting for the Purchaser and does not regard any person other than the Purchaser as its customer in relation to this Agreement, and that it has not made any recommendation to the Company, in relation to this Agreement and is not advising the Company, with regard to the suitability or merits of the Armadillo Shares and in particular Dungarvon has no duties or responsibilities to the Company for the best execution of the transaction contemplated by this Agreement. (m) Private Placement Representations. The Company (i) has received and carefully reviewed such information and documentation relating to the Purchaser that the Company has requested, including, without limitation, the Purchaser's Confidential Private Offering Memorandum dated January 1, 2004 (the "Private Placement Memorandum; (ii) has had a reasonable opportunity to ask questions of and receive answers from the Purchaser concerning the Armadillo Shares, and all such questions, if any, have been answered to the full satisfaction of the Company; (iii) has such knowledge and expertise in financial and business matters that it is capable of evaluating the merits and risks involved in an investment in the Armadillo Shares; (iii) understands that Armadillo has determined that the exemption from the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder is applicable to the offer and sale of the Armadillo Shares, based, in part, upon the representations, warranties and agreements made by the Company herein; and (iv) except as set forth herein, no representations or warranties have been made to the Company by the Purchaser or any agent, employee or affiliate of the Purchaser and in entering into this transaction the Company is not relying upon any information, other than the results of independent investigation by the Company. The Purchaser acknowledges and agrees that the Company makes no representation or warranty with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.1 hereof. 3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows: (a) Organization; Authority. The Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation with the requisite power and authority to enter into and to consummate the transactions contemplated hereby and by the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The acquisition of the Shares to be purchased by the Purchaser hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other general principles of equity. (b) Investment Intent. The Purchaser is acquiring the Shares to be purchased by it hereunder, and will acquire the Underlying Shares relating to such Shares, and the Option 9 Shares for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares, Underlying Shares or Option Shares, or any part thereof or interest therein, without prejudice, however, to such Purchaser's right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares, Underlying Shares or Option Shares in compliance with applicable federal and state securities laws. (c) Experience of Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Securities to be acquired by it hereunder, and has so evaluated the merits and risks of such investment. (d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able to bear the economic risk of an investment in the Securities to be acquired by it hereunder and, at the present time, is able to afford a complete loss of such investment. (e) Access to Information. The Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the Securities offered hereunder and the merits and risks of investing in such securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment in the Securities; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information that it has received about the Company. (f) Reliance. The Purchaser understands and acknowledges that (i) the Shares, Underlying Shares and Option Shares being offered and sold to it hereunder are being offered and sold without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. (g) Regulation S. (i) The Purchaser understands and acknowledges that (A) the Shares acquired pursuant to this Agreement have not been registered under the Securites Act, are being sold in reliance upon an exemption from registration afforded by Regulation S; and that such Shares have not been registered with any state Securites commission or authority; (B) pursuant to the requirements of Regulation S, the Shares may not be transferred, sold or otherwise exchanged unless in compliance with the provisions of Regulation S and/or pursuant to registration under the Securities Act, or pursuant to an available exemption thereunder; and (C) other than as set forth in this Agreement between the Company and the Purchaser, the Company is under no obligation to register the Shares under the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available. 10 (ii) (A) The Purchaser is not a U.S. person and is not acquiring the Shares for the account of any U.S. person; (B) if a corporation, it is not organized or incorporated under the laws of the United States; (C) if a corporation, no director or executive officer is a national or citizen of the United States; and (D) it is not otherwise deemed to be a "U.S. Person" within the meaning of Regulation S. (iii) The Purchaser, was not formed specifically for the purpose of acquiring the Shares purchased pursuant to this Agreement. (iv) The Purchaser is purchasing the Shares for its own account and risk and not for the account or benefit of a U.S. Person as defined in Regulation S and no other person has any interest in or participation in the Shares or any right, option, security interest, pledge or other interest in or to the Shares. The Purchaser understands, acknowledges and agrees that it must bear the economic risk of its investment in the Shares for an indefinite period of time and that prior to any such offer or sale, the Company may require, as a condition to effecting a transfer of the Shares, an opinion of counsel, acceptable to the Company, as to the registration or exemption therefrom under the Shares Act and any state Shares acts, if applicable. (v) The Purchaser will, after the expiration of the Restricted Period, as set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer the Shares only in accordance with Regulation S, or pursuant to an available exemption under the Securities Act and, in any case, in accordance with applicable state Securities laws. The transactions contemplated by this Subscription Agreement have neither been pre-arranged with a purchaser who is in the United States or who is a U.S. Person, nor are they part of a plan or scheme to evade the registration provisions of the United States federal securities laws. (vi) The offer leading to the sale evidenced hereby was made in an "offshore transaction." For purposes of Regulation S, the Purchaser understands that an "offshore transaction" as defined under Regulation S is any offer or sale not made to a person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States. (vii) Neither the Purchaser nor any affiliate of the Purchaser or any person acting on its behalf, has made or is aware of any "directed selling efforts" in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares being purchased hereby. (viii) The Purchaser understands that the Company is the seller of the Shares which are the subject of this Agreement, and that, for purpose of Regulation S, a "distributor" is any underwriter, dealer or other person who participates, pursuant to a contractual arrangement, in the distribution of securities offered or sold in reliance on Regulation 11 S and that an "affiliate" is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question. The Purchaser agrees that it will not, during the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or though any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the Shares other than to a non-U.S. Person. (ix) The Purchaser acknowledges that the Shares will bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN "OFFSHORE TRANSACTION" IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION. ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT. The Company acknowledges and agrees that the Purchaser makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2. ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 4.1 Manner of Offering. The Shares are being issued pursuant to section 4(2) of the Securities Act and Regulation S thereunder. The Armadillo shares are being issued pursuant to section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. 4.2 Notice of Certain Events. The Company shall, on a continuing basis, (i) advise the Purchaser promptly after obtaining knowledge of, and, if requested by the Purchaser, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Shares or the Underlying Shares, for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that 12 makes any statement of a material fact made by the Company in Section 3.1 or in the Disclosure Documents untrue or that requires the making of any additions to or changes in Section 3.1 or in the Disclosure Documents in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Securities under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Securities under any such laws, and use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. 4.3 Blue Sky Laws. The Company shall cooperate with the Purchaser in connection with the exemption from registration of the Securities under the securities or Blue Sky laws of such jurisdictions as the Purchasers may request; provided, however, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified. The Company agrees that it will execute all necessary documents and pay all necessary state filing or notice fees to enable the Company to sell the Securities to the Purchasers. 4.4 Integration. The Company shall not and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchaser. 4.5 Furnishing of Rule 144(c) Materials. The Company shall, for so long as any of the Securities remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, make available to any registered holder of the Securities ("Holder" or "Holders") in connection with any sale thereof and any prospective purchaser of such Securities from such Person, such information in accordance with Rule 144(c) promulgated under the Securities Act as is required to sell the Securities under Rule 144 promulgated under the Securities Act. 4.6 Solicitation Materials. The Company shall not (i) distribute any offering materials in connection with the offering and sale of the Shares or Underlying Shares other than the Disclosure Documents and any amendments and supplements thereto prepared in compliance herewith or (ii) solicit any offer to buy or sell the Shares or Underlying Shares by means of any form of general solicitation or advertising. 4.7 Listing of Common Stock. If the Common Stock is or shall become listed on the OTCBB or on another exchange, the Company shall (a) use its best efforts to maintain the listing of its Common Stock on the OTCBB or such other exchange on which the Common Stock is then listed until expiration of the periods during which the Shares may be converted and (b) shall provide to the Purchaser evidence of such listing. 4.8 Attorney-in-Fact. For the sole purpose of effectuating the terms and provisions of this Agreement and the Certificate of Designation, the Company hereby agrees to give a power of attorney to G&P as is evidenced by EXHIBIT G annexed hereto. All acts done under such 13 power of attorney are hereby ratified and approved and neither the Attorney-in-Fact nor any designee or agent thereof shall be liable for any acts of commission or omission, for any error of judgment or for any mistake of fact or law, as long as the Attorney-in-Fact is operating within the scope of the power of attorney and this Agreement and its exhibits. The power of attorney, being coupled with an interest, shall be irrevocable while any of the Shares remain unconverted, or any portion of this Agreement remains unsatisfied. In addition, the Company shall give the Attorney-in-Fact resolutions executed by the Board of Directors of the Company which authorize transfers of the Shares and future issuances of the Underlying Shares for the Shares, and which resolutions state that they are irrevocable while any of the Shares remain unconverted, or any portion of this Agreement remains unsatisfied. 4.9 Indemnification. (a) Indemnification (i) The Company shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Purchaser and its officers, directors, agents, employees and affiliates, each Person who controls or the Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each such Person, a "Control Person") and the officers, directors, agents, employees and affiliates of each such Control Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Company under this Agreement or any other Transaction Document. (ii) The Purchaser shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Company, its officers, directors, agents and employees, each Control Person and the officers, directors, agents and employees of each Control Person, to the fullest extent permitted by application law, from and against any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Purchaser under this Agreement or the other Transaction Documents. (b) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. 14 An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party. No right of indemnification under this Section shall be available as to a particular Indemnified Party if there is a non-appealable final judicial determination that such Losses arise solely out of the negligence or bad faith of such Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement. (c) Contribution. If a claim for indemnification under this Section is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other and the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether there was a judicial determination that such Losses arise in part out of the negligence or bad faith of the Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or the Indemnified Party's breach of its obligations under this Agreement. The amount paid or payable by a party as a result of any 15 Losses shall be deemed to include any attorneys' or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party. (d) Non-Exclusivity. The indemnity and contribution agreements contained in this Section are in addition to any obligation or liability that the Indemnifying Parties may have to the Indemnified Parties. 4.10 Notice and Consultation Before Securities Issuances.. Until such time as Purchaser shall have sold all of the Shares and the Underlying Shares, the Company shall not offer or issue any equity, equity equivalent security or debt that with a floating conversion price, or any equity lines of credit (the "New Securities"), without first giving thirty (30) days notice thereof to the Purchaser and thereafter consulting in good faith with the Purchaser concerning such issuance. After such consultation between the Company and the Purchaser, the Company may offer or sell the New Securities on such terms and conditions as the Company deems appropriate. Purchaser shall keep all information concerning the New Securities confidential and shall not trade any of the Company's securities until information about the New Securities is publicly disclosed or the Company advises the Purchaser that it has determined not to issue the New Securities. 4.11 Purchaser's Ownership of Common Stock. In addition to and not in lieu of the limitations on conversion set forth in the Certificate of Designation, the conversion and exercise rights of the Purchaser set forth in the Certificate of Designation shall be limited, solely to the extent required, from time to time, such that, unless the Purchaser gives written notice seventy five (75) days in advance to the Company of the Purchaser's intention to exceed the Limitation on Conversion as defined herein, with respect to all or a specified amount of the Shares and the corresponding number of the Underlying Shares, in no instance shall the maximum number of shares of Common Stock which the Purchaser (singularly, together with any Persons who in the determination of the Purchaser, together with the Purchaser, constitute a group as defined in Rule 13d-5 of the Exchange Act) may receive in respect of any conversion of the Shares exceed, at any one time, an amount equal to four and ninety nine one hundredths percent (4.99%) of the then issued and outstanding shares of Common Stock of the Company following such conversion (the foregoing being herein referred to as the "Limitation on Conversion"); provided, however, that the Limitation on Conversion shall not apply to any forced or automatic conversion pursuant to this agreement or the Certificate of Designation; and provided, further that if the Purchaser shall have declared an Event of Default and, if a cure period is provided, the Company shall not have properly and fully cured such Event of Default within any such cure period, the provisions of this Section 4.13 shall be null and void from and after such date. The Company shall, promptly upon its receipt of a Notice of Conversion tendered by the Purchaser (or its sole designee) for the Shares, as applicable, notify the Purchaser by telephone and by facsimile of the number of shares of Common Stock outstanding on such date and the number of Underlying Shares which would be issuable to the Purchaser (or its sole designee, as the case may be) if the conversion requested in such Notice of Conversion or exercise requested in such Notice of Exercise were effected in full, whereupon, in accordance with the Certificate of Designation and notwithstanding anything to the contrary set forth therein, the Purchaser may within one (1) Business Day of its receipt of the Company notice required by this Section 4.13 by facsimile 16 revoke such conversion or exercise to the extent (in whole or in part) that the Purchaser determines that such conversion or exercise would result in the ownership by the Purchaser of shares of Common Stock in excess of the Limitation on Conversion. 4.12 No Violation of Applicable Law. Notwithstanding any provision of this Agreement to the contrary, if the redemption of the Shares otherwise required under this Agreement or the Certificate of Designation would be prohibited by the relevant provisions of Nevada law, such redemption shall be effected as soon as it is permitted under such law; provided, however, that interest payable by the Company with respect to any such redemption shall accrue in accordance with Section 4.14. 