SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: October 21, 1997
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(Date of earliest event reported)
MARQUEE ENTERTAINMENT, INC.
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Exact name of registrant as specified in its charter
Nevada 0-15413 95-3480640
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State of other jurisdiction Commission File No. I.R.S. Employer
of incorporation or ID No.
organization
9044 Melrose Avenue, 3rd Floor, Los Angeles, California 90069
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(Address of principal executive offices)
Registrant's telephone number, including area code:(310) 859-8250
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N/A
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(Former name or former address if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a Stock Purchase and Exchange Agreement dated
October 21, 1997 (the "Stock Purchase Agreement") among Marquee
Entertainment, Inc. ("Registrant"), and Of Sound Mind, Inc.
("OSM"), in exchange for 100% of the issued and outstanding
common stock of OSM, Registrant issued an aggregate of 700,000
shares of Registrant's common stock to the shareholders of OSM
(the "Exchange"). The number of shares delivered to the
shareholders of OSM was determined through negotiations in an
arms length transaction. The shareholders of OSM were Patrick M.
Griffith and Sylvie Griffith (collectively, the "Shareholders").
The aggregate of 700,000 shares of common stock represents
approximately 33.3% of the outstanding common stock of the
Registrant.
As a result of the Exchange the Registrant owns 100% of the
issued and outstanding common stock of OSM. OSM is engaged in
the picture and sound post production business. It offers such
services to the movie picture industry as well as theme parks,
interactive games and the Internet.
The description contained herein of the Exchange is
qualified in its entirety by reference to the Stock Purchase
Agreement, dated October 21, 1997, by and among the Registrant,
and the Shareholders and the Option Agreement between the
Registrant and Patrick Griffith and Sylvie Griffith dated October
21, 1997, which are attached as Exhibits 2.1 and 2.2,
respectively.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements
The financial information described below which is
required by Item 7 of Form 8-K is not yet available. The
Registrant anticipates that it will file the required financial
information as soon as possible, but no later than 60 days from
the date this report must be filed.
Report of Independent Auditors
Balance Sheet of OSM at September 30, 1996 and
September 30, 1997
Statement of Operations of OSM, years ended
September 30,1996 and September 30, 1997
Statement of Cash Flows of OSM, years ended
September 30, 1996 and September 30, 1997
Notes to Financial Statements.
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(b) Pro Forma Financial Information
Pro Forma Balance Sheet at September 30, 1997 (to
be filed with Form 10-K).
Pro Forma Combined Statement of Operations for the
fiscal year ending September 30, 1997.
(c) Exhibits
The following Exhibits are filed with this Form 8-K
2.1 Stock Purchase and Exchange Agreement dated
October 21, 1997 between Marquee
Entertainment, Inc. and the Shareholders of Of
Sound Mind, Inc.
2.2 Option Agreement dated October 21, 1997
between Marquee Entertainment, Inc. and
Patrick and Sylvie Griffith.
Item 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
On October 21, 1997, the Company closed an offering of
$150,000 principal amount convertible subordinated debentures
(the "Debentures") and 150,000 Common Stock Purchase Warrants
exercisable at $.50 (the "Warrants"). Each Debenture bears
interest at the rate of 8% per annum and matures on November 1,
1998. Each Debenture is convertible into shares of the
Registrant's common stock at the lesser of a thirty five percent
discount to the average high closing bid price of the
Registrant's common stock on the five consecutive trading days
ending two days before the date of conversion or a thirty five
percent discount to the average high closing bid price of the
Common Stock on the date of Closing. Each Warrant is exercisable
into the Registrant's Common Stock at a price of $.50 per share
at any time on or after October 31, 1997 and expiring on October
31, 1999.
The offering was made only to "non-U.S. persons" as defined
in Regulation S and the aggregate commission, expenses and legal
fees related to this offering totaled $20,000.
Pursuant to the requirements of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
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MARQUEE ENTERTAINMENT, INC.
By: /s/ Ralph T. Smith
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Ralph T. Smith
President and
Principal Accounting Officer
Date: October 31, 1997
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EXHIBIT 2.1
STOCK PURCHASE AND EXCHANGE AGREEMENT
THIS STOCK PURCHASE AND EXCHANGE AGREEMENT (the "Agreement")
is made and entered into as of the 21st day of October, 1997, by
and between MARQUEE ENTERTAINMENT, INC., a Nevada corporation
(the "Company"), and the individuals whose names appear on the
signature page hereof (the "Shareholders").
RECITALS
A. Of Sound Mind, Inc., a California corporation ("OSM"),
whose issued and outstanding common stock, (the "OSM Stock") is
owned, beneficially and of record, by the individuals whose names
appear on the signature page hereof (the "OSM Shareholders"), who
together own all of the issued and outstanding shares of the OSM
Stock, each owning the number of shares set forth opposite their
respective names.
B. The Company proposes to acquire all outstanding shares
of OSM Stock in exchange for the issuance of an aggregate of
700,000 shares of its common stock,.04 par value (the "Company's
Common Stock") at a closing provided for in Section 1.2 of this
Agreement.
C. The parties hereto intend that the issuance of the
shares of the Company's Common Stock in exchange for the OSM
Stock shall qualify as a "tax-free" reorganization as
contemplated by the provisions of the Internal Revenue Code of
1986, as amended.
NOW THEREFORE, in consideration of the foregoing premises
and the mutual covenants, agreements, representations and
warranties contained herein, the parties hereto agree as follows:
1. ISSUANCE, SALE AND PURCHASE OF SHARES.
1.1 Purchase and Sale.
At the Closing to be held in accordance with the provisions
of Section 2 below, the Company agrees to sell, and each of the
OSM Shareholders agree, severally and not jointly, to purchase
from the Company the aggregate number of authorized and newly
issued shares of the Company's Common Stock determined as
provided in Section 1.2 below. In consideration for the issuance
and sale of the Company's Common Stock to the OSM Shareholders,
and as payment in full of the purchase price for the Company's
Common Stock to be issued to, and purchased at the Closing, each
shall deliver to the Company certificates of common stock or
shares evidencing the entire ownership of OSM, together with duly
executed stock powers to effectuate the transfer of same.
