On Stage Entertainment, Inc.
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), is made and
entered into as of March 13, 2001, by and among ON STAGE ENTERTAINMENT, INC., a
Nevada corporation (the "Company"), and the purchasers listed on Schedule A
attached hereto (collectively, the "Purchasers" and individually, a
"Purchaser").
1. AUTHORIZATION OF SALE OF THE SHARES AND WARRANTS
Subject to the terms and conditions of this Agreement, the Company has
authorized (i) the sale of an aggregate of 1,470,000 of its Series A Preferred
Stock, par value $0.01 per share (the "Shares"), (ii) the sale of warrants in
substantially the same form attached hereto as Exhibit A exercisable for the
purchase of up to 2,800,000 shares of the Company's Series A Preferred Stock
and/or Series A-1 Preferred Stock (each, a "Warrant"), (iii) the issuance of the
Warrant Shares upon exercise of the Warrants (the "Warrant Shares") and (iv) the
issuance of such shares of Common Stock to be issued upon conversion of the
Shares and the Warrant Shares (the "Conversion Shares"). The Shares and the
Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate of Designation of the Relative Rights
and Preferences of the Series A Convertible Preferred Stock of the Company, in
the form attached hereto as Exhibit B (the "Certificate of Designation").
2. AGREEMENT TO SELL AND PURCHASE THE SHARES AND WARRANTS
2.1 Purchase and Sale
Subject to the terms and conditions of this Agreement, each Purchaser
agrees, severally and not jointly, to purchase, and the Company agrees to sell
and issue to each Purchaser, severally and not jointly, at the Closing (as
defined below) that number of Shares and Warrants set forth opposite such
Purchaser's name as indicated on Schedule A attached hereto. The Warrants shall
be issued to the Purchasers at the Closing according to Schedule A attached
hereto as part of the consideration for the aggregate purchase price for each
Purchaser indicated on such Schedule A.
3. DELIVERY OF THE SHARES AT THE CLOSING
(a) The completion of the purchase and sale of the Shares (the "Closing")
shall occur at the offices of ▇▇▇▇▇▇ Godward, LLP, counsel to the Purchasers, at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 11:00 a.m.
local time on March 13, 2001 or such other time and date as may be agreed by the
parties (the "Closing Date").
(b) At the Closing, the Company shall authorize its transfer agent (the
"Transfer Agent") to issue to each Purchaser one or more stock certificates
registered in the name of such Purchaser, or in such nominee name(s) as
designated by such Purchaser in writing, representing the number of Shares
acquired by such Purchaser pursuant to Section 2 above and bearing an
appropriate legend referring to the fact that the Shares were sold in reliance
upon the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"), and Rule 506 under the
Securities Act. The Company will deliver each such certificate against delivery
of payment for the Shares by such Purchaser.
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(c) At any time on or before the 90th day following the Closing, the
Company may sell up to the balance of the Shares not sold at the Closing to such
persons and in such amounts as listed on Schedule B attached hereto (the
"Additional Purchasers"). All such sales made at any additional closings (each
an "Additional Closing"), shall be made on the terms and conditions set forth in
this Agreement. The representations and warranties of the Company set forth in
Section 5 hereof (and the Schedule of Exceptions) shall speak as of the Closing
and the Company shall have no obligation to update any such disclosure. The
representations and warranties of the Additional Purchasers in Section 6 hereof
shall speak as of such Additional Closing. This Agreement, including without
limitation, the Schedule of Purchasers, may be amended by the Company without
the consent of Purchasers to include any Additional Purchasers. Any shares of
Series A Preferred Stock sold pursuant to this Section 3(c) shall be deemed to
be "Shares" for all purposes under this Agreement and any Additional Purchasers
thereof shall be deemed to be "Purchasers" for all purposes under this
Agreement. Each Additional Purchaser shall execute and be bound by the Co-Sale
Agreement (defined below) as a Founder (as defined therein) and the Voting
Agreement (defined below) as a Key Holder (defined therein) at the Additional
Closing, but shall not become a party to the Investor Rights Agreement (defined
below).
4. CONDITIONS TO CLOSING
4.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares and Warrants at the Closing are subject to
the satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 5 hereof shall be
true and correct as of the Closing Date with the same force and effect as if
they had been made as of the Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or observed by it
on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and issuance of the
Shares and Warrants and the proposed issuance of the Conversion Shares shall be
legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) Consents, Permits, and Waivers. The Company shall have obtained any and
all consents, permits and waivers necessary or appropriate for consummation of
the transactions contemplated by the Agreement and the Related Agreements
(including any filing required to comply with the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, and except for such as may be properly obtained
subsequent to the Closing).