4.13 Redemption Restrictions. Notwithstanding any provision of this Agreement to the contrary, if any redemption of the Shares otherwise required under this Agreement or the Certificate of Designation would be prohibited in the absence of consent from any lender to the Company or any of the Subsidiaries, or by the holders of any class of securities of the Company, the Company shall use its best efforts to obtain such consent as promptly as practicable after any such redemption is required. Interest payable by the Company with respect to any such redemption shall accrue in accordance with Section 4.14 until such consent is obtained. Nothing contained in this Section 4.16 shall be construed as a waiver by the Purchaser of any rights they may have by virtue of any breach of any representation or warranty of the Company herein as to the absence of any requirement to obtain any such consent. 4.14 Option for Additional Company Shares. The Company hereby grants to Purchaser an option to acquire that number of shares of the Company's Common Stock (the "Option Shares"), such option to be exercisable during the thirty (30) day period commencing on the date Purchaser completes the conversion of all of the Series B Preferred Stock (the "Conversion Completion Date"), equal to the difference, if a positive amount, between (a) the number of the Company's shares of Common Stock into which the original amount of the Series B Preferred Stock would have been convertible on the Closing Date at a conversion price equal to fifty percent (50%) of the Fixed Conversion Price (as defined in the Certificate of Designation) less (b) the aggregate number of the shares of Common Stock into which the original amount of the Series B Preferred Stock has actually been converted as of the Conversion Completion Date. The exercise price for the Option Shares shall be the Fixed Conversion Price. In case of any stock split, stock dividend, reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each Option Share then outstanding shall have the right thereafter upon exercise to receive only such shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such stock split, stock dividend, reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Purchaser shall have the right to exercise the Option Shares and receive cash in the same manner as other stockholders). In such event, if appropriate, the exercise price for the Option Shares shall be proportionately adjusted. 17 ARTICLE V MISCELLANEOUS 5.1 Fees and Expenses. Except as set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares (and, upon conversion or exercise thereof, the Underlying Shares) pursuant hereto. The Purchaser shall be responsible for any taxes payable by the Purchaser that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document. The Company agrees to pay a total Purchaser's counsel $5,000 for legal fees associated with the transactions contemplated by this Agreement, and $5,000 for escrow services pursuant to the Escrow Agreement, payable at or prior to Closing, and the reasonable disbursements of counsel in connection with the transactions contemplated by this Agreement. The Company shall pay all costs, expenses, fees and all taxes incident to and in connection with: (A) the issuance and delivery of the Securities, (B) the exemption from registration of the Securities for offer and sale to the Purchaser under the securities or Blue Sky laws of the applicable jurisdictions, and (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Company. 5.2 Entire Agreement This Agreement, together with all of the Exhibits and Schedules annexed hereto, and any other Transaction Document contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. This Agreement shall be deemed to have been drafted and negotiated by both parties hereto and no presumptions as to interpretation, construction or enforceability shall be made by or against either party in such regard. 5.3 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given upon facsimile transmission (with written transmission confirmation report) at the number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) whichever shall first occur. The addresses for such communications shall be: If to the Company: Jill Kelly Productions Holding, Inc. 8923 Sunset Boulevard West Hollywood, CA 90069 Attn: _____________ Tel: (310) 360-7900 Fax: (310) 360-7933 With copies to: ____________________ 18 Tel: (703) 720-7011 Fax: (703) 720-7399 If to the Purchaser: See SCHEDULE 1 attached hereto With copies to: Gottbetter & Partners, LLP 488 Madison Avenue, 12th Floor New York, NY 10022 Attn: Adam S. Gottbetter, Esq. Tel: (212) 400-6900 Fax: (212) 400-6901 or such other address as may be designated hereafter by notice given pursuant to the terms of this Section 5.3. 5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 5.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The assignment by a party of this Agreement or any rights hereunder shall not affect the obligations of such party under this Agreement. 5.7 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 5.8 Governing Law; Venue; Service of Process. The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the State of New York. The parties hereto agree that the internal laws of the State of New York shall govern this Agreement and the exhibits hereto, including, but not limited to, all issues related to usury. Any action to enforce the terms of this Agreement or any of its exhibits, or any other Transaction Document shall be brought exclusively in the state and/or federal courts situate in the County and State of New York. Service of process in any action by the Purchaser to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the Company at its principal address set forth in this Agreement. 19 5.9 Survival. The representations and warranties of the Company and the Purchaser contained in Article III and the agreements and covenants of the parties contained in Article IV and this Article V shall survive the Closing. 5.10 Counterpart Signatures. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 5.11 Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, unless counsel for the disclosing party deems such public statement to be required by applicable federal and/or state securities laws. Except as otherwise required by applicable law or regulation, the Company will not disclose to any third party (excluding its legal counsel, accountants and representatives) the names of the Purchaser. 5.12 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 5.13 Limitation of Remedies. With respect to claims by the Company or any person acting by or through the Company, or by the Purchaser or any person acting through the Purchaser, for remedies at law or at equity relating to or arising out of a breach of this Agreement, liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary, punitive, special or consequential damages of any kind. 5.14 Successors and Assigns. This Agreement shall become effective when it is executed by the parties and shall thereafter be binding upon and enure to the benefit of the parties hereto and their permitted successors and assigns. This agreement and any of the rights, interests or obligations hereunder may be assigned by the Purchaser without the consent of the Company. 5.15 Legal Fees and Interest Default Rate. In the event any party hereto commences legal action to enforce its rights under this Agreement or any other Transaction Document, the non-prevailing party shall pay all reasonable costs and expenses (including but not limited to reasonable attorney's fees, accountant's fees, appraiser's fees and investigative fees) incurred in enforcing such rights. In the event of an uncured Event of Default by any party hereunder, interest shall accrue on all unpaid amounts due the aggrieved party at the rate of ten percent (10%) per annum, compounded annually. 20 [ SIGNATURE PAGE FOLLOWS ] 21 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above. Company: Jill Kelly Productions Holding, Inc. By: /s/ Robert A. Friedland ------------------------------------- Name: Robert A. Friedland Title: Chief Executive Officer Purchaser: Dungarvon Associates, Inc., on behalf of Armadillo Investments, PLC By: /s/ Daniel J. Kinder ------------------------------- Name: Daniel J. Kinder Title: Director 22 Schedule 1 Purchaser(s)
Name and Address of Purchase No. of Purchaser Price Shares - -------------------------- ----------- ------- ~~Armadillo Investments Plc. $ 4,000,000 400,000 30 Farringdon Street London EC4A 4HJ Fax: 011.44.20.7724.0090~~
23 EX-10.12 19 w97143exv10w12.txt SERIES B REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.12 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") dated as of March 26, 2004, by and between Jill Kelly Productions Holding, Inc., a Nevada corporation with its principal place of business at 8923 Sunset Boulevard, West Hollywood, CA 90069 (the "Company"), and Armadillo Investments, Plc., a company incorporated in England and Wales, with its principal place of business at 30 Farringdon Street, London EC4A 4HJ (the "Purchaser"). Simultaneously with the execution and delivery of this Agreement, the Purchaser and the Company have entered into a Convertible Preferred Stock Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which Purchase Agreement is incorporated herein by reference, and pursuant to which the Purchaser has agreed to purchase Series B Preferred Stock (the "Shares"), that is convertible into Common Stock, par value $___ per share of the Company (the "Underlying Shares"), and has an option to acquire Common Stock, par value $___ of the Company (the "Option Shares"), all as more particularly provided therein. The Company and the Holder hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition only, the term "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York are authorized or required by law or other government actions to close between the hours of 9:30 a.m. and 5:00 p.m. New York Time. "Commission" means the United States Securities and Exchange Commission. "Common Stock" means the Company's common stock, par value $____ per share. "Event" shall have the meaning set forth in Section 7 hereof. "Event Date" shall have the meaning set forth in Section 7 hereof. 1 "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" or "Holders" means the Purchaser and any other holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" shall have the meaning set forth in Section 6(c) hereof. "Indemnifying Party" shall have the meaning set forth in Section 6(c) hereof. "Inspectors" shall have the meaning set forth in Section 5(a)(viii) hereof. "Losses" shall have the meaning set forth in Section 6(a) hereof. "New York Courts" shall have the meaning set forth in Section 10(e) hereof. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Registrable Securities" means the Underlying Shares and the Option Shares, and any other shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Shares, the Underlying Shares and the Option Shares, excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the seller's rights under this Agreement are not assigned. "Registration" shall have the meaning set forth in Section 3(a) hereof. "Registration Expenses" means all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits 2 incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company. "Registration Statement" means each registration statement, contemplated by Section 3(a) hereof, including the prospectus, amendments and supplements to such registration statement or prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule. "Rule 144A" means Rule 144A promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule.. "Rule 415" shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule. "Securities Act" means the Securities Act of 1933, as amended. "Selling Expenses" means the underwriting or sales discounts and commissions charged with respect to the sale of Registrable Securities. "Selling Holders" means each Holder any of whose Registrable Securities are being registered pursuant to a Registration Statement. "Underwritten Registration" or "Underwritten Offering" means a registration in connection with which securities of the Company are sold to an underwriter for sale to the public pursuant to an effective registration statement. 2. Restrictions on Transfer. (a) Each Holder agrees not to offer, sell, transfer, pledge, assign, hypothecate or otherwise dispose of all or any portion of its Registrable Securities unless 3 and until the transferee has agreed in writing for the benefit of the Company to be bound by the terms of this Agreement and; (i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) Such Holder shall have (A) notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (B) furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. (b) Each certificate representing Registrable Securities shall bear the following legend: THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE STATE "BLUE SKY" OR SECURITIES LAWS ("STATE LAWS"), AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL (i) REGISTERED UNDER THE ACT AND APPLICABLE STATE LAWS OR (ii) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. (c) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Holder shall have obtained an opinion of counsel at such Holder's expense (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend; (d) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. 3. "Piggy-back" Registrations. (a) If the Company decides to register any of its Common Stock or securities convertible into or exchangeable for Common Stock under the Securities Act (a "Registration") on a form that is suitable for an offering of shares of Common Stock by the Company or by third parties and that is not a registration solely to implement an 4 employee benefit plan on form S-8, a registration statement on Form S-4 (or successor form) or a transaction to which Rule 145 or any other similar rule of the Commission is applicable (such form, a "Registration Statement"), the Company shall give written notice to the Holders of its intention to effect such a Registration. Subject to Section 3(b) below, the Company shall use all reasonable efforts to effect Registration under the Securities Act of all Registrable Securities that the Holders request be included in such Registration by a written notice delivered to the Company within thirty (30) days after the notice given by the Company. Each of the Holders agrees that any Registrable Securities which such Holder requests to be included in a Registration pursuant to this Section 3 shall be included by the Company on the same form of Registration Statement as selected for the Registration; (b) If a Registration involves an underwritten offering, the Company shall not be required to register securities in excess of the amount that the principal underwriter reasonably and in good faith recommends in writing for inclusion in such offering (a "Cutback"), a copy of which recommendation, and supporting reasoning, shall be delivered to each Holder. If such a Cutback occurs, the number of shares that are entitled to be included in the Registration and underwriting shall be allocated in the following manner: (i) first, to the Company for any securities it proposes to sell for its own account, (ii) second, to any Person with demand registration rights requiring such registration, and (iii) third, to the Holders and other holders of Company securities with piggy-back registration rights requesting inclusion in the Registration, pro rata among the respective holders thereof on the basis of the number of shares for which each such requesting holder has requested registration; (c) If the Registration of which the Company gives notice is for an underwritten public offering, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 3(a). In such event, the right of any Holder to have its Registrable Securities included in the Registration pursuant to this Section 3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and its other security holders with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriters or the managing underwriter selected by the Company; (d) If the Company elects to terminate any Registration after a Registration Statement for such Registration shall have been filed, the Company will have no obligation to register the Registrable Securities that the Holders sought to have included in such Registration. The Company shall bear all Registration Expenses of the Holders in connection with any Registration. 