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1.2 Shares Issuable.
An aggregate of 700,000 shares of the Company's Common Stock
shall be purchased by and issued and sold to the Shareholders in
the proportion set forth on the signature page of this Agreement.
1.3 Adjustment of Purchase Price.
The parties hereto agree and acknowledge that the financial
information provided by the Shareholders to the Company are
unaudited. Within sixty days after Closing, the Company's
auditors will complete audited financial statements of OSM
("Audited Financial Statements"). In the event the revenues or
profits of OSM as set forth in the unaudited Profit and Loss
statement for the period August 31, 1996 to August 1, 1997
annexed hereto as Schedule 1.3 is less than $1,132,000 and
$74,000 respectively, the number of the Company's Common Stock
issued to the OSM Shareholders in exchange for the OSM Shares
shall be reduced (but not increased) by the number of shares
determined by subtracting the difference between $1,132,000 or
$74,000 as the case may be and the revenues and/or profits set
forth on the Audited Financial Statements, dividing by $1,132,000
or $74,000 as the case may be and multiplying by the initial
number of the Company's Common Stock. The reduced number of
shares of the Company's Common Stock thus obtained shall be the
final purchase price for the OSM Shares.
2. CLOSING.
Concurrently with the execution of this Agreement (the
"Closing") the parties shall deliver the following:
2.1 Deliveries by Company.
The Company shall deliver, or cause to be delivered to the
Shareholders:
(a) Certificates for the shares of the Company's Common
Stock being purchased for their respective accounts, in
form and substance reasonably satisfactory to the
Shareholders and their counsel;
(b) Resolutions (certified as of the date of the Closing as
being in full force and effect by an appropriate officer
of the Company) duly adopted by the Board of Directors
of the Company approving this Agreement and the other
documents, agreements and instruments to be entered into
by the Company as provided herein, which shall be in
form and substance reasonably satisfactory to the
Shareholders and their counsel;
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(c) A duly executed option agreement in the form annexed
hereto as Exhibit A (the "Option Agreement"); and
(d) Duly executed employment agreement of Patrick M.
Griffith ("Principal Shareholder")in the form annexed
hereto as Exhibits B1 (the "Employment Agreements");
2.2 Shareholders' Deliveries.
The Shareholders shall deliver to the Company:
(a) Certificates evidencing the ownership of each
Shareholder, of all shares of OSM Stock owned by them,
respectively, duly endorsed for transfer to the Company;
(b) Duly executed representation and restriction letters;
and
(c) Duly executed counter parts of the Agreements referred
to in paragraphs 2.1 (c) and (d) above (collectively the
"Ancillary Agreements").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each
Shareholder, as follows:
3.1 Organization and Corporate Power.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and
is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which such
qualification is required and where the failure to be so
qualified would have a materially adverse effect upon the
Company. The Company has all requisite corporate power and
authority to conduct its business as now being conducted and to
own and lease the properties which it now owns and leases. The
Company's Articles of Incorporation as amended to date, certified
by the Secretary of State of Nevada, and the By-laws of the
Company as amended to date, certified by the President and the
Secretary of the Company, which have been delivered to the
Shareholders prior to the execution hereof, are true and complete
copies thereof as in effect as of the date hereof.
3.2 Authorization.
The Company has full power, legal capacity and authority to
enter into this Agreement, to execute all attendant documents
and instruments necessary to consummate the transaction herein
contemplated, and to issue and sell the Common Stock to each
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Shareholder, and to perform all of its obligations hereunder.
This Agreement and all other agreements, documents and
instruments to be executed in connection herewith have been
effectively authorized by all necessary action, corporate or
otherwise, on the part of the Company, which authorizations
remain in full force and effect, have been duly executed and
delivered by the Company, and no other corporate proceedings on
the part of the Company are required to authorize this Agreement
and the transactions contemplated hereby, except as specifically
set forth herein. This Agreement constitutes the legal, valid
and binding obligation of the Company and is enforceable with
respect to the Company in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, priority or other laws of court decisions
relating to or affecting generally the enforcements of creditors'
rights or affecting generally the availability of equitable
remedies. Neither the execution and delivery of this Agreement,
nor the consummation by the Company of any of the transactions
contemplated hereby, or compliance with any of the provisions
hereof, will (i) conflict with or result in a breach or,
violation of, or default under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
lease, credit agreement or other agreement, document, instrument
or obligation (including, without limitation, any of its charter
documents) to which the Company is a party or by which the
Company or any of its assets or properties may be bound, or (ii)
violate any judgment, order, injunction, decree, statute, rule or
properties of the Company. No authorization, consent or approval
of any public body of authority or any third party is necessary
for the consummation by the Company of the transactions
contemplated by this Agreement.
3.3 Capitalization.
The authorized and outstanding capital stock of the Company
as of September 30, 1997 is as set forth on Schedule 3.3. All of
the outstanding shares of the Company's Common Stock have been,
and all of the Company's Common Stock to be issued and sold to
each Shareholder pursuant to this Agreement, when issued and
delivered as provided herein will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive or
similar rights.
3.4 Financial Statements.
The Company's financial statements contained in its Form 10-K
filing for the fiscal year ended September 30, 1996, its Form
10-Q filings for the periods ended December 31, 1996, March 31,
1997 and June 30, 1997, each as amended (collectively the
"Company's Financial Statements") are complete in material
respects and have been prepared in accordance with generally
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accepted accounting principles applied on a consistent basis
throughout the periods indicated. The Company's Financial
Statements accurately set out and describe the financial
condition and operating results of the Company as of the dates,
and for the periods indicated therein, subject to normal year-end
audit adjustments. Except as set forth in the Company's
Financial Statements, the Company has no liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1997 and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Company's
Financial Statements. The Company maintains and will continue to
maintain a standard system of accounting established and
administered in accordance with generally accepted accounting
principles.
3.5 Subsidiaries.
Other than Delta Gamma Film Distributors, Inc., the Company
has no subsidiaries and no investments, directly or indirectly,
or other financial interest in any other corporation or business
organization, joint venture or partnership of any kind whatsoever
except as reflected in the Company's Financial Statements or in
other filings made by the Company with the Securities and
Exchange Commission.