(d) Filing of Certificate of Designation. The Certificate of Designation
shall have been filed with the Secretary of State of the State of Nevada and
shall continue to be in full force and effect as of the Closing Date.
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(e) Corporate Documents. The Company shall have delivered to Purchasers or
their counsel, copies of all corporate documents of the Company as Purchasers
shall reasonably request.
(f) Reservation of Conversion Shares. The Conversion Shares issuable upon
conversion of the Shares and Warrant Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(g) Compliance Certificate. The Company shall have delivered to Purchasers
a Compliance Certificate, executed by the President of the Company, dated the
Closing Date, to the effect that the conditions specified in subsections (a),
(c), (d) and (f) of this Section 4.1 have been satisfied.
(h) Secretary's Certificate. The Purchasers shall have received from the
Company's Secretary, a certificate having attached thereto (i) the Company's
Restated Articles of Incorporation, as amended by the Certificate of Designation
and as in effect at the time of the Closing (the "Restated Articles"), (ii) the
Company's Bylaws as in effect at the time of the Closing, (iii) resolutions
approved by the Board of Directors authorizing the transactions contemplated
hereby, (iv) resolutions approved by the Company's stockholders authorizing the
filing of the Restated Articles, and (v) good standing certificates (including
tax good standing) with respect to the Company from the applicable
authority(ies) in Nevada and any other jurisdiction in which the Company is
qualified to do business, dated a recent date before the Closing.
(i) Investor Rights Agreement. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit C (the "Investor Rights Agreement") shall
have been executed and delivered by the parties thereto.
(j) Right of First Refusal and Co-Sale Agreement. The Right of First
Refusal and Co-Sale Agreement substantially in the form attached hereto as
Exhibit D (the "Co-Sale Agreement") shall have been executed and delivered by
the parties thereto. The stock certificates representing the outstanding shares
subject to the Co-Sale Agreement shall have been delivered to the Secretary of
the Company and shall have had appropriate legends placed upon them to reflect
the restrictions on transfer set forth on the Co-Sale Agreement.
(k) Voting Agreement. The Voting Agreement substantially in the form
attached hereto as Exhibit E (the "Voting Agreement") shall have been executed
and delivered by the parties thereto. The stock certificates representing the
outstanding shares subject to the Voting Agreement shall have been delivered to
the Secretary of the Company and shall have had appropriate legends placed upon
them to reflect the restrictions on transfer set forth on the Voting Agreement.
(l) Board of Directors. Upon the Closing, the authorized size of the Board
of Directors of the Company shall be nine (9) members and the Board shall
consist of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, with three vacancies.
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(m) Legal Opinion. The Purchasers shall have received from legal counsel to
the Company an opinion addressed to them, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit F.
(n) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers and their special counsel,
and the Purchasers and their special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(o) Proprietary Information and Inventions Agreement. The Company and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
and the Company's Chief Financial Officer (the "Key Employees") shall have
entered into the Company's standard form of Proprietary Information and
Inventions Agreement, in substantially the form attached hereto as Exhibit G or
in other form reasonably acceptable to the Purchasers.
(p) Fees and Expenses. The Company shall have paid the fees and expenses
set forth in Section 11 out of the proceeds from the Closing.
(q) Advisory Services Agreement. The Company shall have entered into an
Advisory Services Agreement with ▇▇▇▇▇▇ De Leeuw & Co., Inc. (or its designee)
in substantially the form attached hereto as Exhibit H.
4.2 Conditions to Obligations of the Company. The Company's obligation to
issue and sell the Shares and Warrants at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and warranties
in Section 6 made by those Purchasers acquiring Shares hereof shall be true and
correct at the date of the Closing, with the same force and effect as if they
had been made on and as of said date.
(b) Performance of Obligations. Such Purchasers shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by such Purchasers on or before the Closing.
(c) Investor Rights Agreement. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit C shall have been executed and delivered
by the Purchasers.
(d) Approval of Amended Articles. The Amended Articles shall have been
approved by the requisite number of the Company's stockholders.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit I, the Company hereby represents and warrants to the Purchasers as of
the date hereof and as of the date of the Closing (which representations and
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warranties shall be deemed to apply, where appropriate, to each subsidiary of
the Company) that:
5.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Investor Rights Agreement in the form attached hereto as
Exhibit C, the Co-Sale Agreement in the form attached hereto as Exhibit D and
the Voting Agreement in the form attached hereto as Exhibit E (collectively, the
"Related Agreements"), to issue and sell the Shares, Conversion Shares and
Warrants, and to carry out the provisions of this Agreement, the Related
Agreements and the Restated Articles and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
5.2 Subsidiaries. The Company does not own or control any equity security
or other interest of any other corporation, limited partnership or other
business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
5.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, immediately prior to the
Closing, consists of 100,000,000 shares of Common Stock, par value $0.01 per
share, 11,307,930 shares of which are issued and outstanding, and (ii)
10,000,000 shares of Preferred Stock, par value $0.01 per share, 5,000,000
shares of which are designated Series A Preferred Stock, and 3,000,000 shares of
which are designed Series A-1 Preferred Stock, none of which are issued and
outstanding. The outstanding capital securities of the Company, including all
Common Stock, Preferred Stock, options and warrants and exercise prices and
expiration dates thereto, are accurately and fully reflected in the
capitalization table attached hereto as Exhibit J.