5 4. Representations and Warranties. (a) The Company hereby makes the following representations and warranties to the Purchaser: (i) The Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement, and to consummate the transactions contemplated hereby and to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights or by other equitable principles of general application; (ii) The Shares are validly issued, fully paid and non-assessable. The Underlying Shares and the Option Shares have been duly authorized for issuance, offer and sale, and when issued and delivered, in accordance with the Purchase Agreement, shall be validly issued, fully paid and non-assessable; (iii) The Company has and at all times while Shares remain outstanding and the Option Shares remain unissued, has and will continue to maintain an adequate reserve of shares of Common Stock to enable it to perform its obligations under this Agreement and the Purchase Agreement; (iv) The execution, delivery and performance of this Agreement, and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of its or any Subsidiary's articles of incorporation, resolutions or bylaws or (ii) require the consent of any third party, conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect (as defined in the Purchase Agreement); (v) Neither the Company nor any Subsidiary is required to obtain any consent, permit, waiver, authorization or order of, or make any filing or 6 registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement; (vi) Neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (x) adversely affect the legality, validity or enforceability of this Agreement, (y) have a Material Adverse Effect or (z) adversely impair the Company's ability or obligation to perform fully on a timely basis its obligations under this Agreement; (b) The Purchaser hereby represents and warrants to the Company as follows: (i) Such Purchaser is a corporation duly incorporated and validly existing and in good standing under the laws of the jurisdiction of its incorporation. (ii) Such Purchaser has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement have been duly authorized by all necessary corporate action on the part of such Purchaser. This Agreement has been duly executed and delivered by such Purchaser or on its behalf and constitutes the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms; except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, fraudulent transfer, reorganization, moratorium laws and remedies or by other equitable principles of general application or similar laws relating to or affecting generally the enforcement of creditors' rights. (iii) Purchaser is acquiring the Shares and the Option Shares for its own account for investment purposes only and without a view toward the resale or distribution thereof, without prejudice, however, to the Purchaser's right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares or Option Shares in compliance with applicable federal and state securities laws. 5. Procedures for Registration. (a) Whenever the Company is required to register Registrable Securities under this Agreement, it agrees to do the following at its sole cost and expense: 7 (i) advise the underwriter(s), if any, and the Selling Holders promptly and, if requested by such Persons, to confirm such advice in writing: (A) when the prospectus, or any prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective; (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the prospectus or for additional information relating thereto; (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Registrable Securities for qualification, offering or sale in any jurisdiction, or the initiation of any Proceeding for any of the preceding purposes; and (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the prospectus in order to make the statements therein not misleading. If, at any time, the Commission issues any stop order suspending the effectiveness of the Registration Statement or any state securities commission or other regulatory authority issues an order suspending the qualification or exemption from qualification of any Registrable Securities under state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (ii) if requested by any Selling Holder or the underwriter(s), if any, incorporate in the Registration Statement or prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Selling Holder and the underwriter(s), if any, may reasonably request to have included therein, with respect to the number of Registrable Securities, if any, being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering, and the Company shall make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; (iii) furnish to the Selling Holders and each of the underwriter(s), if any, without charge, before filing with the Commission, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including the prospectus and all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (iv) consult with the Selling Holders and the underwriter(s), if any, prior to the filing of such Registration Statement or prospectus; (v) deliver to each of the Selling Holders and underwriter(s), if any, without charge, as many copies of the prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably 8 request, the Company hereby consenting to the use of the prospectus and any amendment or supplement thereto by each of the Selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of any Registrable Securities covered by the prospectus or any amendment or supplement thereto; (vi) use its best efforts, prior to any public offering of Registrable Securities, to register or qualify the Registrable Securities under the securities or blue sky laws of such jurisdictions as the Holder or underwriter(s), if any, may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (vii) cooperate with the Selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities covered by a Registration Statement and not bearing any restrictive legends, except as required by law, and enable such Registrable Securities to be in such denominations and registered in such names as the Holders may request prior to any sale of Registrable Securities made by the underwriter(s), if any; (viii) in connection with the preparation and filing of each Registration Statement under the Securities Act pursuant to this Agreement, the Company shall give Selling Holders, their underwriters, if any, and one counsel or firm of counsel and one accountant or firm of accountants representing all Selling Holders the opportunity to participate in the preparation of such Registration Statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto. (ix) make available for inspection by the Selling Holders, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney, accountant or other agent retained by any Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; (x) notify each seller of Registrable Securities covered by a Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes and untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of 9 the circumstances then existing, and, at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to be an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of any Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing; (xi) keep such registration effective for a period of one hundred eighty (180) days or until the Selling Holders have completed the distribution described in any Registration Statement relating thereto, whichever first occurs; provided, however, that (A) such 180-day period shall be extended for a period of time equal to the longer of (1) the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of securities of the Company and (2) the period ending on the date on which Rule 144(k) first becomes available for transfers of Registrable Securities and (B) in the case of any Registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall be extended, if necessary, to keep the Registration Statement effective until all such Registrable Securities are sold, however in no event longer than one year from the Effective Date of the Registration Statement and provided that Rule 415 permits an offering on a continuous or delayed basis; (xii) cause all such Registrable Securities registered hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; (xiii) provide a transfer agent and registrar for all Registrable Securities registered pursuant to a Registration Statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such Registration Statement; (xiv) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and (xv) at such time as a Registration Statement covering a resale of any Registrable Securities has been declared effective by the Commission, cause its counsel to deliver to the transfer agent for the Common Stock an opinion, subject to the making by Selling Holders of such representations and warranties to Company counsel as it may reasonably require, certifying that such Registrable Securities may be sold by the Selling Holders pursuant to such Registration Statement with the purchasers thereof receiving share certificates without restrictive legend, which opinion shall remain effective so long as such Registration Statement remains in full force and effect; 10 (b) Each Selling Holder shall, upon receipt of notice from the Company of the occurrence of any event of the kind described in Section 4(a)(x), forthwith discontinue disposition of Registrable Securities following the effective date of a Registration Statement covering Registrable Securities until such Holder's receipt of copies of the prospectus supplement and/or post-effective amendment or until it is advised in writing by the Company that the use of the applicable prospectus may be resumed and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus or Registration Statement. (c) Each Holder covenants and agrees that (i) it will not offer or sell any Registrable Securities being registered pursuant to any Registration Statement until such Holder shall have received copies of the related prospectus and notice from the Company that such Registration Statement has become effective and (ii) such Holder and its officers, directors and Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to any Registration Statement. 6. Indemnification. (a) Indemnification by the Company. The Company shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless each Holder, the officers, directors, agents (including any underwriters retained by the Holders in connection with the offer or sale of Registrable Securities), brokers, investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in such Registration Statement, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or amendment or supplement thereto, in light of the circumstances under which they were made) not misleading, except solely to the extent that (I) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by or on behalf of such Holder expressly for use therein, which information was relied on by the Company for use therein or (ii) such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was furnished in writing to the Company by or on behalf of such Holder expressly for use therein. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. 11 (b) Indemnification by Holders. In connection with each Registration Statement, each Selling Holder shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with such Registration Statement or the related prospectus and agrees, severally and not jointly, to indemnify and hold harmless the Company, their directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of or based solely upon any untrue statement of a material fact contained in such Registration Statement, such prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading solely to the extent that (I) such untrue statement or omission is contained in any information furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such prospectus and such information was relied upon by the Company for use in such Registration Statement, such prospectus or such form of prospectus, or (ii) such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was furnished in writing by or on behalf of such Holder to the Company specifically for inclusion in such Registration Statement or such prospectus and such information was relied upon by the Company for use in such Registration Statement, such prospectus or such form of prospectus; provided, however, that anything contained herein to the contrary notwithstanding, no Holder shall be liable for any claims hereunder in an amount in excess of the net proceeds received by such Holder from the sale of its Registrable Securities pursuant to a Registration Statement. In addition, the foregoing shall not inure to the benefit of any Holder if a copy of such prospectus (as then amended or supplemented) was furnished by the Company to such Holder and was not sent or given by or on behalf of such Holder to such Holder's purchaser of Registrable Securities if required by law to have been so delivered. (c) Conduct of Indemnification Proceedings. If any Proceeding is brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. 12 An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (I) the Indemnifying Party has agreed to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed to assume promptly the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but shall retain the right to control the overall Proceedings out of which the claim arose, and counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days after the Indemnified Party gives written notice thereof to the Indemnifying Party. (d) Contribution. If a claim for indemnification under Section 6(a) or 6(b) of this Agreement is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other from the distribution of the Registrable Securities or (ii) if the allocation provided by clause (i) above in this paragraph is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission 13 or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6(c) hereof, any attorneys' or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of its Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Holder or any Person controlling Holder, the Company, its directors or officers or any Person controlling the Company. (f) No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such action, suit or proceeding. (g) The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 7. Rule 144. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information for as long as necessary to permit sales of its securities pursuant to Rule 144. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the 14 Securities Act within the limitation of the exemptions provided by Rule 144. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 8. Rule 144A. The Company agrees that, upon the request of a Holder or any prospective purchaser of Registrable Securities designated by a Holder, the Company shall promptly provide (but in any case within fifteen (15) days of a request) to such Holder or potential purchaser, the following information: (a) a brief statement of the nature of the business of the Company and any subsidiaries and the products and services each of them offers; (b) the most recent consolidated balance sheets and profit and losses and retained earnings statements, and similar financial statements of the Company for the two (2) most recent fiscal years (such financial information shall be audited, to the extent reasonably available); and (c) such other information about the Company, any subsidiaries, and their business, financial condition and results of operations as such Holder or purchaser of such Registrable Securities shall request in order to comply with Rule 144A, as amended, and in connection therewith the anti-fraud provisions of the federal and state securities laws. The Company hereby represents and warrants to the Holders and any prospective purchaser of Registrable Securities from a Holder that the information provided by the Company pursuant to this Section 8 will, as of the dates of such information, not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 9. Consent to be Bound; Assignability of Registration Rights. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement. Subject to the foregoing sentence, the registration rights set forth in this Agreement are assignable to each assignee of Registrable Securities conveyed in accordance herewith who agrees in writing to be bound by the terms and conditions of this Agreement. 10. Miscellaneous. (a) No amendment, modification, termination or cancellation of this Agreement shall be effective unless made in a writing signed by the Company and all of the Persons who are then Holders of Registrable Securities; (b) The Company and the Holders agree that the rights created by this Agreement are unique, and that the loss of any such right is not susceptible to monetary 15 quantification. Consequently, the parties agree that an action for specific performance (including for temporary and/or permanent injunctive relief) of the obligations created by this Agreement is a proper remedy for the breach of the provisions of this Agreement, without the necessity of proving actual damages. If the parties hereto are forced to institute legal proceedings to enforce their rights in accordance with the provisions of this Agreement, the prevailing party shall be entitled to recover its reasonable expenses, including attorneys' fees, in connection with any such action; (c) Except as otherwise specifically provided herein, all notices, requests, demands and other communications provided for hereunder shall be in writing and shall be deemed duly given to the Person for whom intended (i) upon receipt when personally delivered, (ii) one (1) day after being sent by a nationally recognized overnight courier for next day delivery or telecopy providing confirmation or receipt of delivery, or (iii) three (3) days after being sent by certified or registered mail, postage and certified or registered mail fees prepaid, return receipt requested, if sent to such Person at the address for such Person indicated below or to such other address as may be designated by such Person in writing sent by such Person in the manner required by this Section: If to the Company: Jill Kelly Productions Holding, Inc. 8923 Sunset Boulevard West Hollywood, CA 90069 Attn: ____________ Tel: (310) 360-7900 Fax: (310) 360-7933 With copies to: Gottbetter & Partners, LLP 488 Madison Avenue New York, NY 10022 Attn: Adam S. Gottbetter, Esq. Tel: (212) 400-6900 Fax: (212) 400-6901 If to the Holders: To the address of each such Holder as it appears in the stock transfer records of the Company With copies to: Gottbetter & Partners, LLP 488 Madison Avenue New York, NY 10022 Attn: Adam S. Gottbetter, Esq. Tel: (212) 400-6900 Fax: (212) 400-6901 (d) This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken 16 together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof; (e) This Agreement shall be governed by and construed in accordance with the laws of the state of New York without regard to principles thereof relating to the conflict of laws. Each of the Company and each Holder hereby irrevocably submits to the jurisdiction of any New York state court or any federal court sitting in the city and county of New York (collectively, the "New York Courts") in respect of any Proceeding arising out of or relating to this Agreement and irrevocably accepts for itself and in respect of its property, generally and unconditionally, jurisdiction of the New York Courts. Each of the Company and each Holder irrevocably waives, to the fullest extent it may effectively do so under applicable law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding brought in any New York Court and any claim that any such Proceeding brought in any New York Court has been brought in an inconvenient forum; (f) The remedies provided herein are cumulative and not exclusive of one another or of any remedies provided by law; (g) If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (h) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [Signatures on following page] 17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Company: JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert A. Friedland --------------------------------- Name: Robert A. Friedland Title: Chief Executive Officer Purchaser: DUNGARVON ASSOCIATES, INC. ON BEHALF OF ARMADILLO INVESTMENTS, PLC. By: /s/ Daniel J. Kinder -------------------------------- Name: Daniel J. Kinder Title: Director 18 EX-10.13 20 w97143exv10w13.txt SIDE LETTER DATED 3/5/04 ARMADILLO,JUBILEE Exhibit 10.13 ARMADILLO INVESTMENTS, PLC 30 FARRINGDON STREET LONDON EC4A 4HJ March 5, 2004 Jill Kelly Productions Holding, Inc. 8923 Sunset Blvd. West Hollywood, CA 90069 Jubilee Investments Trust, Plc 29 Albemarle Street London W1S 4JB RE: INVESTMENT IN JILL KELLY PRODUCTIONS HOLDING, INC. Gentlemen: This letter will confirm our mutual understanding regarding the investment to be made in Jill Kelly Productions Holding, Inc. ("JKXJ") by Armadillo Investments, Plc. ("Armadillo"). Armadillo's proposed funding of a preferred stock offering of JKXJ shall be increased from the currently proposed Four Million Dollars ($4,000,000) to Six Million Dollars ($6,000,000). JKXJ will deliver to Jubilee Investment Trust, Plc. ("Jubilee") Eight Hundred Thousand (800,000) additional shares of JKXJ Common Stock in connection with the financing of JKXJ by Armadillo. These additional Shares will be issued without the payment of any additional consideration by Jubilee. Please confirm that our understanding is correct by signing