3.6 Absence of Undisclosed Liabilities.
Except as and to the extent reflected or reserved against in
the most recent balance sheet included in the Financial
Statements, the Company has no liability(s) or obligation(s)
(whether accrued, to become due, contingent or otherwise) which
individually or in the aggregate could have a materially adverse
effect on the business, assets, properties, condition (financial
or otherwise) or prospects of the Company.
3.7 No Pending Material Litigation or Proceedings.
Except as set forth on Schedule 3.7, there are no actions,
suits or proceedings pending or, to the best of the Company's
knowledge, threatened against or affecting the Company (including
actions, suits or proceedings where liabilities may be adequately
covered by insurance) at law or in equity or before or by any
federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality,
domestic or foreign, or affecting any of the officers or
directors of the Company in connection with the business,
operations or affairs of the Company, which might result in any
adverse change in the business, properties or assets, or in the
condition (financial or otherwise) of the
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Company, or which might prevent the sale of the transactions
contemplated by this Agreement. The Company is not subject to
any voluntary or involuntary proceeding under the United States
Bankruptcy Code and has not made an assignment for the benefit of
creditors.
3.8 Brokerage.
The Company has no obligation to any person or entity for
brokerage commissions, finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement.
3.9 Investment Representation.
The Company, through its current officers and directors, has
the knowledge and experience in business and financial matters to
meaningfully evaluate the merits and risks of the issuance of the
Company's Common Stock in exchange and consideration for the
shares of Common Stock of OSM as contemplated hereby. The
Company understands and acknowledges that the shares of Stock of
OSM were originally issued to the Shareholders, and will be sold
and transferred to the Company, without registration or
qualification under the Securities Act of 1933, as amended, or
any applicable state securities or "Blue Sky" law, in reliance
upon specific exemptions therefrom, and in furtherance thereof
the Company represents that the OSM Stock will be taken and
received by the Company for its own account for investment, with
no present intention of a distribution or disposition thereof to
others. The Company further acknowledges and agrees that the
certificates representing the OSM Common Stock of the Company
shall bear a restrictive legend, in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 AS AMENDED (THE "ACT"), ARE RESTRICTED SECURITIES,
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE
REGISTERED UNDER THE ACT."
3.10 Disclosure.
Neither this Agreement, nor any certificate, exhibit, or
other written document or statement, furnished to the
Shareholders by the Company in connection with the transactions
contemplated by this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary to be stated in order to make the
statements contained herein or therein not misleading.
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3.11 Tax Returns and Payments.
All tax returns and reports, including, without limitation,
all foreign returns and reports, of the Company required by law
to be filed have been duly filed, and all taxes, assessments,
fees and other governmental charges heretofore levied upon any
properties, assets, income or franchises of the Company which are
due and payable have been paid, except as otherwise reflected in
the Financial Statements. No extension of time for the
assessment of deficiencies in any federal or state tax has been
requested of or granted by the Company.
3.12 Compliance with Law and Government Regulations.
The Company is in compliance with all applicable statutes,
regulations, decrees, orders, restrictions, guidelines and
standards, whether mandatory or voluntary, imposed by the United
States of America, any state, county, municipality or agency of
any thereof, and any foreign country or government to which the
Company is subject. Without limiting the generality of the
foregoing, the Company has filed all reports and statements
required to be filed pursuant to the Securities Act of 1933 (the
"1933 Act") and Securities Exchange Act of 1934 (the "1934 Act")
including all periodic reports required under the Section 13 or
15 of the Exchange Act and Form SR reports under Rule 463 of the
Securities Act of 1933. Each of such reports was complete, did
not contain any material misstatement of or omit to state any
material fact.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
The Shareholders hereby represent and warrant to the Company
as follows:
4.1 Authorization.
All Shareholders have full power, legal capacity and
authority to enter into this Agreement, to execute all attendant
documents and instruments necessary to consummate the
transactions herein contemplated, and to perform all of the
obligations to be performed by them hereunder. This Agreement
and all other agreements, documents and instruments to be
executed by the Shareholders in connection herewith have been
duly executed and delivered and constitute the legal, valid and
binding obligation of the Shareholders executing and delivering
the same, and is enforceable with respect to them in accordance
with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, priority or other laws or
court decisions relating to or affecting generally the
enforcements of creditors' rights or affecting the availability
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of equitable remedies. No authorization, consent or approval of
any public body or authority is necessary for the consummation by
the Shareholders of the transactions contemplated hereby.
4.2 Ownership of OSM Stock.
The Shareholders own the shares of OSM Stock to be
transferred to the Company free and clear of (i) any lien,
charge, mortgage, pledge, conditional sale agreement, or other
encumbrance of any kind or nature whatsoever, and (ii) any claim
as to ownership thereof or any rights, powers or interest therein
by any third party, whether legal or beneficial, and whether
based on contract, proxy or other document or otherwise. All of
the shares of OSM Stock have been duly authorized and validly
issued and are fully paid and non-assessable.
4.3 Investment Representation.
The Shareholders have the knowledge and experience in
business and financial matters to meaningfully evaluate the
merits and risks of the transfer of OSM Common Stock in exchange
and consideration for the shares of the Company's Common Stock as
contemplated hereby. The Shareholders understand and acknowledge
that the shares of Stock of the Company will be sold and
transferred to the Shareholders, without registration or
qualification under the Securities Act of 1933, as amended, or
any applicable state securities or "Blue Sky" law, in reliance
upon specific exemptions therefrom, and in furtherance thereof
the Shareholders represent that the Common Stock will be taken
and received by the Shareholders for their own account for
investment, with no present intention of a distribution or
disposition thereof to others. The Shareholders further
acknowledge and agree that the certificates representing the
Common Stock of the Company shall bear a restrictive legend, in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 AS AMENDED (THE "ACT"), ARE RESTRICTED SECURITIES,
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE
REGISTERED UNDER THE ACT."