(b) Under the Amended and Restated On Stage Entertainment, Inc. 1996 Stock
Option Plan and the Amended and Restated Legends in Concert, Inc. 1996 Stock
Option Plan (together, the "Option Plans"), (i) no shares have been issued
pursuant to restricted stock purchase agreements and/or the exercise of
outstanding options; (ii) options to purchase 1,454,850 shares have been granted
and are currently outstanding, and ownership of such options with corresponding
vesting schedule is as listed on Exhibit J;, and (iii) 195,550 shares of Common
Stock remain available for future issuance to officers, directors, employees and
consultants of the Company.
(c) Other than as set forth on Exhibit J, and except as may be granted
pursuant to this Agreement and the Related Agreements, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or agreements of any kind
for the purchase or acquisition from the Company of any of its securities.
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(d) The rights, preferences, privileges and restrictions of the Shares are
as stated in the Certificate of Designation. The Shares are convertible into
Common Stock on a one-for-one basis as of the date hereof. The Conversion Shares
have been duly and validly reserved for issuance. When issued in compliance with
the provisions of this Agreement and the Restated Articles, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances other than liens and encumbrances created
by or imposed upon the Purchasers; provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
5.4 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Certificate of Designation has been taken or
will be taken prior to the Closing. The Agreement and the Related Agreements,
when executed and delivered, will be valid and binding obligations of the
Company enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions in
Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
5.5 Financial Statements. The Company has made available to each Purchaser
(a) its unaudited balance sheets as at December 31, 2000, and audited balance
sheets as at December 31 of both 1999 and 1998 and audited statements of income
operations, stockholders' equity (deficit) and cash flows for each of the twelve
months ended December 31, 1999, 1998 and 1997, with the accompanying reports of
BDO ▇▇▇▇▇▇▇, LLP, Independent Certified Public Accountants and an unaudited
statement of income operations, stockholders' equity (deficit) and cash flows
for the twelve months ended December 31, 2000, and (b) its unaudited balance
sheet as at January 31, 2001 (the "Statement Date") and unaudited statements of
operations and cash flows for the one month period ended on the Statement Date
(collectively, the "Financial Statements"), copies of such 2000 and 2001
financial statements will be filed with the Securities and Exchange Commission
("SEC") in the Company's form 10-KSB and the Company's financial condition and
results of operations as reflected in such audited statements will not differ in
any material adverse way from such conditions and results as in the unaudited
statements. The Financial Statements, together with the notes thereto, are
complete and correct in all material respects, have been prepared in accordance
with United States' generally accepted accounting principles and, as to the
audited financial statements, the Rules and Regulations of the SEC applied on a
consistent basis throughout the periods indicated, except as disclosed therein,
and present fairly the financial position of the Company as of December 31,
2000, 1999 and 1998 and the Statement Date and the results of operations and
cash flows for each of the years ended December 31, 2000, 1999, 1998 and 1997
and for the month ended January 31, 2001; provided, however, that the unaudited
financial statements are subject to normal recurring year-end audit adjustments
(which are not expected to be material either individually or in the aggregate),
and do not contain all footnotes required under United States' generally
accepted accounting.
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5.6 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and agreements
between the Company and its employees with respect to the sale of the Company's
Common Stock, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or to its knowledge by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $10,000 (other than obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business), or
(ii) the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the
purchase of "off the shelf" or other standard products), or (iii) provisions
restricting the development, manufacture or distribution of the Company's
products or services, or (iv) indemnification by the Company with respect to
infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale or license agreements entered into in the ordinary
course of business).