below. Very Truly Yours, DUNGARVON ASSOCIATES, INC. On behalf of ARMADILLO INVESTMENTS, PLC By: /s/ Daniel J. Kinder ---------------------------- Name: Daniel J. Kinder -------------------------- Title: Director ------------------------- Accepted and Agreed JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Robert A. Friedland ---------------------------------- Name: Robert A. Friedland -------------------------------- Title: CEO ------------------------------- DUNGARVON ASSOCIATES, INC. On behalf of JUBILEE INVESTMENT TRUST, PLC By: /s/ Daniel J. Kinder ---------------------------------- Name: Daniel J. Kinder -------------------------------- Title: Director ------------------------------- EX-10.14 21 w97143exv10w14.txt SIDE LETTER DATED 4/20/04 ARMADILLO,JUBILEE Exhibit 10.14 ARMADILLO INVESTMENTS, PLC 30 FARRINGDON STREET LONDON EC4A 4HJ April 20,2004 Jill Kelly Productions Holding, Inc. 8923 Sunset Blvd. West Hollywood, CA 90069 Jubilee Investments Trust, Plc 29 Albemarle Street London WlS 4JB Maximum Media Ventures, LLC 1175 Walt Whitman Road, Suite 100 Melville, New York 11747 Maximum Ventures, Inc. 1175 Walt Whitman Road, Suite 100 Melville, New York 11747 RE: INVESTMENT IN JILL KELLY PRODUCTIONS HOLDING, INC. Gentlemen: Reference is made to that certain Convertible Preferred Stock Purchase Agreement (the "Purchase Agreement"), dated as of March 26, 2004, between Jill Kelly Productions Holding, Inc. ("JKXJ") and Armadillo Investments, PLC ("Armadillo") and to that certain Side Letter (the "Side Letter"), dated March 5, 2004, among JKXJ, Jubilee Investments Trust and Armadillo. This letter will confirm our mutual understanding regarding the investment to be made in JKXJ by Armadillo. Capitalized terms used and not otherwise defined in this Letter shall have the meanings ascribed to such terms in the Purchase Agreement. Christows Ltd. ("Christows"), on behalf of Armadillo, will only place eighty percent (80%) of the Armadillo Shares (the "Initial Shares") related to Armadillo's funding of the Series B Preferred Stock Offering pursuant to the Purchase Agreement. Christows, on behalf of Armadillo, shall have until July 26,2004 to place the remaining twenty percent (20%) of the Armadillo Shares (the "Stub Shares"). If the Stub Shares are not placed by July 26,2004, (i) the 800,000 shares of JKXJ Common Stock referenced in the Side Letter will be returned as soon as practicable to JKXJ for deposit into JKXJ's treasury account and (ii) the Stub Shares will be distributed as soon as practicable to JKXJ, Maximum Ventures, Inc. ("MVI") and Maximum Media Ventures, LLC ("MMV"), on a pari passu basis, to be sold at their discretion (JKXJ will receive 70% of the Stub Shares, MMV will receive 20% of the Stub Shares, subject to Section 2 of the Master Agreement between JKXJ and MMV, and MVI will receive 10% of the Stub Shares). MMV shall, upon distribution of the Stub Shares, execute a note in the principal amount equal to $120,000, the agreed upon value of the Stub Shares. Section 5.1 of the Purchase Agreement contemplates that JKXJ shall pay a total of $5,000 to Gottbetter & Partners, LLP ("G&P") for legal fees associated with the transactions contemplated by the Purchase Agreement and $5,000 to G&P for escrow services. For clarity, there will be no other fees due to G&P for legal fees related to the subsequent issuance of the Stub Shares. Please confirm that our understanding is correct by signing below. Very Truly Yours, DUNGARVON ASSOCIATES, INC. On behalf of ARMADILLO INVESTMENTS, PLC By: /s/ Daniel Kinder ----------------- Name: Daniel Kinder Title: Director Accepted and Agreed JILL KELLY PRODUCTIONS HOLDING, INC. By: /s/ Ronald C. Stone ------------------- Name: Ronald C. Stone Title: Chief Financial Officer and Chief Operating Officer DUNGARVON ASSOCIATES, INC. On behalf of JUBILEE INVESTMENT TRUST, PLC By: /s/ Daniel J. Kinder -------------------- Name: Daniel J. Kinder Title: Director MAXIMUM VENTURES, INC. By: /s/ Abraham Mirman ------------------ Name: Abraham "Avi" Mirman Title: President MAXIMUM MEDIA VENTURES, INC. BY MAXIMUM VENTURES, INC. By: /s/ Abraham Mirman ------------------ Name: Abraham "Avi" Mirman Title: President EX-10.16 22 w97143exv10w16.txt CORPORATE BUILDERS CONSULTING AGREEMENT EXHIBIT 10.16 CONSULTING AGREEMENT This Consulting Agreement is entered into effective August 5, 2003 by and among Corporate Builders, L.P., a limited partnership organized under the laws of New York ("CB"), Maximum Ventures, Inc., a New York corporation ("MV") and Jill Kelly Productions, Inc., a Delaware corporation ("JKP") with respect to the following facts: A. CB has been retained by MV to assist MV in its promotion of JKP and the introduction of financing sources to MV. B. JKP desires to retain CB to promote its corporate image on the terms and conditions set forth herein. NOW THEREFORE THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. Nature of Services. CB shall use its best efforts to promote JKP and introduce MV to financing sources (the "Services"). CB warrants and represents that all services it provides comply with all applicable laws, rules and regulations. 2. Compensation. In consideration of the Services provided by CB under this Agreement, CB shall receive, within sixty (60) days of the date of execution of this Agreement by JKP, the following: a. From JKP: Five Hundred Thousand (500,000) shares of common stock (the "Common Stock"), par value $.001, of Jill Kelly Productions Holding, Inc. that contains standard restrictions (the "JKXJ Restricted Stock") and One Hundred Twenty Five Thousand (125,000) warrants to purchase the Common Stock at $0.25 per share (the "JKXJ Company Warrants"). B. From MV: Five Hundred Thousand (500,000) warrants to purchase restricted JKXJ Common Stock at $0.001 per share (the "JKXJ MV Warrants"; and, together with the JKXJ Company Warrants, the "JKXJ Warrants") and an option from MV to purchase One Hundred Twenty Five Thousand (125,000) shares of JKXJ Common Stock at $0.25 per share (the "JKXJ Options"). CB acknowledges its understanding that (i) the JKXJ Restricted Stock, JKXJ Warrants, JKXJ Options and the shares of Common Stock from the exercise of the JKXJ Warrants and JKXJ Options (the "JKXJ Underlying Shares") have not been registered under the Securities Act of 1933, as amended; (ii) the JKXJ Warrants, JKXJ Options, JKXJ Common Stock and JKXJ Underlying Shares shall be subject to various restrictions; and (iii) the JKXJ Warrants, JKXJ Options, JKXJ Common Stock and JKXJ Underlying Shares will not be marketable or transferable until after they are duly registered. The JKXJ Restricted Shares and the JKXJ Underlying Shares will be included in the registration filed by JKP. CB agrees that, after registration, on any given day, CB may not sell or otherwise transfer its JKXJ Restricted Stock, JKXJ Warrants, JKXJ Options and JKXJ Underlying Shares except as follows: sale or transfer is limited to the greater 1 of five thousand (5,000) shares per day or twenty five percent (25%) of the average volume of JKP shares traded in the five (5) days preceding the date of intended sale or transfer by CB. Neither JKP nor MV makes any representations or warranties with respect to the value of the JKXJ Warrants, JKXJ Options, JKXJ Common Stock and JKXJ Underlying Shares. The JKXJ Warrants, JKXJ Options, JKXJ Common Stock and JKXJ Underlying Shares held by CB may be transferred by CB to an affiliate of CB. 3. Term. This Agreement shall automatically expire two (2) years from the date of execution of this Agreement. Either party may terminate this upon thirty (30) days' written notice to the other. In the event of termination after September 23, 2003, CB shall still be entitled to receive the compensation described in paragraph 2 above. 4. Notice. Any notice given under this Agreement must be made in writing by personal delivery, or by first class mail, postage prepaid, registered or certified, with return receipt requested, or by express mail and by fax, bearing the address and fax number herein set forth or such other address as may be specified in a written notice given to the other party in the manner herein set forth. Notices so given shall be effective on the second day after the date of mailing or on the date of personal delivery or fax, addressed as follows: If to JKP: Jill Kelly Productions, Inc. 8923 Sunset Blvd. Los Angeles, CA 90069 Attention: Robert Friedland, CEO Telephone: (310) 360-7900 Fax: (310) 360-7933 If to CB: Corporate Builders P.O. Box 8737 Deerfield Beach, FL 33443 Attention: Earnest D. Chu Telephone: (561) 315-6311 Fax: (954) 567-4637 If to MV: Maximum Ventures, Inc. 1175 Walt Whitman Road, Suite 100 Melville, NY 11747 Attention: Abraham Mirman Telephone: (631) 424-9009 Fax: (631) 424-9010 5. Authorization. Each party signing this Agreement and any documents executed in connection with this Agreement, whether signed individually or on behalf of any person or entity, warrants and represents that he has full authority to execute it on 2 behalf of the party on whose behalf he so signs. Each separately acknowledges and represents that the representations and warranties contained herein are essential and material provisions of this Agreement and shall survive execution of this Agreement. Each party agrees to perform any further acts, and to execute and deliver such documents as are reasonably necessary or appropriate to fully implement the provisions of this Agreement. Time is of the essence to the performance of all matters hereunder. 6. Entire Agreement. This instrument contains the entire agreement and understanding between the parties hereto with respect to the matters contained herein and supersedes and replaces all prior negotiations and agreements between the parties hereto, or any of them, whether written or oral. 7. No Assignment. CB shall not assign its obligations under this Agreement without the prior written consent of JKP. 8. California Law. This Agreement is made and entered into in the State of California and shall in all respects be interpreted, enforced and governed by and under the laws of said State. If any provision of this Agreement is held to be invalid, void or unenforceable, the balance of the provisions shall, nevertheless, remain in full force and effect and shall be in no way affected, impaired or invalidated. 9. Counterparts. This Agreement shall be effective only after all parties have signed same in the spaces provided. This Agreement may be executed in multiple counterpart copies, each of which shall be deemed an original. 10. Headings and Pronouns. The headings in this Agreement are for convenience only and shall not affect, govern or control the construction hereof. Masculine or feminine pronouns shall be substituted for the neuter forms, and feminine pronouns shall be substituted for the masculine, and vice versa, and the plural shall be substituted for the singular and vice versa, in any place or places herein in which the context requires such substitution. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above-written. "JKP" Jill Kelly Productions, Inc., A Delaware corporation By: /s/ Robert A. Friedland --------------------------------- Robert A. Friedland, CEO 3 "CB" Corporate Builders, L.P. By: /s/ Earnest D. Chu --------------------------------- Earnest D. Chu Title: CEO "MV" Maximum Ventures By: /s/ Abraham Mirman --------------------------------- Name: Abraham Mirman Title: CEO 4 EX-10.17 23 w97143exv10w17.txt FACTORING AGREEMENT EXHIBIT 10.17 FACTORING AGREEMENT SUMMIT Financial Resources, L. P. ("SUMMIT"), a Hawaii limited partnership, and JK DISTRIBUTION INC., A NEVADA CORPORATION and JILL KELLY PRODUCTIONS, INC., A DELAWARE CORPORATION ("Client's"), agree as follows: 1. Definitions. a. "Acceptable account" shall mean an account of Client's conforming to the representations, warranties, and requirements of this Agreement. b. "Account" shall mean any and all accounts as defined in the Uniform Commercial Code, accounts receivable, amounts owing to Client's under any rental agreement or lease, payments on construction contracts, promissory notes or on any other indebtedness, any rights to payment customarily or for accounting purposes classified as accounts receivable, and all rights to payment, proceeds or distributions under any contract, of Client's, presently existing or hereafter created, and all proceeds thereof. c. "Account debtor" shall mean any account debtor obligated for payment of any account. d. "Account debtor dispute" shall refer to any delay or failure of an account debtor to timely pay an account or any portion of an account for any reason which is not solely a credit problem, including, without limitation, any dispute or claim against Client's (whether or not relating to the goods or services sold giving rise to the account), whether or not valid, setoff, deduction, or any other alleged defense or counterclaim. An account subject to both a credit problem and an account debtor dispute shall be treated as subject only to an account debtor dispute. e. "Advance" or "Advances" shall mean an advance described in Paragraph 3, Purchase Price of Accounts, below. f. "Chargeback" refers to the procedure whereby a Client's purchases an account back from SUMMIT pursuant to the recourse or limited non-recourse obligations of Client's under this Agreement or pursuant to any other provision of this Agreement. g. "Collateral" refers collectively to the following, and to any other collateral or security for the obligations of Client's under this Agreement: (1) All inventory as defined in the Uniform Commercial Code, wherever located, all goods, merchandise or other personal property held for sale or lease, names or marks affixed thereto for purposes of selling or identifying the same or the seller or manufacturer thereof and all related rights, title and interest, all raw materials, work or goods in process or materials or supplies of every nature used, consumed or to be used in Client's business, all packaging and shipping materials, and all other goods customarily or for accounting purposes classified as inventory, of Client's, now owned or hereafter acquired or created, all proceeds and products of the foregoing and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the foregoing, all property received wholly or partially in trade or exchange for any of the foregoing, all leases of any of the foregoing, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of any of the foregoing or any interest therein. (2) All accounts (as defined in Subparagraph "b", above). (3) Any and all general intangibles of Client's, presently existing or hereafter arising, including general intangibles as defined in the Uniform Commercial Code, chooses in action, proceeds, contracts, distributions, dividends, refunds, security deposits, judgments, insurance claims, any right to payment of any nature, intellectual property rights or licenses, any other rights or assets of Client's customarily or for accounting purposes classified as general intangibles, and all documentation and supporting information related to any of the foregoing, and all proceeds thereof. (4) All balances, reserves, deposits, debts or any other amounts or obligations of SUMMIT owing to Client's, including, without limitation, any rebates, the Reserve, and any other amounts owing pursuant to this Agreement, whether or not due, now existing or hereafter arising or created, and all proceeds thereof. (5) All equipment and goods as defined in the Uniform Commercial Code, all motor vehicles, including all tires, accessories, spare and repair parts, and tools, wherever located, and all related right, title and interest, of Client's, now owned or hereafter acquired or created, all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the any of the foregoing, all leases of any of the foregoing, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of any of the foregoing or any interest therein (collectively, the "Equipment"). h. "Credit problem" means the filing of a petition for relief under Chapter 7 or Chapter 11 of the United States Bankruptcy Code by an account debtor within ninety (90) days of the date of the invoice. i. "Discount" shall mean the discount described in Paragraph 3, Purchase Price of Accounts, below. j. "Event of Default" shall mean an event of default as defined in Paragraph 25, Default and Remedies, below. k. "Person" shall mean an individual, corporation, partnership, trust, or any other legal entity. l. "Rebate" shall mean the rebate described in Paragraph 3, Purchase Price of Accounts, and 4, Payment of Purchase Price and Rebate below. m. "Reserve" shall mean the Reserve described in Paragraph 5, Reserve for Security, below. 