The Principal Shareholders hereby represent and warrant to
the Company as follows:
4.4 Organization and Corporate Power.
OSM is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and are
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duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is
required and where the failure to be so qualified would have a
materially adverse effect upon their respective business. OSM has
all requisite corporate power and authority to conduct business
as now being conducted and to own and lease the properties which
they now own and lease. The Certificate of Incorporation of OSM,
as amended to date, and the By-laws of OSM as amended to date,
certified by its President and Secretary, which have been
delivered to the Company prior to the execution hereof, are true
and complete copies thereof as in effect at the date hereof.
4.5 Financial Statements.
(a) Schedule 4.45 sets forth the internal, unaudited Profit
and Loss Statement of OSM as of August 31, 1996 and 1997
and internal unaudited balance sheet of OSM for the
period September 1, 1996 through July 15, 1997 on a
historical basis giving effect to all operations and
costs in existence at the time (the "Financial
Information"):
(b) The Financial Information was compiled from OSM's
internal management reports in the ordinary course of
OSM's business. The Financial Information is not
consistent in all circumstances with generally accepted
accounting principles. The amounts with respect to
property, plant and equipment set forth in the Financial
Statements, fairly present, in all material respects,
such information as of the dates referred to therein,
and the revenues and gross margins set forth in the
Financial Information fairly present, in all material
respects, such information for the periods referred to
therein.
(c) Since August 1, 1997, OSM has kept its financial records
in a manner consistent with its practices at the time
and during the periods reflected in paragraph (b) above
without change, in any material respect, of policy or
procedure, as to nature of item, amount or otherwise.
4.6 Capital Stock.
OSM has an authorized capitalization consisting of 20,000
shares of common stock, without par value, of which 10,000 shares
are issued and outstanding. All such outstanding shares have
been duly authorized and validly issued and are fully paid and
non-assessable. There are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing
for the purchase, issuance or sale of any shares of the capital
stock of OSM, other than as contemplated by this Agreement.
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4.7 Subsidiaries and Investments.
OSM does not have any subsidiaries or interest in any
corporation, partnership, join venture or other entity.
4.8 Leases.
Schedule 4.8 attached hereto, contains an accurate and
complete list of all leases to which OSM is a party, accurate and
complete copies of which have been delivered to the Company (as
lessee or lessor). Each lease set forth on Schedule 4.8 (or
required to be set forth on Schedule 4.8) is in full force and
effect; all rents and additional rents due to date on each such
lease have been paid; in each case, the lessee has been in
peaceable possession since the commencement of the original term
of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations thereunder
has been granted by the lessor; and there exists no event of
default or event, occurrence, condition or act (including the
consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any
further event or condition, would become a default under such
lease. OSM has not violated any of the terms or conditions under
any such lease in any material respect, and, to the best
knowledge, information and belief of the Principal Shareholders,
OSM, all of the covenants to be performed by any other party
under any such lease have been fully performed. The property
leased by OSM is in a state of good maintenance and repair and is
adequate and suitable for the purposes for which it is presently
being used.
4.9 Material Contracts.
Except as set forth on Schedule 4.9 attached hereto, OSM is
not bound by:
(a) any agreement, contract or commitment relating to the
employment of any person by the Company, or any bonus,
deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other
employee benefit plan;
(b) any agreement, indenture or other instrument which
contains restrictions with respect to payment of
dividends or any other distribution in respect of its
capital stock;
(c) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other
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entity (each a "Person") or any agreement, contract or
commitment relating to the making of any such loan,
advance or investment;
(d) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other
than the endorsement of negotiable instruments for
collection in the ordinary course of business);
(e) any management, service, consulting or any other similar
type contract;
(f) any agreement, contract or commitment limiting the
freedom of OSM or any subsidiary to engage in any line
of business or to compete with any Person;
(g) any agreement, contract or commitment not entered into
in the ordinary course of business which involves
$25,000 or more and is not cancelable without penalty or
premium within 30 days; or
(h) any agreement, contract or commitment which might
reasonably be expected to have a potential adverse
impact on the business or operations of OSM; or
(i) any agreement, contract or commitment not reflected in
the Financial Statements under which OSM is obligated to
make cash payments of, or deliver products or render
services with a value greater than $10,000 individually
or $25,000 in the aggregate, or receive cash payments
of, or receive products or services with a value greater
than $10,000 individually or $25,000 in the aggregate,
and any other agreement, contract or commitment which is
material to the conduct of the business of OSM.
Each contract or agreement set forth on Schedule 4.9 (or not
required to be set forth on Schedule 4.9) is in full force and
effect and there exists no default or event of default or event,
occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder.
The Company has not violated any of the terms or conditions of
any contract or agreement set forth on Schedule 4.8 (or not
required to be set forth on Schedule 4.9) in any material
respect, and, to the best knowledge, information and belief of
the Principal Shareholders and OSM, all of the covenants to be
performed by any other party thereto have been fully performed.
Except as set forth on Schedule 4.9, the consummation of the
transactions contemplated hereby does not constitute an event of
default (or an event, which with notice or the lapse of time or
both would constitute a default) under any such contract or
agreement.
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4.10 Books and Records.
Except as set forth in Schedule 4.9 attached hereto, OSM does
not have any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise
wholly or partly dependent upon or held by any means (including
any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto
and therefrom) are not under the exclusive ownership and direct
control of OSM.
4.11 Title to Properties; Encumbrances.
Except as set forth in Schedule 4.11 attached hereto OSM has
good, valid and marketable title to all of its material
properties and assets (real and personal, tangible and
intangible), in each case subject to no encumbrance, lien, charge
or other restriction of any kind or character, except for (i)
liens consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such
property by OSM in the operation of its business, (ii) liens for
current taxes, assessments or governmental charges or levies on
property not yet due and delinquent and (iii) liens described on
Schedule 4.11 attached hereto (liens of the type described in
clauses (i), (ii) and (iii) are hereinafter sometimes referred to
as "Permitted Liens").
4.12 Compliance with Law and Government Regulations.
To the best knowledge of the Principal Shareholders, after
due inquiry, OSM is in compliance with all applicable statutes,
regulations, decrees, orders, restrictions, guidelines and
standards, whether mandatory or voluntary, imposed by the United
States of America or any agency thereof.