(c) Except as set forth in the Financial Statements, the Company has not
(i) declared or paid any dividends, or authorized or made any distribution upon
or with respect to any class or series of its capital stock, (ii) incurred or
guaranteed any indebtedness for money borrowed or any other liabilities (other
than with respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the ordinary course of business) individually in excess
of $10,000 or, in the case of indebtedness and/or liabilities individually less
than $10,000, in excess of $25,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
5.7 Obligations to Related Parties. There are no obligations of the Company
to officers, directors, stockholders, or employees of the Company other than (a)
for payment of salary for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company). None of the officers, directors or, to the best of
the Company's knowledge, key employees or stockholders of the Company or any
members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation which competes with the Company, other than passive
investments in publicly traded companies (representing less than 1% of such
company) which may compete with the Company. No officer, director or
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stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
5.8 Changes. Since the Statement Date, there has not been to the Company's
knowledge:
(a) Any change in the assets, liabilities, financial condition, prospects
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is reasonably expected to have a
material adverse effect on such assets, liabilities, financial condition,
prospects or operations of the Company;
(b) Any resignation or termination of any officer, key employee or group of
employees of the Company; and the Company, to the best of its knowledge, does
not know of the impending resignation or termination of employment of any such
officer, key employee or group of employees;
(c) any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(f) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(g) Any declaration or payment of any dividend or other distribution of the
assets of the Company;
(h) Any labor organization activity related to the Company;
(i) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(j) Any change in any material agreement to which the Company is a party or
by which it is bound which materially and adversely affects the business,
assets, liabilities, financial condition, operations or prospects of the
Company;
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(k) Any other event or condition of any character that, either individually
or cumulatively, has materially and adversely affected the business, assets,
liabilities, financial condition, prospects or operations of the Company;
(l) Any material change in the law regarding the Company's core business
operations; or
(m) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (l) above.
5.9 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
5.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted and as presently proposed to be conducted, without any
known infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing proprietary rights,
nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging that the
Company has violated or, by conducting its business as presently proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity, nor
is the Company aware of any basis therefor.
(c) The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as presently proposed to be
conducted. The Company will cause each Key Employee and officer of the Company
to execute a proprietary information and inventions agreement in the form of
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Exhibit K attached hereto. No former or current employee, officer or consultant
of the Company has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions pursuant to
such employee, officer or consultant's proprietary information and inventions
agreement. The Company does not believe it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been assigned to the Company.
5.11 Compliance with Other Instruments. The Company is not in violation or
default of any term of its Restated Articles or Bylaws, or of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order or writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Certificate of Designation, will
not, with or without the passage of time or giving of notice, result in any such
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties. The Company has avoided every condition, and
has not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution agreement or other
agreement required to be disclosed on the Schedule of Exceptions.
5.12 Litigation. Except as set forth in Exhibit L, there is no action,
suit, proceeding or investigation pending or, to the Company's knowledge,
currently threatened against the Company that questions the validity of this
Agreement, or the Related Agreements or the right of the Company to enter into
any of such agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or, to
the Company's knowledge, threatened, or any basis therefor known by the Company
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
5.13 Tax Returns, Payments, and Elections. The Company has timely filed all
tax returns and reports (federal, state and local) as required by law. These
returns and reports are true and correct in all material respects. The Company
has paid all taxes and other assessments due, except those contested by it in
good faith. The provision for taxes of the Company as shown in the Financial
Statements is adequate for taxes due or accrued as of the date thereof. The
Company has not elected pursuant to the Internal Revenue Code of 1986, as
amended ("Code"), to be treated as an S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any
10
other elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation, or amortization) that would have a material
effect on the business, properties, prospects, or financial condition of the
Company. The Company has never had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. None of the
Company's federal income tax returns and none of its state income or franchise
tax or sales or use tax returns has ever been audited by governmental
authorities. Since the date of the Financial Statements, the Company has made
adequate provisions on its books of account for all taxes, assessments, and
governmental charges with respect to its business, properties, and operations
for such period. The Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes, including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositaries.
5.14 Employees. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. The Company is
not a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
5.15 Obligations of Management. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer or key employee is currently working
or, to the Company's knowledge, plans to work for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.
5.16 Registration Rights and Voting Rights. Except as required pursuant to
the Investor Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to register (as defined in Section
1.1 of the Investor Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, except as contemplated in the Voting Agreement, no
11
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
5.17 Compliance with Laws; Permits. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
5.18 Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. No Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's knowledge after
reasonable investigation, by any other person or entity on any property owned,
leased or used by the Company. For the purposes of the preceding sentence,
"Hazardous Materials" shall mean (a) materials which are listed or otherwise
defined as "hazardous" or "toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from contamination,
the control of hazardous wastes, or other activities involving hazardous
substances, including building materials, or (b) any petroleum products or
nuclear materials.