2. Factoring of Accounts. SUMMIT may purchase from Client's such acceptable accounts as Client's may submit to SUMMIT, subject to the terms and conditions of this agreement. The obligation of SUMMIT to purchase accounts from Client's is discretionary and SUMMIT shall have no obligation to purchase any account from Client's, notwithstanding anything to the contrary in this Agreement. SUMMIT may decline to purchase any account submitted by Client's for any reason or for no reason, without notice, regardless of any course of conduct or past purchases of accounts by SUMMIT. SUMMIT shall be the sole and exclusive factor for Client's accounts. Client's will not factor or otherwise finance its accounts receivable except with SUMMIT. Notwithstanding anything to the contrary in this Agreement, the purchase of accounts by SUMMIT shall be deemed to be a true purchase with transfer of title and shall not be deemed to be a loan arrangement or secured transaction, except to the extent that a true purchase of accounts is subject to laws relating to secured transactions. Initial [_________] Date 3/29/01 1 3. Purchase Price of Accounts. An advance shall be the amount paid to Client's by SUMMIT upon the initial purchase of an acceptable account. The amount of the advance shall be the face amount of each account less the discount. The discount shall be Thirty-Five Percent (35%) of the face amount of each account. The amount of the discount may be adjusted by SUMMIT at any time. The discount will be indicated on the factoring bill of sale. Client's shall be entitled to a rebate on the discount determined as follows: Discount -Base Commission -Total Daily Funds Charges Rebate The base commission shall be calculated at a rate of Two Percent (2.0%) of the face amount of each account for the first Sixty (60) day period, or part thereof, and an additional One and One Quarter of One Percent (1.25%) of the face amount of each account for each additional Thirty (30) day period, or part thereof, until payment in full is received on the account. If Client's are declared in default pursuant to Section 25 of the Agreement, Client's shall be obligated to pay to SUMMIT, on all obligations, a base commission that is ten percent (10%) above the otherwise applicable base commission from and after the occurrence and during the continuance of an Event of Default. The total daily funds charges will be determined as follows: Daily Funds Rate x Advance Amount Daily Funds Charge Daily Funds Charge x Days Outstanding Total Daily Funds Charges The daily funds rate shall be the prime rate as announced in the Wall Street Journal plus Two Percent (2.00%) divided by 360. If Client's are declared in default pursuant to Section 25 of the Agreement, Client's shall be obligated to pay to SUMMIT, on all obligations, a daily funds rate that is ten percent (10%) above the otherwise applicable daily funds rate from and after the occurrence and during the continuance of an Event of Default. The prime rate shall be adjusted and initially determined in accordance with the following provision: At the option of SUMMIT, the prime rate may be adjusted from time to time as of the date of any change in the prime rate. The initial prime rate shall be the prime rate in effect under this formula on the date of this Factoring Agreement. The days outstanding shall be the number of days from purchase of the account by SUMMIT until payment in full is received by SUMMIT. The Monthly Minimum Fee shall be determined by multiplying One Half of One Percent (.50%) by the Maximum Credit Line. Such payment shall be due and payable upon demand and may be treated as a chargeback. Client's shall be obligated to pay the Monthly Minimum Fee for at least Twenty-four (24) months from the date of this Agreement, notwithstanding any termination by Client's pursuant to Section 16, Termination of Factoring, or any termination based on any Event of Default. If Client's decide to terminate prior to the end of the term, Client's will be obligated to pay the greater of Two Percent (2.00%) of the Maximum Credit Line or the Monthly Minimum Fee multiplied by the number of months remaining in the Factoring Agreement. Unless Client's give SUMMIT written notice that it will not renew this Agreement at least sixty (60) days prior to the end of such period, this obligation to pay the Monthly Minimum Fee shall automatically renew and be extended for successive additional periods of Twelve (12) months each until such notice is timely given. A Facility Fee of Two Percent (2.00%) of the Maximum Credit Line shall be due and payable upon each one year anniversary date of the Factoring Agreement. At no time will the aggregate outstanding financed balance exceed Three Hundred Fifty Thousand Dollars ($350,000.00) (the "Maximum Credit Line"). A Line Origination fee of Two Percent (2.00%) of the Maximum Credit Line shall be payable at the time of the first advance. Payments will be applied against proper accounts after allowing five (5) business days for collection and clearance of payments. 4. Payment of Purchase Price and Rebate. Payment to Client's for accounts factored to SUMMIT will be available within three (3) business days of the date the account and all other required documentation is received by SUMMIT. Any rebate owing to Client's by SUMMIT will be paid after the weekly collection cycle or at such other intervals as may be determined by SUMMIT. Payment shall be made in accordance with any written instructions of Client's which are agreed to by SUMMIT. Absent other instructions, payment shall be made by the mailing of a check to Client's. 5. Reserve for Security. As security for the payment of recourse obligations and performance of all obligations of Client's hereunder, SUMMIT may withhold a reserve (the "Reserve") from amounts owing to Client's by SUMMIT The Reserve may be funded by SUMMIT withholding amounts owing to Client's for advances or for rebates or, upon request of SUMMIT, Client's will from time to time pay SUMMIT an amount sufficient to fund the Reserve. In the sole discretion of SUMMIT, the amount of the Reserve may be adjusted at any time. SUMMIT may, at any time and from time to time, regardless of whether the obligation is delinquent, setoff and apply all or any part of the Reserve to any obligation of Client's owing to SUMMIT. Upon doing so, SUMMIT may fund the resulting deficiency in the Reserve by again withholding payments owing to Client's as provided in this paragraph. Upon termination of the right of Client's to submit accounts to SUMMIT as provided in Paragraph 16 Termination of Factoring, any balance of the Reserve shall be due and owing and paid to Client's upon completion of the following conditions: (1) all amounts owing to SUMMIT by Client's pursuant to this Agreement or otherwise have been paid in full; and (2) Ninety-one (91) days have elapsed since such termination. Initial [_________] Date 3/29/01 2 SUMMIT shall be free to use the Reserve as working capital or as SUMMIT otherwise determines. SUMMIT shall have no obligation to segregate, not commingle or otherwise account for the use of the Reserve. Client's shall not be entitled to any interest on the Reserve. The Reserve shall be a debt owed to Client's by SUMMIT, payable in accordance with the terms and conditions of this Agreement. 6. Recourse and Limited Non-Recourse Purchases. All accounts shall be purchased with limited non-recourse. All account shall be subject to chargeback if not paid in full within ninety (90) days of the date on the face of the invoice unless the account debtor fails to pay due to a credit problem. Client's agree to purchase any and all chargeback accounts, or the uncollected portion thereof, from SUMMIT upon demand. The purchase price to be paid by the Client's for a chargeback shall be the face amount of the account, less any collections received on the account by SUMMIT. Any waiver or extension by SUMMIT of the right to demand that Client's purchase any chargeback accounts shall not constitute a waiver or extension to any other accounts and such waiver or extension may be revoked at any time without notice. 7. Credit Insurance. SUMMIT may, but is not obligated to, obtain an umbrella credit insurance policy for factored accounts receivable. The umbrella policy will provide coverage for certain losses due to insolvency (as defined in the policy). SUMMIT may elect to place coverage under the policy on any accounts factored pursuant to this Factoring Agreement and or require the Client's to purchase coverage under the policy when any account represents Twenty Five percent (25%) of the total outstanding factored accounts. Client's may also elect, by written notice to SUMMIT, to place coverage under the policy on any accounts factored pursuant to this Factoring Agreement. Placement of coverage shall be subject to the policy being in effect, coverage being available under the terms and conditions and dollar limitations of the policy, and any required approval of the insurer. Client's shall pay SUMMIT a fee in an amount equal to five-tenths percent (.5%) of the face amount of each invoice for which coverage under the policy is placed. This fee is payable upon demand and may be deducted from amounts owing to Client's by SUMMIT. Credit insurance coverage shall be subject to all terms and conditions of the policy. No obligations of Client's under this Factoring Agreement shall be excused or deferred based upon insurance coverage or any pending claim under the policy. Upon payment of any claim under the policy to SUMMIT, SUMMIT shall, in its discretion, pay the payment to Client's as reimbursement for corresponding chargeback obligations creating the claim that Client's has paid to SUMMIT, apply the payment to other obligations of Client's to SUMMIT, or add the payment to the Reserve. 8. Chargeback Procedure. Upon an account becoming eligible for chargeback, chargeback shall be deemed to have automatically taken place at that time. SUMMIT may then (i) setoff such chargeback against any amount then or thereafter owing by SUMMIT to Client's, including, without limitation, payments for the purchase of accounts; (ii) notify Client's that chargeback has been made, identifying the subject accounts, whereupon Client's shall promptly purchase such accounts and pay the amount owing to SUMMIT, (iii) SUMMIT may debit the Reserve, or (iv) SUMMIT may exercise any combination of the alternatives set forth in this paragraph as to any account or group of accounts. 9. Collection Procedures. a. SUMMIT shall have the exclusive right to collect accounts and receive payments thereon. Client's shall not bill for, submit any invoice, or otherwise attempt to collect any factored account except as authorized in writing by SUMMIT. b. Client's agrees to pay all reasonable handling and out of pocket costs incurred by SUMMIT in collection of the accounts of Client's, including, without limitation, postage, credit and search expenses, photocopy charges, and long distance phone expenses. Payment of such costs shall be due upon request. SUMMIT may deduct such costs from amounts owing to Client's and may debit the Reserve for such costs. c. Client's shall promptly and completely respond to all requests from SUMMIT for any information or records requested to assist in collection of factored accounts. If Client's fails to respond to any request within five (5) days, SUMMIT may treat the account as a chargeback. d. Client's may authorize SUMMIT to revise the amount of or otherwise modify an outstanding account. SUMMIT shall have no obligation to advise the account debtor of such revision except to send the account debtor any revised invoice which may be provided to SUMMIT by Client's. In the event such revision results in a reduction in the amount owing on such account, such reduced amount may be treated as a chargeback. e. In the event an account debtor makes payment to Client's on an account which has been purchased by SUMMIT, Client's shall immediately deliver the payment to SUMMIT. If payment is made in cash, such payment shall be immediately delivered to SUMMIT. If payment is made by check or similar instrument, such instrument shall be immediately delivered to SUMMIT in the form received without negotiation. Upon inquiry from the account debtor or upon request of SUMMIT, Client's shall notify the account debtor to make payment directly to SUMMIT. Any payments received by Client's on accounts purchased by SUMMIT shall be held in trust by Client's for SUMMIT. If any payment received by Client's on an account which has been purchased by SUMMIT is deposited or negotiated by Client's, or if Client's fails to tender the payment to SUMMIT within five (5) business days of receipt by Client's, Client's shall promptly pay SUMMIT an amount equal to ten percent (10%) of the payment, not as a penalty but as liquidated damages, to compensate SUMMIT for additional administrative and collection expenses, interest costs and other damages resulting from such action. Client's acknowledges and agrees that it would be very difficult or impossible to calculate such damages and that ten percent (10%) of the payment is a fair estimation of those damages. Upon failure by Client's to immediately deliver any such payment or ten percent (10%) fee to SUMMIT, SUMMIT may treat the amount of such payment and fee as a chargeback. The duty of Client's to immediately deliver any such payment and to pay any such fee to SUMMIT shall terminate only when such chargeback is paid. Client's acknowledge and agree that it has no right, title or interest whatsoever in the funds constituting payment of an account purchased by SUMMIT, that said funds are the sole and exclusive property of SUMMIT, and that any use of or interference with said funds by Client's will result in civil and criminal liability. f. Client's shall immediately notify SUMMIT of any account debtor dispute concerning an account purchased by SUMMIT and of any bankruptcy filing, lien, garnishment or other legal action concerning such accounts. g. SUMMIT shall make a good faith, commercially reasonable effort to collect the factored accounts. It is agreed that collection of accounts in a commercially reasonable manner does not require, and SUMMIT shall have no obligation to, commence any legal action, including the sending of an attorney's demand letter, to collect any account. Client's hereby waives and releases any and all claims relating to or arising out of any act or omission by SUMMIT in the collection of the factored accounts, gross negligence and intentional misconduct excepted. Initial [_________] Date 3/29/01 3 h. Upon request of SUMMIT, Client's will cause all payments on all accounts of Client's, whether or not factored to SUMMIT, to be sent directly to such address as may be designated by SUMMIT. SUMMIT is authorized to receive and open all such payments and retain such payments which are owing to SUMMIT. i. Upon request of SUMMIT, Client's will tender to SUMMIT all payments received by Client's from an account debtor on accounts created after Client's begins factoring any accounts of that account debtor to SUMMIT, whether or not those accounts are factored to SUMMIT. Upon such request being made, all such payments received by Client's shall be the sole and exclusive property of SUMMIT and shall be held in trust by Client's for SUMMIT. All such payments shall be applied on obligations of that account debtor to SUMMIT. j. In the event SUMMIT receives any payment from an account debtor on an account which has not been factored to SUMMIT, SUMMIT may, subject to any rights of the account debtor, apply such payment to any other obligation of Client's owing to SUMMIT, including, without limitation, funding of any deficiency in the Reserve. 10. Acceptable Accounts. SUMMIT will purchase only acceptable accounts. An acceptable account must meet all of the following requirements and conditions: a. The account shall be evidenced by an invoice submitted to SUMMIT in duplicate meeting the following conditions: (1) Contain the Client's name, invoice number, and date; (2) Contain the full and complete name and address of the account debtor; (3) Clearly set forth the amount owing and to be collected by SUMMIT; (4) State the due date and any other terms for payment of the account; (5) Be completely legible; (6) Be stamped with a notice, in a form acceptable to SUMMIT, stating that the account has been purchased by SUMMIT and is payable to SUMMIT; and (7) Be accompanied by such other documents as are required by SUMMIT. b. The account shall be submitted to SUMMIT within seven (7) business days of the date the goods are sold or services performed giving rise to the account are completed, except as otherwise approved in writing by SUMMIT. c. The invoice shall be accompanied by proof of delivery of goods or performance of services acceptable to SUMMIT. d. The account shall meet and comply with the following conditions: (1) Client's has sole and unconditional good title to the account, the account and any goods sold to create the account being free from any other security interest, assignment, lien or other encumbrance of any type; (2) The account is a bona fide obligation of the account debtor for the amount identified on the account and there have been no payments, deductions, credits, payment terms, or other modifications or reductions in the amount owing on such account except as set forth on the face of the invoice; (3) To the best knowledge of Client's, there are no defenses or setoffs to payment of the account which can be asserted by way of defense or counterclaim against Client's or SUMMIT; (4) To the best knowledge of Client's, the account will be timely paid in full by the account debtor; (5) Any services performed or goods sold which give rise to the account have been rendered or sold in compliance with all applicable laws, ordinances, rules and regulations and were performed or sold in the ordinary course of Client's business; (6) There have been no extensions, modifications, or other agreements relating to payment of such account except as shown upon the face of the invoice; (7) The account debtor is located or authorized to do business within the United States; and (8) No proceeding has been commenced or petition filed under any bankruptcy or insolvency law by or against the account debtor, no receiver, trustee or custodian has been appointed for any part of the property of the account debtor, and no property of the account debtor has been assigned for the benefit of creditors. 