4.13 Payroll Taxes.
Except as disclosed on Schedule 4.14, OSM has withheld taxes
from its employees' compensation, if any, in the amounts required
by applicable law and has filed all required federal, state and
local returns and reports with respect thereto, and has paid all
required applicable, employee income tax withholding, social
security and unemployment taxes for all periods (or portions
thereof, except with respect to shares issued that may be deemed
to be compensation) ending on or before the date hereof.
4.14 Tax Returns.
Except as disclosed on Schedule 4.14, OSM has timely filed
all federal, state and local tax returns and reports required to
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be filed by it. There have been no federal state or local income
tax audits of OSM, except as set forth on Schedule 4.143. The
Principal Shareholders do not know of any pending matters, other
than the matter disclosed on Schedule 4.14, assessments, notices
of deficiency or demand, for taxes or proposed deficiencies
against OSM for any federal, state or local taxes.
4.15 Absence of Undisclosed Liabilities.
Except as and to the extent reflected or reserved against in
the Financial Statements of OSM or on Schedule 4.15 or Schedule
4.17, and as to matters arising in the ordinary course of its
business since such date, OSM has no liability(s) or
obligation(s) (whether accrued, to come due, contingent or
otherwise) which individually or in the aggregate could have a
material adverse effect on the business, assets, properties,
condition (financial or otherwise) or prospects of OSM.
4.16 No Changes Since August Balance Sheet Date.
Since the date of the last balance sheet included in OSM's
Financial Statements (the "Balance Sheet Date"), OSM has not:
(a) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise),
except liabilities and obligations in the ordinary
course of business and consistent with past practice,
resulting in an increase for the liabilities shown on
the such Balance Sheet of less than $25,000 in the
aggregate;
(b) permitted any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted
Liens);
(c) sold, transferred or otherwise disposed of any assets
except inventory sold in the ordinary course of business
and consistent with past practice;
(d) made any single capital expenditure or commitment
therefor, in excess of $10,000 or made aggregate capital
expenditures and commitments therefor in excess of
$25,000;
(e) declared or paid any dividend or made any distribution
on any shares of its capital stock, or redeemed,
purchased or otherwise acquired any shares of its
capital stock or any option, warrant or other right to
purchase or acquire any such shares;
(f) made any bonus or profit sharing distribution or payment
of any kind;
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(g) increased its indebtedness for borrowed money which was
in the ordinary course of business and consistent with
past practice, or made any loan to any person;
(h) written off as uncollectible any notes or accounts
receivable, except immaterial write-downs or write-offs
in the ordinary course of business and consistent with
past practice which do not exceed $25,000 in the
aggregate charged to applicable reserves, and none of
which individually or in the aggregate is material to
OSM;
(i) granted any increase in the rate of wages, salaries,
bonuses or other remuneration or benefits of any
executive employee or other employees or consultants,
and no such increase is customary on a periodic basis or
required by agreement or understanding except as set
forth on Schedule 4.9;
(j) canceled or waived any claims or rights of substantial
value;
(k) made any change in any method of accounting or auditing
practice;
(l) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and
in the ordinary course of business and consistent with
past practices;
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or
entered into any agreement or arrangement of any kind
with, any of its officers, directors or shareholders or
any affiliate or associate of its officers, directors or
shareholders, except compensation to officers at rates
not exceeding the rate of compensation in effect as of
the Balance Sheet Date;
(n) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise)
other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past
practice of liabilities and obligations reflected and
reserved against in OSM's Financial Statements or
incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet
Date;
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(o) suffered any material adverse changes in its working
capital, financial condition, assets, liabilities
(absolute, accrued, contingent or otherwise), reserves,
business operations or prospects; or
(p) agreed, whether or not in writing, to do any of the
foregoing.
4.17 No Pending Material Litigation or Proceedings.
Except as disclosed in Schedule 4.17 or the Financial
Statements of OSM, there are no actions, suits or proceedings
pending or, to the best knowledge of the Shareholders, threatened
against or affecting the Shareholders, or OSM (including actions,
suits or proceedings where liabilities may be adequately covered
by insurance) at law or in equity or before any federal, state,
municipal or other governmental department, commission, court,
board, bureau, agency or instrumentality, domestic or foreign, or
affecting any of the officers or directors of OSM in connection
with the business, operations or affairs of OSM which might
result in any material adverse change in the business, properties
or assets, or in the condition (financial or otherwise) of OSM,
or the transfer to the Company of the OSM Stock by the
Shareholders or any of the obligations to be performed by the
Shareholders under this Agreement. Neither OSM nor the
Shareholders are subject to any voluntary or involuntary
proceeding under the United States Bankruptcy Code, nor have they
made an assignment for the benefit of creditors.
4.18 Brokerage.
Neither the Principal Shareholders nor OSM have entered into
an agreement with any individual or entity with respect to the
payment of a finder's fee in connection with the transactions
contemplated by this Agreement.
4.19 Disclosure.
Neither this Agreement, nor any certificate, exhibit, or
other written document or statement, furnished to the Company by
the Shareholders in connection with the transactions contemplated
by this Agreement contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary to be stated in order to make the statements contained
herein or therein not misleading.
5. COVENANTS OF THE COMPANY.
The Company covenants and agrees as follows:
15
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5.1 Capital Infusion.
The Company covenants and agrees to provide an aggregate of
$100,000 to OSM for its ongoing operations within five (5) days
of the execution of this Agreement, which shall be considered
contribution to the capital of the recipient;. Additionally, it
is the Company's intent to raise additional capital (up to
$900,000) over the next three months, a portion of which will be
utilized for the operations of OSM.
5.2 Indemnification of Personal Guarantees.
The Company agrees to indemnify Principal Shareholders and
hold them harmless from and against any liabilities in an amount
not to exceed $700,000, arising from personal guarantees of
obligations of OSM entered into prior to the date of this
Agreement. This indemnification shall be in addition to any
other indemnification provided to the Principal Shareholders
hereunder. The Company also agrees to use its reasonable efforts
to relieve the Principal Shareholder of such guarantee
obligations.