5.19 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 6 hereof, the offer, sale and
issuance of the Shares, Conversion Shares and Warrants will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
5.20 SEC Filings. The Company has filed in a timely manner all documents
required to be filed by the Company with the SEC since August 13, 1997 and has
identified and furnished or made available to the Purchasers true and complete
copies of the same, including true and complete copies of all exhibits to such
documents (collectively, the "On Stage SEC Reports"). The On Stage SEC Reports
complied in all material respects with the SEC's requirements, the requirements
12
of the Securities and Exchange Act of 1934, as amended, and the requirements of
the Securities Act as of their respective filing dates; the information
contained therein as of the date thereof did not contain 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 in light of the circumstances under
which they were made not misleading. Each of the financial statements
(including, in each case, any related notes) contained in the On Stage SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with United States' generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC), fairly presented the
financial position of the Company as of the dates noted therein and fairly
presented the results of the Company's operations and cash flows for the periods
indicated, assuming that the Company would continue as a going concern, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to be
material in amount individually or in the aggregate.
5.21 Full Disclosure. The Company has provided the Purchasers with all
information requested by the Purchasers in connection with their decision to
purchase the Shares. Neither this Agreement, the exhibits hereto, the Related
Agreements nor any other document delivered by the Company to Purchasers or
their attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which they were made.
5.22 Minute Books. The minute books of the Company made available to the
Purchasers contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
5.23 Real Property Holding Corporation. The Company is not a real property
holding corporation within the meaning of Code Section 897(c)(2) and any
regulations promulgated thereunder.
5.24 Insurance. The Company has general commercial, product liability, fire
and casualty insurance policies with coverage customary for companies similarly
situated to the Company.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
6.1 Requisite Power and Authority. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
13
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) as limited by
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the indemnification
provisions of Section 2.9 of the Investor Rights Agreement may be limited by
applicable laws.
6.2 Investment Representations. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment
indefinitely unless the Shares (or the Conversion Shares) are registered
pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that the Company has no present intention of registering
the Shares, the Conversion Shares or any shares of its Common Stock. Purchaser
also understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the Shares
or the Conversion Shares under the circumstances, in the amounts or at the times
Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the Shares and the
Conversion Shares for Purchaser's own account for investment only, and not with
a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents that by reason
of its, or of its management's, business or financial experience, Purchaser has
the capacity to protect its own interests in connection with the transactions
contemplated in this Agreement, and the Related Agreements. Further, Purchaser
is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement.
(d) Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(e) Rule 144. Purchaser acknowledges and agrees that the Shares, and, if
issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
14
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(f) Residence. If the Purchaser is an individual, then the Purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made is located at the address or addresses
of the Purchaser set forth on Exhibit A.
(g) Foreign Investors. If Purchaser is not a United States person (as
defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), Purchaser hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Shares or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Shares, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any government or other consents that may need to be obtained, and (iv)
the income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale or transfer of the Shares. Purchaser's
subscription and payment for and continued beneficial ownership of the Shares
will not violate any applicable securities or other laws of Purchaser's
jurisdiction.
6.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investor Rights Agreement.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchasers in this Agreement and in the certificates for the Shares
delivered pursuant to this Agreement shall survive the execution of this
Agreement for a period of two years, the delivery to the Purchasers of the
Shares being purchased and the payment therefor.
8. NOTICES
All notices, requests, consents and other communications under this
Agreement shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be delivered as addressed as follows:
(a) if to the Company, to:
On Stage Entertainment, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
15
with a copy to:
Nida & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to a Purchaser, at its address as set forth on the signature page to
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.
Such notice shall be deemed effectively given upon confirmation of receipt
by facsimile, one business day after deposit with such overnight courier or
three days after deposit of such registered or certified airmail with the U.S.
Postal Service, as applicable.
9. MODIFICATION; AMENDMENT
This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchasers of a majority of
the Shares sold pursuant to this Agreement.
10. TERMINATION
This Agreement may be terminated as to any Purchaser, at the option of such
Purchaser, if the Closing has not occurred on or before thirty (30) days from
the date of this Agreement.
11. EXPENSES
The Company, upon closing, shall pay (i) all fees and expenses incident to
the negotiation, preparation and execution of this Agreement and related
documents (including legal and accounting fees and expenses) not to exceed five
hundred thousand dollars ($500,000) and (ii) a transaction management fee to
▇▇▇▇▇▇ De Leeuw & Co., Inc. of five hundred thousand dollars ($500,000).
12. HEADINGS
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
13. SEVERABILITY
If any provision contained in this Agreement should be held to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained in this Agreement shall not
in any way be affected or impaired thereby.
16
14. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the state of California and the federal law of the United States of
America.
15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party to this Agreement and delivered to
the other parties.
[SIGNATURE PAGES FOLLOW]
17
ON STAGE ENTERTAINMENT, INC.
STOCK AND WARRANT PURCHASE AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
ON STAGE ENTERTAINMENT, INC.