11. Grant of Security Interest. Client's hereby grant SUMMIT a security interest in the Collateral. The Collateral shall secure all obligations of Client's to SUMMIT arising under or relating to this Agreement and all other obligations of Client's to SUMMIT which recite that they are secured by the Collateral. Clients' obligations under this Agreement may also be secured by other collateral as may be evidenced by other documentation apart from this Agreement. Clients' and SUMMIT acknowledge that all security interests and liens contemplated herein are given as a contemporaneous exchange for new value to Client's, regardless of when advances under this Agreement are actually made. 12. Representations, Warranties and Covenants of Client's. Client's represent, warrant and covenant that: a. All accounts sold to SUMMIT are acceptable accounts; b. Client's has been duly organized or incorporated, as the case may be, and is in good standing, under the laws of the state of its organization or incorporation; c. The place of business of Client's, or, if Client's have more than one place of business, the location of its chief executive office, is in the City of Los Angeles, County of Los Angeles, State of California, and will not be moved therefrom without at least thirty (30) days prior written notice to SUMMIT; d. All records of Client's pertaining to accounts sold to SUMMIT shall be kept and stored in the City of Los Angeles, County of Los Angeles, State of California, and will not be moved therefrom without at least thirty (30) days prior written notice to SUMMIT; e. The Equipment will be located in the State of California and, other than temporary (not to exceed three months) uses outside that state in the ordinary course of Clients' business, will not be removed from that state without the prior written consent of SUMMIT; f. Client's shall keep the Equipment in good repair and be responsible for any loss or damage to the Equipment. Client's shall pay when due all taxes, license fees and other charges on the Equipment. Client's shall not sell, misuse, conceal, or in any way dispose of the Equipment or permit it to be used unlawfully or for hire or contrary to the provisions of any insurance coverage. Risk of loss of the Equipment shall be on Client's at all times unless SUMMIT takes possession of the Equipment. Loss of or damage to the Equipment or any part thereof shall not release Client's from any of the obligations secured by the Equipment. SUMMIT or its representatives may, at any time and from time to time, enter any premises where the Equipment is located and inspect, audit and check the Equipment; Initial [_________] Date 3/24/01 4 g. Client's agree to insure the Equipment, at Clients' expense, against loss, damage, theft, and such other risks as SUMMIT may request to the full insurable value thereof with insurance companies and polices satisfactory to SUMMIT. Proceeds from such insurance shall be payable to SUMMIT as its interest may appear and such policies shall provide for a minimum ten days written cancellation notice to SUMMIT. Upon request, policies or certificates attesting to such coverage shall be delivered to SUMMIT. Insurance proceeds may be applied by SUMMIT toward payment of any obligation secured by this agreement, whether or not due, in such order of application as SUMMIT may elect. h. Client's are duly qualified to do business in each jurisdiction where the conduct of its business requires such qualification, i. Client's have all necessary licenses and other certificates or permits required for the conduct of its business and all such necessary licenses and other certificates or permits are current and will be maintained at all times; j. Client's have and shall maintain the full power and authority to conduct the business in which it engages and to enter into and perform its obligations under this Agreement. k. The execution, delivery and performance by Client's of this Agreement have been duly authorized by all necessary action on the part of Client's, and are not inconsistent with any Articles of Incorporation, By-Laws, Articles of Partnership, or other organizational document of Client's, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which Client's is a party or by which it is bound, and upon execution and delivery hereof, this Agreement will constitute a legal, valid and binding agreement and obligation of Client's, enforceable in accordance with its terms; l. All financial statements of Client's, and of any guarantor of Clients' obligations under this Agreement, have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of Client's and any such guarantor as of the date thereof and the results of operations for the period or periods covered thereby. Since the date of such financial statements there has been no material, adverse change in the financial condition of Client's or any such guarantor. Client's agrees to submit financial statements for Client's to SUMMIT and Client's shall cause any such guarantor to submit financial statements for such guarantor to SUMMIT as may be requested by SUMMIT, all such financial statements to be prepared in accordance with generally accepted accounting principles and to be in a form and from a firm acceptable to SUMMIT; m. Client's shall conduct its business in a lawful manner and in compliance with all applicable federal, state, and local laws, ordinances, rules, regulations, and orders and shall pay when due all lawfully imposed taxes upon its property, business and income; n. Client's will at all times keep accurate and complete records relating to its accounts. Client's shall not show factored accounts as an asset on its financial statements. SUMMIT and its representatives shall have the right at any reasonable time to enter any premises where any such records are located to inspect, audit, check, copy and make extracts from any records or other data relating to said accounts or to any other transactions between SUMMIT and Client's. Reasonable out of pocket expenses to conduct such audits or inspections will be the responsibility of the Client's; o. This Agreement, the financial statements referred to herein, and all other statements furnished by Client's to SUMMIT in connection herewith contain no untrue statement of a material fact and omit no material fact necessary to make the statements contained therein or herein not misleading. Client's represents and warrants that it has not failed to disclose in writing to SUMMIT any fact that materially and adversely affects, or is reasonably likely to materially and adversely affect, Client's's business, operations, properties, prospects, profits, condition (financial or otherwise), or ability to perform this Agreement; and p. Client's agree to execute any financing statements, notices of assignment, and other documents reasonably requested by SUMMIT for perfection or enforcement of the rights and interests of SUMMIT, and to give good faith, diligent cooperation to SUMMIT, and to perform such other acts reasonably requested by SUMMIT for perfection and enforcement of the rights and interests of SUMMIT. SUMMIT is authorized to file, record, or otherwise utilize such documents as it sees fit. 13. Representations, Warranties and Covenants Concerning Collateral. Client's represent, warrant, and covenant concerning the Collateral as follows: a. Client's have sole and unconditional good title to the Collateral, the Collateral being free from any other security interest, assignment, lien or other encumbrance of any type, except as has been previously disclosed to SUMMIT; and b. The Collateral will be kept free from any other security interest, assignment, lien or other encumbrance of any type, except as consented to in writing by SUMMIT. c. Client's agree to insure the Collateral, at Clients' expense, against loss, damage, theft, and such other risks as SUMMIT may request to the full insurable value thereof with insurance companies and policies satisfactory to SUMMIT. Proceeds from such insurance shall be payable to SUMMIT as its interests may appear and such policies shall provide for a minimum ten days written cancellation notice to SUMMIT. Upon request, policies or certificates attesting to such coverage shall be delivered to SUMMIT. Insurance proceeds may be applied by SUMMIT toward payment of any obligation secured by the Collateral, whether or not due, in such order of application as SUMMIT may elect. 14. Assignment of Rights Concerning Collateral. Client's hereby assign to SUMMIT all of its interest in and rights to any inventory or other goods giving rise to the accounts factored to SUMMIT which may be returned by account debtors, all rights as an unpaid vendor or lienor, all rights of stoppage in transit, replevin and reclamation relating thereto, all rights in and to all security therefor and guarantees thereof, all rights against third parties with respect thereto, and all rights under the Uniform Commercial Code and any other law, statute, regulation or agreement. Any goods so recovered or returned shall be set aside, marked with the name of SUMMIT, and held for the account of SUMMIT. Client's will promptly notify SUMMIT of all such returned or recovered inventory or other goods. Upon request, Client's shall deliver such inventory or other goods to SUMMIT. SUMMIT may take possession of such inventory or other goods and resell such inventory or other goods. Client's shall pay all reasonable costs and expenses incurred in taking possession and selling such inventory and other goods, including, without limitation, reasonable attorneys fees and legal expenses, transportation expenses, storage expenses, insurance, and sales commissions. Such reasonable costs and expenses may be treated as a chargeback. All proceeds from such resale shall be retained by SUMMIT and the net proceeds credited against the obligations of Client's. 15. Adjustments Upon Refund of Collections. In the event SUMMIT is required to refund or pay back any collection received on any factored account for any reason other than a credit problem concerning a limited recourse account, Client's shall promptly reimburse SUMMIT for such amount. Such reimbursement may be treated as a chargeback. Initial [_________] Date 3/29/01 5 16. Termination of Factoring. The right of Client's to submit accounts to SUMMIT for factoring shall remain in force and effect until terminated by either party hereto by giving sixty (60) days written notice of such termination. This Agreement may be terminated by SUMMIT at any time without notice should any default occur. Upon the effective date of such notice, Client's and SUMMIT shall be excused from the covenants of the second paragraph of Paragraph 2 Factoring of Accounts providing that SUMMIT shall be the sole and exclusive factor for Clients' accounts. Upon such termination or in the event an Event of Default terminates the right of Client's to submit accounts to SUMMIT, at the election of SUMMIT all outstanding, recourse accounts factored to SUMMIT may be immediately subject to chargeback. In the event Client's elect to terminate its right to submit accounts to SUMMIT or an Event of Default terminates the right of Client's to submit accounts to SUMMIT within ninety (90) days of the date of this Agreement, Client's shall forfeit to SUMMIT twenty-five percent (25%) of the Reserve, not as a penalty but as liquidated damages to compensate SUMMIT for loss of profits, recovery of expenses, and other damages resulting from such premature termination. Client's acknowledge and agree that it would be very difficult or impossible to calculate such amounts and that twenty-five percent (25%) of the Reserve is a fair estimation of those amounts. 17. Right to Perform for Client's. SUMMIT may, in its sole discretion, elect to discharge any security interest, lien or other encumbrance upon any account purchased by SUMMIT from Client's, elect to pay any insurance charges payable by Client's or provide insurance as required herein if Client's fails to do so. Any such payments and all expenses incurred in connection therewith shall be treated as a chargeback. SUMMIT shall have no obligation to discharge any such security interest, lien or other encumbrance or pay such insurance charges or provide such insurance. In the event Client's is indebted to SUMMIT as the account debtor on any account which has been purchased by SUMMIT, SUMMIT may treat such debt as a chargeback. 18. Power of Attorney to Endorse Checks. Client's does hereby make, constitute and appoint SUMMIT, and its designees, as its true and lawful attorneys-in-fact, with full power of substitution, with full power to endorse the name of Client's upon any checks or other forms of payment on accounts purchased by SUMMIT and to effect the deposit and collection thereof. Such power may be exercised at any time. Client's does hereby make, constitute, and appoint SUMMIT, and its designees, as Clients' true and lawful attorneys in fact, with full power of substitution, such power to be exercised only upon the occurrence of an Event of Default, to: (a) receive, open, and dispose of all mail addressed to Client's; (b) cause mail relating to accounts of Client's sold to SUMMIT to be delivered to a designated address of SUMMIT where SUMMIT may open all such mail and remove therefrom any payment of such accounts; (c) SUMMIT may settle or adjust account debtor disputes in respect to said accounts for amounts and upon such terms as SUMMIT, in good faith, deems to be advisable, in such case crediting Client's with only the proceeds received and collected by SUMMIT after deduction of SUMMIT' costs, including reasonable attorneys fees and legal expenses; and (d) SUMMIT may do any and all other things necessary or proper to carry out the intent of this Agreement and to perfect and protect the rights of SUMMIT created under this Agreement. Exercise of any of the foregoing powers shall be in the sole discretion of SUMMIT without any duty to do so. 19. Disclosure of Information. Client's hereby consents to SUMMIT disclosing to any financial institution or investor providing financing for SUMMIT, any and all information, knowledge, reports and records, including, without limitation, financial statements, concerning Client's or any guarantor. 20. Fee on Unpaid Chargebacks. In the event Client's fail to pay any chargeback, Client's agree to pay a fee on the chargeback amount from the date of chargeback until paid, both before and after judgment, of thirty six percent (36%) per annum, unless such fee is in violation of law in which case such fee shall be at the maximum rate allowable by law. 21. Sale of All Acceptable Accounts. Unless otherwise agreed in writing by SUMMIT, Client's may not sell only a portion of the accounts for any particular account debtor to SUMMIT but shall offer to sell to SUMMIT all acceptable accounts of an account debtor unless Client's elects not to sell any accounts of that account debtor to SUMMIT. 22. Collection of Chargeback Accounts. Until a chargeback has been paid in full, SUMMIT shall retain the right to collect the account(s) giving rise to such chargeback. All out of pocket expenses, including reasonable attorneys fees and legal expenses, incurred by SUMMIT in seeking collection of such chargeback account(s) shall be added to the amount due for payment of said chargeback. Client's hereby authorizes SUMMIT to initiate any legal action to collect a chargeback account which is not paid by Client's within fifteen (15) days of chargeback. Client's further authorizes SUMMIT to settle or compromise any such chargeback account, in the sole discretion of SUMMIT subject only to acting in good faith, which has not been paid within fifteen (15) days of chargeback. Any deficiency remaining after such settlement or compromise shall remain as a chargeback. 23. No Third Party Beneficiary. This Agreement is made for the sole and exclusive benefit of SUMMIT and Client's and is not intended to benefit any third party. No such third party may claim any right or benefit or seek to enforce any term or provision of this Agreement. 24. Indemnification. Client's agree to indemnify SUMMIT for any and all claims, liabilities, and damages which may be awarded against SUMMIT, and for all reasonable attorneys fees, legal expenses and other expenses incurred in defending such claims, arising from or relating in any manner to the purchase of accounts pursuant to the terms of this Agreement, excluding claims based on the negligence or misconduct of SUMMIT. SUMMIT shall have sole and complete control of the defense of any such claims, and is hereby given authority to settle or otherwise compromise any such claims as SUMMIT, in good faith, determines shall be in its best interests. 25. Default and Remedies. Time is of the essence of this agreement. The occurrence of any of the following events shall constitute a default under this Agreement and be termed an "Event of Default": a. Failure by Client's to promptly repurchase any account or pay any chargeback in accordance with the terms of this Agreement; b. Client's fails in the payment or performance of any obligation, covenant, agreement, or liability created by this Agreement; c. Any representation, warranty, or financial statement made by or on behalf of Client's in this Agreement, or on behalf of any guarantor of this Agreement, proves to have been false or materially misleading when made or furnished; Initial [_________] Date 3/29/01 6 d. Any default or event which, with the giving of notice or the passage of time or both, occurs on any indebtedness of Client's or any such guarantor to others; e. Client's or any such guarantor becomes dissolved or terminated, or experiences a business failure; f. A receiver, trustee, or custodian is appointed for any part of Clients' or any such guarantor's property, or any part of Clients' or any such guarantor's property is assigned for the benefit of creditors; g. Any proceeding is commenced or petition filed under any bankruptcy or insolvency law by or against Client's or any such guarantor; h. Any judgment is entered against Client's or any such guarantor which may materially affect Clients' or any such guarantor's financial condition; i. Client's or any such guarantor becomes insolvent or unable to pay its debts as they mature; or j. The accounts purchased by SUMMIT from Client's become, for any reason whatsoever, substantially delinquent or uncollectible. Waiver of any Event of Default shall not constitute a waiver of any subsequent Event of Default. Upon the occurrence of any event of Default and at any time thereafter, at the election of SUMMIT and without notice of such election, SUMMIT may terminate the right of Client's or factor accounts to SUMMIT and all obligations of Client's to SUMMIT shall become immediately due and payable. At the election of SUMMIT, all outstanding recourse accounts and outstanding limited recourse accounts which are eligible for chargeback may be immediately subject to chargeback. SUMMIT shall have the right to enter upon any premises where the Collateral or records pertaining thereto may be take possession of the Collateral and records relating thereto or, Client's shall, if requested by SUMMIT, assemble such Collateral and records at a place designated by SUMMIT. SUMMIT shall have all rights and remedies under the Uniform Commercial Code. Without notice to Client's, SUMMIT may obtain the appointment of a receiver of the business, property and assets of Client's and Client's consents to the appointment of SUMMIT or such person as SUMMIT may designate as such receiver. SUMMIT may continue to hold the Reserve for payment of any obligations of Client's to SUMMIT then existing or which may thereafter arise. At any time after the occurrence of an Event of Default, SUMMIT may, in its desecration, apply the reserve against obligations of Client's owing to SUMMIT. In the event the Reserve is applied against chargeback shall remain the property of SUMMIT and SUMMIT may continue to pursue and collect such accounts until all obligations of Client's to SUMMIT then owing or which may thereafter arise have been paid in full or are otherwise satisfied. SUMMIT may sell, lease or otherwise dispose of any or all of the Collateral and, after deducting the reasonable costs and out-pocket expenses incurred by SUMMIT, including, without limitation, (1) reasonable attorney fees and legal expenses, (2) transportation and storage costs, (3) advertising of sale of the Collateral, (4) sale commissions, (5) sales tax, (6) costs for improving or repairing the Collateral, and (7) costs for preservation and protection of the Collateral, apply the remainder to pay, or to hold as a reserve against, the obligations secured by the Collateral. 26. Payment of Expenses and Attorneys Fees. Client's shall pay all reasonable expenses of SUMMIT relating to the negotiation, drafting of documents, and documentation of this Agreement, and administration of this Agreement, including, without limitation, title insurance, recording fees, filing fees, reasonable attorneys fees and legal expenses, audit fees, inspection fees, wire transfer fees, and overnight delivery expenses, whether incurred in entering into this Agreement, in future amendments or modifications to this Agreement, or in ongoing administration of this Agreement. SUMMIT currently charges a fee for field audit of Clients' records and business of $600.00 per day plus travel expenses. Upon occurrence of an Event of Default, Client's agrees to pay all costs and expenses, including reasonable attorney fees and legal expenses, incurred by SUMMIT in enforcing or exercising any remedies under this Agreement or any other rights and remedies. Client's agrees to pay all expenses, including reasonable attorney fees and legal expenses, incurred by SUMMIT in any bankruptcy proceedings of any type involving Client's, this Agreement, or the Collateral, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral or relating to any plan of reorganization. 