6. [INTENTIONALLY OMITTED]
7. INDEMNIFICATION.
7.1 Indemnification by Company.
The Company agrees to indemnify and hold Shareholders, it
successors and assigns, harmless from and against any liability
resulting from breach of representations or warranties of the
Company under this Agreement. In no event shall the aggregate
liability of the Company hereunder exceed $100,000.
7.2 Indemnification by Shareholders.
Shareholders agree to indemnify and hold Company, its
successors and assigns, harmless from and against any liability
resulting from breach of any representation made by them or
warranty, respectively, of Shareholders under this Agreement,
notwithstanding anything to the contrary contained in this
Agreement, Shareholders shall not be obligated to indemnify
Company until the aggregate of all losses as to which
indemnification would be required exceeds One Hundred Thousand
Dollars ($100,000), in which case Shareholders shall be required
to indemnify Company for such excess amounts. In no event shall
the aggregate liability of Shareholders hereunder exceed
$100,000.
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7.3 Time Period for Indemnification.
The right of indemnification as to breaches or
representations and warranties is only to the extent that written
notice of the claim for indemnification is given to the party
from which indemnification is sought prior to the expiration of a
period ending fifteen months subsequent to the Closing which
shall be the period of limitation as to any such breach or
breaches, except as otherwise specifically provided to the
contrary in this Agreement.
7.4 Further Limitation.
Notwithstanding anything contained herein to the contrary,
neither party shall have a right of indemnification hereunder by
reason of any breach by either party of any warranty or
representation contained in this Agreement to the extent that
such party seeking indemnification has of the Closing Date,
actual knowledge of the fact or matter forming the basis for such
breach (or alleged breach) of such warranty or representation.
7.5 Exclusive Remedy.
This indemnification shall be the sole and exclusive remedy
for any of the parties hereof in connection with a breach of any
representation or warranty by any other party hereof.
8. ADDITIONAL AGREEMENTS OF THE PARTIES.
8.1 Taxes and Expenses.
The Company and the Shareholders shall each pay all of their
own respective taxes, attorneys' fees and other costs and
expenses payable in connection with or as a result of the
transactions contemplated hereby and the performance and
compliance with all agreements and conditions contained in this
Agreement respectively to be performed or observed by each of
them.
8.2 Expiration of Representations and Warranties.
The respective representations and warranties contained
herein and in any other document or instrument delivered by or on
behalf of the Company, and the Shareholders, shall survive the
Closing for a period of fifteen months. Nothing contained in
this Section 8.2 shall in any way affect any obligations of any
party under this Agreement that are to be performed, in whole or
in part, at any time after the Closing, nor shall it prevent or
preclude any party from pursuing any and all available remedies
at law or in equity for actual fraud in the event that, prior to
the Closing, any other party had actual knowledge of any material
17
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breach of any of its representations and warranties herein but
failed to disclose to or actively concealed such knowledge prior
to the Closing from the other party(s) to whom the
representations and warranties were made.
8.3 Agreements of the Company.
During the term of the Option Agreement, the Company will not
take any action to sell or transfer the capital stock or assets
of OSM, other than in the ordinary course of their respective
businesses.
9. MISCELLANEOUS.
9.1 Other Documents.
Each of the parties hereto shall execute and deliver such
other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of them of
the implementation and consummation of this Agreement and the
transactions herein contemplated.
9.2 Parties in Interest.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, and the heirs, personal representatives,
successors and assigns of all of them, but shall not confer,
expressly or by implication, any rights or remedies upon any
other party.
9.3 Governing Law.
This Agreement is made and shall be governed in all respects,
including validity, interpretation and effect, by the laws of the
State of California.
9.4 Notices.
All notices, requests, demands, offerings, acceptances,
consents and other communications required or permitted under
this Agreement shall, unless otherwise provided, be in writing
and shall be deemed to have been duly given if personally
delivered and actually received or if mailed by first class
registered or certified mail, return receipt requested, or by
first class mail, addressed to the parties hereto at their
respective addresses provided below, or in each case to such
other person or address as may be designated by notice hereunder.
Each notice, demand, request or other communication transmitted
in the manner described in this paragraph shall be deemed to have
been given and received as follows: (i) four business days after
delivery to the addressee by certified mail, return receipt
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<PAGE>
requested, (ii) immediately when delivered by hand to the party
to whom such notice is to be given at its address set forth on
the first page or signature page herein, which address shall be
sufficient in order to effect the service of process against each
such party or such other address for the party as shall be
specified by notice given pursuant thereto or (iii) two business
days after being sent by priority delivery next day by Federal
Express or other similar reputable overnight carrier.
(a) If to the Company to:
Marquee Entertainment, Inc.
9044 Melrose Avenue, 3rd Floor
Los Angles, CA 90069
Attn: Harold Brown, CEO
(b) If to Shareholder, at their addresses set forth on the
signature page hereof.
Any party hereto may change its address by written notice to
the other party given in accordance with this Section 9.4.
9.5 Entire Agreement.
This Agreement and the exhibits and schedules attached hereto
contain the entire agreement between the parties and supersede
all prior agreements, understandings and writings between the
parties with respect to the subject matter hereof and thereof.
Each party hereto acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have
been made by any party, which are not embodied herein or in an
exhibit hereto, and that no other agreement, statement or promise
may be relied upon or shall be valid or binding. Neither this
Agreement nor any term hereof may be changed, waived, discharged
or terminated orally. This Agreement may be amended or any term
hereof may be changed, waived, discharged, or terminated by an
agreement in writing signed by all parties hereto.
9.6 No Equitable Conversion.
Prior to the Closing, neither the execution of this Agreement
nor the performance of any provision contained herein shall cause
any party hereto to be or become liable in any respect for the
operations of the business of any other party, or the condition
or property owned by any other party, for compliance with any
applicable laws, requirements, or regulations of, or taxes,
assessments, or other charges now or hereafter due to any
governmental authority, or for any other charges or expenses
whatsoever pertaining to the conduct of the business or the
ownership, title, possession, use, or occupancy of any other
party.