By:__________________________________
Name:
Its:
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
PURCHASERS:
▇▇▇▇▇▇ DE LEEUW AND COMPANY IV, LP
By:______________________________
Name:____________________________
Title:_____________________________
▇▇▇▇▇▇ DE LEEUW AND COMPANY IV ASSOCIATES, LP
By:_________________________________
Name:______________________________
Title:_______________________________
DELTA FUND, LP
By: _____________________________
Name: _____________________________
Title: _____________________________
Address of Purchasers ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Listed Above: ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
BOARD OF TRUSTEES OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ JUNIOR UNIVESITY
By: _____________________________
Name: _____________________________
Title: _____________________________
Address: c/o ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Stanford Management Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
---------------------------------------------------
ADDITIONAL INVESTORS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ FAMILY TRUST
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ REVOCABLE TRUST ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
▇▇▇▇▇▇▇ ▇. PARROT GIDWITZ REVOCABLE TRUST DATED 9/12/96
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
VISION SERVICE PLAN EXECUTIVE DEFERRED PLAN RABBI TRUST
▇▇▇▇▇▇▇ ▇▇▇▇ CORPORATION
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
DU ▇▇▇▇ 1991 TRUST ▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇ FAMILY TRUST
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
SCHEDULE A
Schedule of purchasers
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
PURCHASER INVESTMENT SHARES TRANCHE #2 TRANCHE #3 TRANCHE #4
PURCHASED WARRANTS WARRANTS WARRANTS
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
▇▇▇▇▇▇ De Leeuw and Company IV, LP $5,467,508.65 1,151,056 767,370 959,212 959,212
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
▇▇▇▇▇▇ De Leeuw and Company IV $84,013.47 17,687 11,791 14,740 14,740
Associates, LP
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
Delta Fund, LP $81,477.88 19,257 12,839 16,048 16,048
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
Board of Trustees of the ▇▇▇▇▇▇ $57,000.00 12,000 8,000 10,000 10,000
Stanford Junior University
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
TOTAL $5,700,000 1,200,000 800,000 1,000,000 1,000,000
-------------------------------------- ------------------- ---------------- ----------------- ---------------- ------------------
SCHEDULE B
Additional purchasers
-------------------------------------------------------------------- ---------------------- -------------------
PURCHASER INVESTMENT SHARES PURCHASED
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ $150,000 30,000
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇▇▇ Family Trust $150,000 30,000
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust $200,000 40,000
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $150,000 30,000
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $200,000 40,000
-------------------------------------------------------------------- ---------------------- -------------------
Gidwitz Revocable Trust dated 9/12/96 $100,000 20,000
-------------------------------------------------------------------- ---------------------- -------------------
Vision Service Plan Executive Deferred Plan Rabbi Trust $100,000 20,000
-------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇▇▇ ▇▇▇▇ Corporation $50,000 10,000
------------------------------------------------------------------- ---------------------- -------------------
Du ▇▇▇▇ 1991 Trust $200,000 40,000
------------------------------------------------------------------- ---------------------- -------------------
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ Family Trust $50,000 10,000
------------------------------------------------------------------- ---------------------- -------------------
TOTAL $1,350,000 270,000
------------------------------------------------------------------- ---------------------- -------------------
EXHIBIT A
Form of Warrant
EXHIBIT B
Certificate of Designation
EXHIBIT C
Investor Rights Agreement
EXHIBIT D
Right of First Refusal and Co-Sale Agreement
EXHIBIT E
Voting Agreement
EXHIBIT F
Form of Legal opinion
1. Each of the Company and each of its subsidiaries has been duly organized
and is a validly existing corporation in good standing under the laws of
the respective jurisdiction of its organization.
2. Each of the Company and each of its subsidiaries has the requisite
corporate power to own or lease its property and assets and to conduct its
business as it is currently being conducted and is qualified as a foreign
corporation to do business in all jurisdictions where it is required to be
so qualified.