27. Bankruptcy Considerations. In addition to any other covenants made herein by Client's, Client's covenant that they will notify SUMMIT of any voluntary or involuntary bankruptcy petition filed by or against Client's or any guarantor of this Agreement under the United States Bankruptcy Code, within twenty-four (24) hours of any such filing. Failure to notify SUMMIT of any such bankruptcy filing within twenty-four (24) hours shall constitute an Event of Default. Client's acknowledges that this Agreement is a contract to extend debt financing or financial accommodations to or for the benefit of Client's within the meaning of 11 U.S.C. Section 365(c)(2) and, as such, may not be assumed or assigned. SUMMIT shall be under no obligation to purchase accounts under this Agreement from and after the filing of any voluntary or involuntary petition against Client's. However, SUMMIT may, at its sole option, agree to provide post-petition financing to the debtor and/or debtor-in-possession after the filing of a voluntary or involuntary bankruptcy petition by or against Client's. Any such agreement to provide post-petition financing shall not obligate SUMMIT to purchase accounts until such time as the Bankruptcy Court approves the post-petition financing agreement. 28. Jury Waiver, Exclusive Jurisdiction of Utah Courts. Client's hereby irrevocably submits to the jurisdiction of any Utah State or Federal court sitting in Salt Lake County in any action or proceeding arising out of or relating to this Agreement, or any other agreements, and Client's hereby irrevocably agrees that all claims, with respect to such action or proceeding court. Client's hereby irrevocably waives, to the fullest extent Client's may effectively do so, the defense of inconvenient forum to the maintenance of such action or proceeding. Client's irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to Clients' address specified in the Agreement. Client's agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other matter provided by law. Nothing in this Section shall affect SUMMIT'S right to serve legal process in any other manner permitted by law or affect SUMMIT'S right to bring an action or proceeding against Client's or Clients' properly in the courts of other jurisdictions. CLIENT'S HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY OF ANY ACTION OR PROCEEDING ASSERTING ANY CAUSE OF ACTION, CLAIM, THIRD PARTY CLAIM OR COUNTERCLAIM (COLLECTIVELY, "CLAIMS") ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER AGREEMENT, OR THE COLLATERAL. THIS WAIVER EXTENDS TO ALL SUCH CLAIMS, INCLUDING, WITHOUT LIMITATION, CLAIMS WHICH INVOLVE PERSONS OR ENTITIES OTHER THAN SUMMIT, CLAIMS WHICH ARISE OUT OF OR ARE IN ANY WAY CONNECTED TO THE RELATIONSHIP BETWEEN SUMMIT AND CLIENT'S, AND ANY CLAIMS FOR DAMAGES, BREACH OF CONTRACT, SPECIFIC PERFORMANCE, TORT OR ANY EQUITABLE OR LEGAL RELIEF OF ANY KIND. Initial ___________ Date 3/29/01 7 29. Severability of Invalid Provisions. Headings, Interpretations of Agreement. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All headings in this Agreement are inserted for convenience and shall not be considered part of the Agreement or be used in its interpretation. All references in this Agreement to the singular shall be deemed to include the plural when the context so requires, and visa versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation. 30. Notices. All notices hereunder shall be in writing and may be mailed, postage prepaid, addressed as follows: To SUMMIT: SUMMIT Financial Resources, L. P. 2323 South Foothill Drive Salt Lake City, UT 84109 Attention: Director of Operations To Client's: JK Distribution Inc. 9127 Thrasher Avenue (P.O. Box 691447) Los Angeles, CA 90069-9447 Attention: Robert A. Friedland Jill Kelly Productions, Inc. 9127 Thrasher Avenue (P.O. Box 691447) Los Angeles, CA 90069-9447 Attention: Robert A. Friedland Any notice so mailed shall be deemed given three (3) days after mailing. Any notice otherwise delivered shall be deemed given when received by the addressee. 31. Survival of Representations. Warranties and Covenants. All agreements, representations, warranties and covenants made herein by Client's shall survive the execution and delivery of this Agreement and any bankruptcy proceedings involving Client's and shall continue in effect so long as any obligation to SUMMIT contemplated by this Agreement is outstanding and unpaid, notwithstanding any termination of this Agreement. 32. Assignability. This Agreement is not assignable or transferable by Client's and any such purported assignment or transfer is void. This Agreement shall be binding upon the successors of Client's. Client's acknowledges and agrees that SUMMIT may assign all or any portion of this Agreement, including, without limitation, assignment of the rights, benefits and remedies of SUMMIT hereunder without any assignment of the duties, obligations or liabilities of SUMMIT hereunder. 33. Integrated Agreement. Amendment, Headings. Governing Law. This Agreement shall replace and supersede any prior agreement between Client's and SUMMIT. This Agreement and the documents identified or contemplated herein constitute the entire agreement between SUMMIT and Client's as to the subject matter hereof and may not be altered or amended except by written agreement signed by SUMMIT and Client's. No provision hereof may be waived by SUMMIT except upon written waiver executed by SUMMIT. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah and this Agreement shall be deemed to have been executed by the parties in the State of Utah. Dated: 3/29, 2001. JK Distribution Inc. BY: /s/ Robert A. Friedland ----------------------------------- Robert A. Friedland Title (Its): Chairman/CEO Jill Kelly Productions, Inc. By: /s/ Robert A. Friedland ----------------------------------- Robert A. Friedland Title (Its): Chairman/CEO Witnessed or verified signature by: [ILLEGIBLE] SUMMIT Financial Resources, L. P., a Hawaii limited partnership By: [ILLEGIBLE] Title: Authorized Representative Initial_____ Date ________ 8 EX-10.18 24 w97143exv10w18.txt GLOBAL LICENSING AGREEMENT EXHIBIT 10.18 LICENSING AGREEMENT REGARDING VIDEO RIGHTS PARTIES; Jill Kelly Productions, a legal entity under the law of the state of California (USA), based and registered as well as holding office in Delaware on 8923 Sunset Boulevard, West Hollywood, California 90069, hereafter: Licensor and The private limited liability company under Dutch law de besloten vennootschap met beperkte aansprakelijkheid Global Distributors Netherlands BV, based and registered at Van Heemstraweg 39 A, 6658 KE, gemeente Beneden-Leeuwen, The Netherlands, hereafter: Licensee; WHEREAS: With the going into effect of the following agreement licensor owns or is entitled to commit acts of disposition worldwide concerning the following rights in the hardcore version: NEW TITLES: 100 % NATURAL BODY ILLUSION CAN'T STOP ME EXPERIMENT IN SEX FOOL FOR LOVERS FRIENDS & LOVERS GRACED JUST SEX MIND PHUK OUT OF CONTROL OUT OF CONTROL AGAIN PASSION DESIGNER PERFECT PINK PART 14 PSYCHOSIS REFLECTIONS SECRET DREAMS OLD TITLES: INDUSTRIAL SEX INVENTING STAR KILLER SEX LIPSTICK MEN ARE FROM MARS NAUGHTY PINK PERFECT PINK PART 12 PERFECT PINK PART 13 SEX GAMES SEXY SIRENS BEAUTYFUL COUPLES BLONDE ON BLONDE COOL BABES, HOT BODS DRIPPING FUCKING WET PART 1 DRIPPING FUCKING WET PART 2 DRIPPING FUCKING WET PART 3 DRIPPING FUCKING WET PART 4 FAST & FEMALE 1. During the term of the following agreement licensor will become entitled to commit acts of disposition worldwide concerning other, new, motion pictures (titles) intended for viewing by adult audiences, i.e. sex films of an explicit nature with at least an X-rating under US-law and in the hard core version; 1.1. Licensor has made available to licensee before the going into effect the titles mentioned above and licensor has selected already all old titles to order during the term of this agreement as well as the first order of new titles to be made during the term of this agreement; 1.2. Licensee distributes, reproduces, prints, manufactures, sells films of the nature mentioned before; 1.3. Licensor is not active on the whole European market and here offers to license the rights mentioned above exclusively to licensee under the terms and conditions mentioned hereunder for the whole of Europe, exclusive the Iberian Peninsula (Spain and Portugal) and the countries of the former Soviet Union; 1.4. Licensee accepts this offer under the terms and conditions mentioned below; HAVE AGREED AS FOLLOWS: ARTICLE 1 DEFINITIONS Titles: All movie pictures licensor owns and/or is entitled to commit acts of disposition with; Licensed titles: Titles licensed to and selected by licensee following the procedure mentioned in article 2; New title: a movie picture manufactured and/or released by licensor no matter were or how, not longer then 2 months before being offered by licensor to licensee following the procedure mentioned in article 2. However, a new compilation or remix of other titles is not regarded as a new title in respect of this agreement; Old title: a movie manufactured and released longer then 2 months before being offered by licensor to licensee following the procedure mentioned in article 2. However, any compilation or remix of movies manufactured and/or released before is in respect of this agreement considered as an old title; Licensed rights: the exclusive right for a period of 7 years after licensing by licensee, under copyright to reproduce, print, manufacture, sell and distribute licensed titles and still images (either in whole or in part) taken from the licensed titles, in home video format and/or stills only for the whole of Europe, excluding the Iberian Peninsula (Spain and Portugal) and the countries of the former Soviet Union; Territory: the whole of Europe, excluding the Iberian Peninsula (Spain and Portugal) and the countries of the former Soviet Union; Term of agreement: from October 2003 until August 31 2004 ARTICLE 2 LICENSING TITLES, PROCEDURE 2.1 With the going into effect of this agreement licensor has made available to licensee an overview/list of all the titles now available for license; 2.2 Starting October 2003 licensor will, not later then the first day of every month during the period this agreement is in effect, will present a written list of all the new titles to licensee. Licensor will supply these new titles to licensee with the standard quality adult-features as licensee is used to receive; 2.3 Provided that at least 8 new titles are made available by licensor (of a quality of at least 6) for license in the month following the procedure mentioned in article 2 sub 2, licensee is obliged to select and license at least 6 (six) new titles at a flat fee of $[__________________] [AMOUNT REDACTED - A REQUEST FOR CONFIDENTIAL TREATMENT HAS BEEN FILED PURSUANT TO RULE 406 OF THE SECURITIES ACT] per new title; In case in any given month during the term of this agreement, less new titles then the numbers mentioned above are available to licensee of the standard quality, the number of titles to license is lowered pro rata; 2.4 licensee hereby commits to buy at least 6 new titles for the coming 10 month's (starting the 31st of November 2003) when licensee fails to purchase or pay this quantity of new releases within this period, licensee will loose all rights of this contract and licensor is free to re-sell these licensed-titles to a third party. 2.5 The license fee is due monthly before the 31st of the month (starting before the 31st of November 2003) ARTICLE 3 DELIVERY 3.1 Not later then the 10th of every month (including listed new and old titles above) licensor shall deliver art work and a DV Cam/Betacam SP of each licensed title to licensee as well as a list of the licensed titles. Licensor is free to present this list in the form of a (draft of an) invoice provided reference is made to this agreement; 3.2 The delivery of each licensed title consists of the artwork and the masters, and one DV Cam in the NTCS format (hard version), or a BETACAM-SP master in the NTSC format (hard version), one CD/Rom in layers of both, video-box and DVD-sleeve artwork, 20 hard and 20 soft chromes, and a proof of the fact that all actors and actresses concerned (model-releases), were at least 18 years or older during the production of the licensed titles. ARTICLE 4 WARRANTS COCNERNING AGES ACTORS/ACTRESSES 4.1. Licensor warrants, indemnifies and holds harmless licensee completely concerning the ages of the actors/actresses in the titles. ARTICLE 5 COPYRIGHTS 5.1 Licensor guarantees licensee that he owns and/or is entitled to commit acts of disposition concerning the titles presented to licensee. Licensor indemnifies and holds licensee harmless both completely and unconditionally in that respect. 5.2 Licensor herein grants licensee the rights, at the licensee's expense but in licensor's name, to obtain copyright or other legal registration of the licensed titles in the Territory. Licensor constitutes licensee, licensor's attorney during the term hereof, but at licensee's expense, to lawfully protect the licensee's rights of the licensed titles, provided that licensee shall indemnify and hold harmless licensor from any cost, loss or responsibility whatsoever arising from the exercise of any power conferred upon licensee herein; 5.3 Regarding protection of parallel import, into licensee's territory, licensor will only grant the distributor of the Iberian Peninsula (Spain and Portugal) and the distributors of the countries Of the former Soviet Union, to release the movie's (DVD-VHS) in their own language only (Spanish-Portuguese- former U.S.S.R languages). ARTICLE 6 DEFAULT 6.1 Without prejudice to their respective rights to demand total compensation of damages to the party in default, parties in case one or both parties act in deviance or default of this agreement both have the right to terminate the agreement after haven given proper notice to the other party by registered mail and/or fax and/or recognized international courier. If served by courier, service shall be conclusively deemed made seventy-two (72) hours after deposit thereof, postage prepaid, addressed to the other party to who service is to be given, as hereinafter provided. All notices or demands to either party must be given at the following addresses or such other addresses as either party from time to time may designate by notice given to the other party as aforesaid. 6.2 Any notice or other communication required or permitted hereunder shall be sufficiently given if sent by e-mail, fax or nationally recognized international courier and addressed as follows: If to Licensor: Jill Kelly Productions, Inc. 8923 Sunset Blvd. West Hollywood, CA 90069 Attention: Robert Friedland, CEO Telephone: (310) 360-7900 Fax: (310) 360-7933 E-mail: bob@jillkellyproductions.com If to Licensee: Global Distributors NetherlandsBV Van Heemstraweg 39A 6658 KE Beneden-Leeuwen The Netherlands Attention: Th.B.H. Ruzette Telephone: 011-31-487-595386 E-mail: bert@playhouseplaza.com ARTICLE 7 MISCELLANEOUS 7.1 This Agreement contains the entire agreement and understanding between the parties hereto and supersedes and replaces all prior negotiations and agreements between the parties hereto, or any of them, whether written or verbal; 7.2 If any provision of this Agreement is held to be invalid, void or unenforceable, the balance of the provisions shall, nevertheless, remain in full force and effect and shall be in no way affected, impaired or invalidated. 7.3 This Agreement shall be binding upon and inure to the benefit of each of the parties, their respective assigns, successors in interest and legal representatives. ARTICLE 7a ATTORNEYS' FEES In the event that any party hereto should bring any action, suit or other proceeding against any other party hereto, contesting the validity of this Agreement, or attempting to enforce, remedy, prevent or obtain relief from any breach of this Agreement, or to rescind, negate, modify, or reform this Agreement, any of the terms or provisions hereof, or any of the matters referred to herein, the prevailing party shall recover all of such party's attorneys' fees and costs incurred in such action. ARTICLE 7b APPLICABLE LAW AND JURISDICTION This Agreement is made and entered into in the State of California, USA and shall in all respects be interpreted, enforced and governed by and under the laws of said State. Thus agreed and signed, Asmterdam, 23-09-2003 West Hollywood, CA, USA 23/9/03 /s/ Th.B.H. Ruzette /s/ Robert Friedland --------------------------- ----------------------------- Global Distributors Jill Kelly Productions, Inc. Netherlands BV Robert Friedland, CEO Th.B.H. Ruzette, CEO TOTAL SUM OF THIS AGREEMENT FOR 34 TITLES: MATERIALS, TOTAL: U.S. $[_______________][AMOUNT REDACTED - A REQUEST FOR CONFIDENTIAL TREATMENT HAS BEEN FILED PURSUANT TO RULE 406 OF THE SECURITIES ACT] LICENSING FEES, TOTAL: U.S. $[_______________][AMOUNT REDACTED - A REQUEST FOR CONFIDENTIAL TREATMENT HAS BEEN FILED PURSUANT TO RULE 406 OF THE SECURITIES ACT] EX-21.1 25 w97143exv21w1.txt LIST OF SUBSIDIARIES . . . EXHIBIT 21.1 LIST OF SUBSIDIARIES
Names Under Which Name of Subsidiary State of Incorporation Subsidiary Does Business - ------------------ ---------------------- ------------------------ ~~1. Jill Kelly Productions, Inc. Delaware Jill Kelly Productions 2. J.K. Distribution, Inc. Nevada J.K. Distribution~~
EX-23.1 26 w97143exv23w1.txt CONSENT OF SHERB & CO EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Jill Kelly Productions Holding, Inc. on Form SB-2 of our report dated February 20, 2004 and March 26, 2004 with respect to Note 16, relating to the consolidated financial statements of Jill Kelly Productions Holding, Inc. as of December 31, 2003 and for the years ended December 31, 2003 and 2002 appearing in this Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Sherb & Co., LLP New York, NY May 13, 2004 EX-23.2 27 w97143exv23w2.txt CONSENT OF KLEHR,HARRISON,HARVEY,BRANZBURG,ELLERS EXHIBIT 23.2 CONSENT OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP We hereby consent to the reference to us under the caption "Legal Matters" in the Prospectus forming a part of this Registration Statement of Jill Kelly Productions Holding, Inc. on Form SB-2. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. /s/ KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP May 14, 2004 -----END PRIVACY-ENHANCED MESSAGE-----


