Rainmaker Entertainment Inc. (RNK.TO: Quote) said Thursday that it has entered into an asset purchase agreement according to which Rainmaker Studios Inc., a wholly owned subsidiary of Xing Xing Digital Corp., has agreed to buy certain assets which comprises substantially all of Rainmaker's animation studio assets.
The assets will be acquired in consideration for the assumption of existing Rainmaker book liabilities in an approximate amount of $7 million and the assumption of all real property leases.
Rainmaker Entertainment has agreed to provide a loan to Rainmaker Studios in the aggregate principal amount of $5 million, in respect to the transaction. This loan, which has a term of four years, will bear interest at a rate of prime plus 2 percent and may be prepaid at any time without penalty.
The company shall also be granted an option, exercisable during the fourth year of the loan, to convert the principal and accrued interest in respect of the loan into common shares of Rainmaker Studios.
Based on the starting principal amount of the loan, Rainmaker Entertainment would be entitled to acquire 30 percent of the outstanding common shares of Rainmaker Studios at the time of conversion. Also, during the term of the loan, Rainmaker Entertainment shall be entitled to nominate one of five directors to the board of Rainmaker Studios.
Tim McElvaine, Chairman of the Board, said, "Following completion of the Transaction, Rainmaker's assets will include working capital in excess of $2 million, proceeds of the RSI loan, the potential to participate in any adjusted gross revenues payable to the producer of Escape from Planet Earth and substantial non-capital tax losses. The board remains committed to maximizing the value of these assets for Rainmaker's shareholders."
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by RTT Staff Writer
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