3. The Company has all requisite corporate power to execute and deliver the
Stock and Warrant Purchase Agreement, the Investor Rights Agreement, the
Right of First Refusal and Co-Sale Agreement and the Voting Agreement (the
"Financing Agreements"), to sell and issue the Shares thereunder, to issue
the shares of the Company's common stock issuable upon conversion of the
Shares (the "Conversion Shares") and to carry out and perform its
obligations under the terms of the Financing Agreements. All corporate
action on the part of the Company, its directors and stockholders necessary
for the authorization, execution and delivery of the Financing Agreements
by the Company and the authorization, sale, issuance and delivery of the
Shares (and the Conversion Shares) has been taken. The Financing Agreements
have been duly and validly authorized, executed and delivered by the
Company and each such agreement constitutes a valid and binding agreement
of the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity under Section 2.9 of the Investor
Rights Agreement may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
4. The Company's authorized capital stock consists of (a) one hundred million
(100,000,000) shares of common stock, par value $0.01 per share, of which
eleven million three hundred seven thousand nine hundred thirty
(11,307,930) shares are issued and outstanding, and (b) ten million
(10,000,000) shares of preferred stock, par value $0.01 per share, none of
which were issued or outstanding prior to the Closing, of which: (i) five
million (5,000,000) shares have been designated Series A Preferred Stock,
par value $0.01 per share and (ii) three million (3,000,000) shares have
been designated Series A-1 Preferred Stock, par value $0.01 per share
(together, the "Series Preferred"). The outstanding shares of Common Stock
have been duly authorized and validly issued, are fully paid and
nonassessable and were issued in accordance with applicable federal and
state securities laws. The rights, preferences and privileges of the Series
Preferred are as stated in the Company's Certificate of Designation of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock
(the "Certificate of Designation"). The Shares have been duly authorized,
and upon issuance and delivery against payment therefor in accordance with
the terms of the Agreement, the Shares will be validly issued, outstanding,
fully paid, nonassessable and free of preemptive rights. The Conversion
Shares have been duly reserved, and upon issuance and delivery in
accordance with the terms of the Company's Certificate of Designation, will
be validly issued, outstanding, fully paid and nonassessable. To the best
of our knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of
the authorized but unissued capital stock of the Company, other than the
conversion privileges of the Series Preferred, rights created in connection
with the transactions contemplated by the Agreement and the Financing
Agreements, one hundred ninety-five thousand five hundred fifty (195,550)
shares reserved for issuance under the Company's 1996 Stock Option Plan and
those rights disclosed by the Company in the Agreement and the Schedule of
Exceptions delivered by the Company in connection therewith.
5. The execution and delivery of the Financing Agreements by the Company and
the issuance of the Shares (and the Conversion Shares) pursuant thereto do
not violate any provision of the Company's Restated Articles of
Incorporation, as amended by the Certificate of Designation and as in
effect as of the date of Closing, or, to the best of our knowledge, any
provision of any applicable federal or state law, rule or regulation. To
the best of our knowledge, the execution, delivery and performance of and
compliance with the Agreements, and the issuance of the Shares (and the
Conversion Shares) do not violate, or constitute a default under, any of
the Material Agreements, and do not violate or contravene (a) any
governmental statute, rule or regulation applicable to the Company or (b)
any order, writ, judgment, injunction, decree, determination or award,
which has been entered against the Company and which is specifically
identified in the Schedule of Exceptions delivered in connection with the
Agreement.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the Financing
Agreements or that might result, either individually or in the aggregate,
in any material adverse change in the assets, financial condition, or
operations of the Company.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or
governmental body in the United States required for the consummation by the
Company of the transactions contemplated by the Agreement, have been made
or obtained, except for (a) the filing of a Notice of Transaction Pursuant
To Section 25102(f) of the California Corporate Securities Law of 1968, as
amended (b) for the filing of a Form D pursuant to Securities and Exchange
Commission Regulation D and (c) any filing required by other applicable
Blue Sky filings.
8. The offer and sale of the Shares is exempt from the registration
requirements of the Securities Act, subject to the timely filing of a Form
D pursuant to Securities and Exchange Commission Regulation D.
EXHIBIT G
Form of Proprietary Information and Inventions Agreement
ON STAGE ENTERTAINMENT, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by On Stage
Entertainment, Inc. (the "Company"), the compensation now and hereafter paid to
me and shares of the Company's Common Stock I have received or will receive in
excess of the number of shares purchased with cash and/or property, I hereby
agree as follows:
NONDISCLOSURE
1.1 Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns. I have been informed and acknowledge that the unauthorized taking of
the Company's trade secrets could result in a civil liability under [INSERT
APPROPRIATE NEVADA CODE REFERENCE], and that, if willful, could result in an
award for double the amount of the Company's damages and attorneys' fees; and is
a crime under [INSERT APPROPRIATE NEVADA CODE REFERENCE], punishable by
[________].
1.2 Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.
1.4 No Improper Use of Information of Prior Employers and Others. During my
employment by the Company I will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employer or any other person
to whom I have an obligation of confidentiality, and I will not bring onto the
premises of the Company any unpublished documents or any property belonging to
any former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.
2. ASSIGNMENT OF INVENTIONS.
2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.
2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"Prior Inventions"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit A but am only to disclose a cursory name for
each such invention, a listing of the party(ies) to whom it belongs and the fact
that full disclosure as to such inventions has not been made for that reason. A
space is provided on Exhibit A for such purpose. If no such disclosure is
attached, I represent that there are no Prior Inventions. If, in the course of
my employment with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Company Inventions without the Company's prior written
consent.