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9.7 Headings.
The captions and headings used herein are for convenience
only and shall not be construed as a part of this Agreement.
9.8 Attorneys' Fees.
In the event of any litigation between the parties hereto,
the non-prevailing party shall pay the reasonable expenses,
including the attorneys' fees, of the prevailing party in
connection therewith.
9.9 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above
written.
MARQUEE ENTERTAINMENT, INC.
By: /s/ Hal Brown
---------------------------
Hal Brown, Chairman and CEO
Number of OSM Number of Co.
"Shareholders" Shares Exchanged Shares Rec'd.
/s/ Patrick M. Griffith 5,000 350,000
- -----------------------
Patrick M. Griffith
/s/ Sylvie Griffith 5,000 350,000
- ----------------------
Sylvie Griffith
20
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EXHIBITS
A - Option Agreement
B1 - Employment Agreement of Patrick M. Griffith
SCHEDULES
3.3 Capitalization
3.7 Marquee Entertainment, Inc. Pending Material Litigation or
Proceedings
4.5 Financial Statements
4.8 Leases
4.9 Material Contracts
4.10 Books and Records
4.11 Title to Properties; Encumbrances
4.14 Tax Returns
4.15 Undisclosed Liabilities
4.17 Of Sound Mind, Inc. Pending Material Litigation or
Proceedings
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SCHEDULE 3.3
Authorized Outstanding
Preferred Stock $.01 par value 10,000,000 -0-
Common Stock $.04 par value 25,000,000 1,398,716
Options and Warrants Outstanding:
105,000 options exercisable into Common Stock at $1.00 per share
130,000 options exercisable into Common Stock at $1.50 per share
50,000 options exercisable into Common Stock at $.50 per share
15,000 incentive options exercisable into Common Stock at $.44 -
.88 per share
20,000 Non-Qualified options, exercisable into Common Stock at
$.44- .88 per share
Convertible Debentures
$239,450 convertible into Company's Common Stock at the
Conversion Price of $.25 per share
$201,800 convertible into Company's Common Stock at the
Conversion Price of $.25 per share
22
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SCHEDULE 3.7
None
23
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EXHIBIT 2.2
OPTION AGREEMENT
OPTION AGREEMENT dated as of the 21st day of October, 1997
by and between the individuals listed on the signature page (the
"Optionees") with Edvardo Bissiccio and Patrick Griffith
sometimes referred to as the "Principal Optionees", and MARQUEE
ENTERTAINMENT, INC., a Nevada corporation with offices at 9044
Melrose Avenue, 3rd Floor, Los Angeles, CA 90069 ("Marquee").
W I T N E S S E T H
WHEREAS, concurrently with the execution hereof, Marquee is
acquiring one hundred percent (100%) of the issued and
outstanding shares of the common stock ("OSM Common Stock"") of
Of Sound Mind, Inc., a California corporation ("OSM") from the
Optionees;
WHEREAS, Marquee desires to grant to Optionees, and
Optionees are willing to accept, on the terms and conditions set
forth herein, an option to purchase one hundred percent (100%) of
the issued and outstanding shares of OSM Common Stock;
NOW, THEREFORE, for and in consideration of the premises,
representations and warranties and the mutual covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Optionees and Marquee (collectively, the
"Parties" and, sometimes individually, a "Party"), intending to
be legally bound, hereby agree as follows:
1. OPTION GRANTED.
(a) Subject to the terms and conditions set forth herein,
for value received, Marquee hereby grants to the Optionees an
option (the "Option") to purchase from Marquee, during the period
set forth in Section 2 hereof, one hundred percent (100%) of the
issued and outstanding shares of the OSM Common Stock (the "OSM
Shares").
(b) If following the date of this Agreement, the outstanding
shares of Common Stock of or American are OSM are, without the
receipt of consideration by the issuer thereof, increased,
decreased, changed into or exchanged for a different number or
kind of shares or securities of such issuer through
reorganization, reclassification, stock dividend, stock split,
reverse stock split or similar change in such issuer's
capitalization, Marquee shall deliver to the Optionee upon the
exercise of this Option in addition to or in lieu of OSM Shares
specified in this Section 1, voting common stock of such issuer
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in equitably adjusted amounts. In the event of any such change in
OSM's capitalization, all reference to the OSM Shares herein
shall refer to the number of OSM Shares as so adjusted.
2. EXERCISE PERIOD.
(a) Unless earlier terminated in accordance with Section
2(b) hereof, the Option may be exercised, only by the Optionees
(the "Exercising Optionees") holding an aggregate in excess of
466,667 shares of Marquee Common Stock ("Marquee Shares"), at any
time during the period (the "Exercise Period") commencing on the
date of a "Commencement Event" defined in paragraph 2(c) below
and ending at 5:00 P.M. (California time) forty five days
following notice of such event.
(b) This Option shall terminate (the "Termination Date"):
(i) Upon Optionees having materially breached any
agreement or covenant made by the Optionees in this
Option Agreement, or the Stock Purchase and
Exchange Agreement between the Parties dated
October 21, 1997 (the "Stock Purchase and Exchange
Agreement"), or the Company has terminated the
employment agreements between the Principal
Optionees and OSM dated October 21, 1997
(collectively the "Employment Agreements" or
individually the "Employment Agreement") for
"Cause"; or
(ii) at 5:00 p.m. (California time) on March 1, 1998.
(c) For the purposes of this Agreement, a "Commencement
Event" shall mean the failure of Marquee to provide an aggregate
of $100,000 to OSM for its ongoing operations as more fully set
forth in paragraph 5.1 of the Stock Purchase and Exchange
Agreement.
3. EXERCISE PRICE.
(a) The purchase price for the OSM Shares pursuant to the
Option (the "Exercise Price") shall be the number of Marquee
shares received by each Exercising Optionee pursuant to the Stock
Purchase and Exchange Agreement, plus an amount in U.S. currency
(to be paid pro rata amongst the Exercising Optionees) equal to
the closing bid price of the Marquee Shares (as quoted by the
NASDAQ OTC-Bulletin Board, NASDAQ Small-Cap Stock Market or other
exchange in which the Marquee Shares are traded on the date of
exercise), multiplied by the aggregate number of Marquee Shares
issued to the non Exercising Optionees pursuant to the Stock
Purchase and Exchange Agreement.