			December 31,
			2003

ASSETS
CURRENT ASSETS:
	Cash		$	171,748
	Accounts receivable, net			285,705
	Inventories			364,663
	Other current assets			203,701

		TOTAL CURRENT ASSETS		1,025,817
PROPERTY AND EQUIPMENT, net				55,154
FILM PRODUCTION COSTS, net				5,711,104

			$	6,792,075


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
	Accounts payable		$	587,150
	Accrued expenses			483,563
	Income tax payable			361,000
	Loans payable			233,249
	Due to related party			778,414
	Dividends payable			82,211
	Capital lease obligations			22,001
	Customer advances			50,642

		TOTAL CURRENT LIABILITIES		2,598,230
NOTES PAYABLE				1,272,031
DUE TO INVESTORS				1,681
STOCKHOLDERS’ EQUITY:
	Preferred stock, $.001 par value; authorized 1,030,000 shares; issued and outstanding 48,800 shares			1,270,146
	Common stock, $.001 par value; authorized 300,000,000 shares; issued and outstanding 23,750,000 shares			23,750
	Additional paid-in capital			12,081,163
	Accumulated Deficit			(10,454,926	)

		TOTAL STOCKHOLDERS’ EQUITY		2,920,133

			$	6,792,075



			For the Years Ended
			December 31,

			2003			2002

REVENUES			$	3,908,788		$	3,619,905
COST OF REVENUES				2,242,746			1,828,823

GROSS PROFIT				1,666,042			1,791,082
OPERATING EXPENSES:
	General and administrative			523,892			235,284
	Stock based compensation			3,181,920			37,500
	Advertising			231,296			259,775
	Bad debt expense			27,650			230,194
	Other operating expenses			844,613			608,051

		TOTAL OPERATING EXPENSES		4,809,371			1,370,804

INCOME (LOSS) FROM OPERATIONS				(3,143,329	)		420,278
OTHER INCOME (EXPENSE):
	Interest income			11,095			7,007
	Interest expense			(5,829,492	)		(21,062	)

		TOTAL OTHER INCOME (EXPENSE)		(5,818,397	)		(14,055	)

NET INCOME BEFORE INCOME TAXES				(8,961,726	)		406,223
	Provision for income taxes			—			177,000

NET INCOME (LOSS)				(8,961,726	)		229,223
	Deemed and accrued preferred stock dividend			(274,157	)		—

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS			$	(9,235,883	)	$	229,223

NET INCOME (LOSS) PER SHARE — basic and diluted			$	(1.02	)	$	0.23

WEIGHTED NUMBER OF SHARES OUTSTANDING — basic and diluted				9,056,142			998,787


	Page
Summary		3
Risk Factors		8
Note Regarding Forward-Looking Statements		19
Management’s Discussion and Analysis of Financial Condition or Plan of Operations		20
Description of Business		28
Legal Proceedings		34
Directors, Executive Officers, Promoters and Control Persons		35
Executive Compensation		36
Security Ownership of Certain Beneficial Owners and Management		37
Selling Holders		41
Plan of Distribution		44
Use of Proceeds		46
Certain Relationships and Related Transactions		47
Description of Securities		48
Disclosure of Commission Position on Indemnification for Securities Act Liabilities		52
Market for Common Equity		53
Experts		54
Legal Matters		55
Where You Can Find More Information		55
Index to Financial Statements		F1
STOCK PURCHASE AGREEMENT AMONG TURF HOLDING
AGREEMENT & PLAN OF MERGER DATED AUGUST 8, 2003
AMENDED & RESTATED ARTICLES OF INCORPORATION
BY-LAWS
SPECIMEN CERTIFICATE OF COMMON STOCK
FORM OF WARRANT
PROMISSORY NOTE FOR $778,414.05
KORETSKY SETTLEMENT AGREEMENT
LONG SETTLEMENT AGREEMENT
BAXTER SETTLEMENT AGREEMENT
FRIEDLAND SETTLEMENT AGREEMENT
PATTERSON SETTLEMENT AGREEMENT
LONDON SETTLEMENT AGREEMENT
SLIPYAN SETTLEMENT AGREEMENT
JOHNSON SETTLEMENT AGREEMENT
FORM OF SUBSCRIPTION AGREEMENT
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
SERIES B REGISTRATION RIGHTS AGREEMENT
SIDE LETTER DATED 3/5/04 ARMADILLO,JUBILEE
SIDE LETTER DATED 4/20/04 ARMADILLO,JUBILEE
CORPORATE BUILDERS CONSULTING AGREEMENT
FACTORING AGREEMENT
GLOBAL LICENSING AGREEMENT
LIST OF SUBSIDIARIES
CONSENT OF SHERB & CO
CONSENT OF KLEHR,HARRISON,HARVEY,BRANZBURG,ELLERS

•		independent distributors;

•		retailers;

•		cable, satellite and hotel television operators; and

•		Internet webpage operators.


		exercise of common stock purchase warrants for working capital purposes.

•		each share of our Series A Preferred Stock remains issued and outstanding for two years;

•		we elect to pay all of the dividends in shares of our common stock; and

•		the shares of our common stock that we issue as dividends are valued at $0.25 per share.

•		Playboy Enterprises, Inc.;

•		Vivid Entertainment; and

•		Video Company of America.

•		attract and retain qualified personnel;

•		upgrade and expand our infrastructure so that it matches our level of activity; and

•		improve and refine our operating and financial systems and managerial controls and procedures.

•		if our distributors experience excessive chargebacks and/or credits;

•		if our distributors experience excessive fraud ratios;

•		if there is a breach of our distributors’ security resulting in a theft of credit card data;

•		if there is a change in policy of the acquiring banks and/or credit card associations with respect to the processing of credit card charges for adult-related content; and

•		tightening of credit card association chargeback regulations in international commerce.

•		the availability of an Internet infrastructure sufficient to support its growth;

•		delays in the development or adoption of new standards and protocols required to handle increased Internet activity;

•		increased governmental regulation of the Internet; and

•		piracy, particularly in new jurisdictions.

•		our operating development and financial condition;

•		our expectations of growth in demand for our products and services;

•		our expansion and acquisition plans;

•		the impact of expansion on our revenue potential, cost basis and margins;

•		the effects of regulatory developments and legal proceedings with respect to our business;

•		the impact of exchange rate fluctuations; and

•		our ability to obtain additional financing.

•		the sale of our movies through independent wholesale and retail distributors in popular media formats such as DVDs, videotapes and electronic formats;

•		the licensing of our movies to cable, satellite and hotel television operators; and

•		the licensing of our movies to Internet webpage operators.

•		persuasive evidence of a sale or licensing arrangement with a customer exists;

•		the film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery;

•		the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale;

•		the arrangement fee is fixed or determinable; and

•		collection of the arrangement fee is reasonably assured.

•		Develop strategic alliances and joint ventures with businesses both inside and outside of the adult entertainment industry to broaden our distribution channels;

•		Adapt new technology and distribution channels, such as broadband distribution of our movies;

•		Increase market share through strategic acquisitions;

•		Complete the digitalization of our entire movie library in order to prepare our library for distribution in new electronic media; and

•		Continue to increase and strengthen brand awareness.

•		Extensive library of high quality adult movies – We have an extensive library of high quality adult movies. Subject to existing license agreements, we hold exclusive worldwide rights to this entire movie archive. We believe that this electronic archive constitutes one of the largest libraries of premier quality adult movies.

•		Recognized brand name - We believe that our target consumers associate our Jill Kelly Productions brand name with high quality adult movies. This name recognition attracts talent, leading producers of adult media content, retailers, distributors and prospective joint venture partners interested in working with us.

•		Established market position and distribution network - We have a well-established worldwide distribution network which has been built up, including numerous points of sale in the United States, Europe, Asia, Japan, Canada and Australia. This broad distribution network provides an effective channel to introduce new products and services and new formats for existing products and services. We believe that our broad, multi-format distribution network affords the consumers of our products convenient access to high quality adult media content in the format of their choice.

•		Flexible operating structure - We produce our own adult movies and acquire adult movies from third party directors on a project basis. This

•		two are in sales;

•		three are in production and post-production;

•		one is a movie director/producer;

•		four are movie performers; and

•		the remainder are in management and general operations.

•		each person or entity known by us to be the beneficial owner of more than 5% of our common stock, Series A Preferred Stock or Series B Preferred Stock, as applicable;

•		each of our directors;

•		each of our executive officers; and

•		all of our directors and executive officers as a group.

		Common Stock

•		that the holders of our Series A Preferred Stock will convert their shares of our Series A Preferred Stock into an aggregate of 20,820,000 shares of our common stock;

•		that the selling stockholders will exercise all 5,205,000 issued and outstanding warrants;

•		that the holders of our outstanding shares of Series A Preferred Stock will not elect to exercise their conversion rights for at least two years; and

•		that we will pay the holders of our Series A Preferred Stock shares of our common stock valued at $0.25 per share as payment of two years of accrued dividends.

•		block transactions;

•		transactions on the over-the-counter electronic bulletin board or on such other market on which our common stock may from time to time be trading;

•		privately negotiated transactions;

•		through the writing of options on the shares;

•		short sales; or

•		any combination of these transactions.

•		the market price prevailing at the time of sale;

•		a price related to the prevailing market price;

•		negotiated prices; or

•		such other price as the selling stockholders determine from time to time.

•		fail to observe or perform any material covenant, agreement or warranty relating to the adjustment of the conversion price for our Series B Preferred Stock;

•		materially breach or default on any of our obligations under the Convertible Preferred Stock Purchase Agreement, dated as of March 26, 2004, between us and Armadillo Investments, PLC or any related agreement entered into by us in connection with such agreement;

•		file for bankruptcy or commence any other proceeding for the reorganization, dissolution, insolvency or liquidation of our company;

•		have the trading of our shares of common stock suspended, delisted or otherwise ceased and not reinstated within 30 days; or


	JILL KELLY PRODUCTIONS HOLDING, INC.
	By:	/s/ Robert A. Friedland
		Robert A. Friedland
		Chief Executive Officer


	/s/ SHERB & CO., LLP
	Sherb & Co., LLP
	Certified Public Accountants


															Total
	Preferred Stock				Common Stock				Additional						Stockholders’
									Paid-In			Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)

Balance, January 1, 2002		—	$	—		998,787	$	999	$	—		$	(1,449,066	)	$	(1,448,067	)
Net income		—		—		—		—		—			229,223			229,223

Balance, December 31, 2002		—		—		998,787		999		—			(1,219,843	)		(1,218,844	)

Issuance of warrants for interest		—		—		—		—		5,754,494			—			5,754,494
Issuance of warrants for services										919,100			—			919,100
Reverse acquisition		—		—		19,000,000		19,000		(19,000	)		—			—
Preferred stock issued for cash net of expenses of $633,500 and beneficial conversion of $1,567,500		29,100		709,000		—		—		1,567,500			—			2,276,500
Preferred stock issued for debt net of beneficial conversion of $1,600,000		19,700		370,000		—		—		1,600,000			—			1,970,000
Amortization of beneficial conversion		—		191,146		—		—		—			(191,146	)		—
Accrued dividends		—		—		—		—		—			(82,211	)		(82,211	)
Conversion of warrants		—		—		3,201,213		3,201		(2,881	)		—			320
Stock issued to Equivest						25,000		25		6,225			—			6,250
Stock issued for non-legal services						25,000		25		6,225			—			6,250
Stock issued to Corporate Builders		—		—		500,000		500		2,249,500			—			2,250,000
Net loss		—		—		—		—		—			(8,961,726	)		(8,961,726	)

Balance, December 31, 2003		48,800	$	1,270,146		23,750,000	$	23,750	$	12,081,163		$	(10,454,926	)	$	2,920,133


Note 2 —	Summary of Significant Accounting Policies


Furniture, fixtures, exhibits and props	$	48,945
Equipment		21,582
Tenant Improvements		21,489

		92,017
Less accumulated depreciation		(36,862	)

Net property and equipment	$	55,154


Year Ended December 31,

2004	$	19,393
2005		3,583
2006		299

Total minimum lease payments		23,275
Less: Imputed interest		1,274

Present value of net minimum lease payments	$	22,001


Accrued payroll taxes	$	180,714
Accrued royalties (see Note 10)		180,278
Accrued other		122,572

	$	483,564


(1) Individual	$	35,000
(2) Due to Officer		55,000
(3) S & W, LLP		15,000
(4) Summit Financial		128,249

	$	233,249


For the Year Ended December 31,

2004	$	58,037
2005		59,778
2006		61,572
2007		63,419
2008		29,679

Total minimum lease payments	$	272,485