2.3 Assignment of Inventions. Subject to Section 2.5, I hereby assign and
agree to assign in the future (when any such Inventions or Proprietary Rights
are first reduced to practice or first fixed in a tangible medium, as
applicable) to the Company all my right, title and interest in and to any and
all Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or conceived
or reduced to practice or learned by me, either alone or jointly with others,
during the period of my employment with the Company. Inventions assigned to the
Company, or to a third party as directed by the Company pursuant to this Section
2, are hereinafter referred to as "Company Inventions."
2.4 Obligation to Keep Company Informed. During the period of my employment
and for twelve (12) months after termination of my employment with the Company,
I will promptly disclose to the Company fully and in writing all Inventions
authored, conceived or reduced to practice by me, either alone or jointly with
others. In addition, I will promptly disclose to the Company all patent
applications filed by me or on my behalf within a year after termination of
employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
[INSERT APPROPRIATE NEVADA CODE REFERENCE]; and I will at that time provide to
the Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under the provisions of [INSERT APPROPRIATE NEVADA
CODE REFERENCE]. I will preserve the confidentiality of any Invention that does
not fully qualify for protection under [INSERT APPROPRIATE NEVADA CODE
REFERENCE].
2.5 Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.6 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.7 Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable effort,
to secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be required
by the Company) of all Proprietary Information developed by me and all
Inventions made by me during the period of my employment at the Company, which
records shall be available to and remain the sole property of the Company at all
times.
4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment
by the Company I will not, without the Company's express written consent, engage
in any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment by the Company I will not, either directly or
through others, solicit or attempt to solicit any employee, independent
contractor or consultant of the company to terminate his or her relationship
with the Company in order to become an employee, consultant or independent
contractor to or for any other person or entity. I agree further that for the
period of my employment by the Company and for one (1) year after the date of
termination of my employment by the Company I will not solicit the business of
any client or customer of the Company (other than on behalf of the Company).
5. NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
6. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.
7. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.
8. NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
9. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.
10. GENERAL PROVISIONS.
10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of Nevada, as
such laws are applied to agreements entered into and to be performed entirely
within Nevada between Nevada residents. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in [______]
County, Nevada for any lawsuit filed there against me by Company arising from or
related to this Agreement.
10.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.
10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
10.6 Waiver. No waiver by the Company of any breach of this Agreement shall
be a waiver of any preceding or succeeding breach. No waiver by the Company of
any right under this Agreement shall be construed as a waiver of any other
right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
10.7 Advice of Counsel. I acknowledge that, in executing this agreement, I
have had the opportunity to seek the advice of independent legal counsel, and I
have read and understood all of the terms and provisions of this agreement. This
agreement shall not be construed against any party by reason of the drafting or
preparation hereof.
10.8 Entire Agreement. The obligations pursuant to Sections 1 and 2 of this
Agreement shall apply to any time during which I was previously employed, or am
in the future employed, by the Company as a consultant if no other agreement
governs nondisclosure and assignment of inventions during such period. This
Agreement is the final, complete and exclusive agreement of the parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
This Agreement shall be effective as of the first day of my employment with
the Company, namely:
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: ___________
(Signature)
(Printed Name)
ACCEPTED AND AGREED TO:
ON STAGE ENTERTAINMENT, INC.
By:
-------------------------------------------------------
Title:
----------------------------------------------------
(Address)
Dated: _______
EXHIBIT A
TO: On Stage Entertainment, Inc.
FROM:
DATE:
SUBJECT: Previous Inventions
1. Except as listed in Section 2 below, the following is a complete list of
all inventions or improvements relevant to the subject matter of my employment
by On Stage Entertainment, Inc. (the "Company") that have been made or conceived
or first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:
No inventions or improvements.
See below:
Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
Invention or Improvement Party(ies) Relationship
1.
2.
3.
Additional sheets attached.
EXHIBIT H
ADVISORY SERVICES AGREEMENT
EXHIBIT I
Schedule of Excpetions
In connection with that certain Stock and Warrant Purchase Agreement dated
as of March 13, 2001 by and among On Stage Entertainment, Inc. (the "Company")
and the Purchaser, as defined therein (the "Agreement"), the Company hereby
delivers this Schedule of Exceptions to the Company's representations and
warranties given in the Agreement. The section numbers in this Schedule of
Exceptions correspond to the section numbers in the Agreement; provided,
however, that each exception is taken and such information is provided as to all
representations and warranties of the Company set forth in the Agreement, to the
extent relevant as is clear based on the nature and specificity of such
exception. Capitalized terms used but not defined herein shall have the same
meanings given them in the Agreement.
See Attached schedule
EXHIBIT J
Capitialization Table