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<PAGE>
(b) If following the date of this Agreement the outstanding
shares of Common Stock of Marquee are, without the receipt of
consideration by the issuer thereof, increased, decreased,
changed into or exchanged for a different number or kind of
shares or securities of such issuer through reorganization,
reclassification, stock dividend, stock split, reverse stock
split or similar change in such issuer's capitalization, the
Exercising Optionees shall deliver to Marquee upon the exercise
of this Option in addition to or in lieu of Marquee Shares
specified in this Section 3, voting common stock of such issuer
in equitably adjusted amounts. In the event of any such change
in Marquee's capitalization, all reference to the Marquee Shares
herein shall refer to the number of Marquee Shares as so
adjusted.
4. EXERCISE OF OPTION; PURCHASE OF SHARES.
(a) Unless earlier terminated and upon a Commencement Event,
the Option may be exercised at any time during the Exercise
Period by the delivery to Marquee at its address set forth in
this Agreement of (i) the completed Subscription Form, a copy of
which is attached hereto; (ii) the number of Marquee Shares (and
cash if applicable) equal to the Exercise Price; and (iii) this
original Option.
(b) Upon receipt thereof, and subject to the provisions of
subsection (c) hereof, each Exercising Optionees shall be deemed
to be the holders of record of that number of OSM Shares as (i)
originally held by them as set forth in the Stock Purchase and
Exchange Agreement plus (ii) the pro rata number of OSM Shares
which were held by those Optionees not exercising their Options,
notwithstanding that the stock transfer books of OSM shall then
be closed or that certificates representing the OSM Shares shall
not then be actually delivered to the Exercising Optionees, and
Marquee shall, as promptly as practicable, cause to be executed
and delivered to Optionees a certificate or certificates
representing the OSM Shares. Each stock certificate so delivered
shall be in such denomination as may be requested by such
Exercising Optionee and shall be registered in the name of such
Exercising Optionee. Marquee shall pay all expenses, taxes and
other charges payable in connection with the preparation,
execution and delivery of stock certificates pursuant to this
section.
(c) Upon the effectiveness of the exercise of the Option
pursuant to this Agreement and as a condition subsequent to the
obligation of Marquee to sell and deliver the OSM Shares pursuant
to this Agreement, OSM shall pay the net balance of intercompany
indebtedness ("Debt") due to Marquee. In the event there is a
dispute as to the amount net due to Marquee, such dispute will be
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<PAGE>
submitted to a firm of independent certified public accountants
acceptable to both parties. The certificate of such auditors
concerning the net balance shall be binding on all parties.
5. REPLACEMENT OF OPTION. Upon receipt by Marquee of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and upon surrender and cancellation of this Option, if
mutilated, Marquee will make and deliver a new Option of like
tenor, in lieu of this Option. This Option shall be promptly
canceled by Marquee upon the surrender thereof in connection with
any exchange or replacement. Optionee shall pay all expenses,
taxes and other charges payable in connection with the
preparation, execution and delivery of a replacement Option
pursuant to this Section 5.
6. REPRESENTATIONS OF MARQUEE. Marquee hereby represents and
warrants to Optionees as of the date hereof and as of the Closing
Date:
(a) Marquee is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada.
(b) Upon the consummation of the purchase and sale of the
OSM Shares pursuant to the Option, the Shares will be sold and
transferred to Exercising Optionees free and clear of all liens,
claims and encumbrances.
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by Marquee. This Agreement
constitutes the legal, valid and binding obligation of Marquee,
enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, receivership,
insolvency, moratorium or other laws or equitable principles of
general applicability relating to creditors' rights and
availability of certain equitable remedies, including specific
performance.
7. COVENANTS OF MARQUEE. Marquee agrees and covenants that
during the period beginning from the date of this Option
Agreement and ending on the Termination Date:
(a) Marquee shall take all necessary corporate action in its
capacity as shareholder of OSM Common Stock to elect a five
member board of such company and elect two nominees of the
Optionees, as directors of such company.
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(b) Marquee will not transfer or encumber its OSM Shares nor
will it cause or permit OSM to take any of the following actions
without the prior written consent of both of the Principal
Optionees:
(i) amend the certificate of incorporation of OSM;
(ii) amend the Bylaws of OSM;
(iii) merge, consolidate or exchange shares with any
other party.
(iv) sale, lease, or exchange of more than 5% in one
transaction or 15% in the aggregate of the
property or assets of OSM either in the regular
course of business or other than in regular
course of business;
(v) change any of the titles, duties, salary or
other compensation of any Principal Optionee
except in accordance with the terms of their
Employment Agreement;
(vi) incur any corporate indebtedness of OSM, enter
into any business transaction or financial
commitment (including, but not limited to, any
intercompany payments or advances) involving in
excess of $25,000 in a single transaction or
$150,000 in the aggregate;
(vii) declare or pay any dividends and other
distributions on the stock of OSM;
(viii) dissolve OSM;
(ix) enter into or perform any business transactions
between an Executive Officer, Director, or any
person performing the normal duties and
responsibilities normally assigned to Directors
of Marquee and OSM or any contract or other
transaction between OSM and a corporation,
partnership, or association in which one or more
of the Executive Officers, Directors, or any
persons performing the managerial duties and
responsibilities normally assigned to directors,
are officers of Marquee, directors, have a
material financial interest, direct or indirect;
(x) form any subsidiary of OSM, or any joint
venture, partnership, business trust or limited
liability company in which OSM is to have an
interest;
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<PAGE>
(xi) designate or issue any shares or class stock of
OSM;
(xii) grant of any option, right or warrant to
purchase any securities of OSM or in any way
encumber the Shares;
(xiii) materially change the business of OSM;
(xiv) permit checks above $10,000 to be authorized
without the signature of at least one of the
Principal Optionees; or
(xv) change of any of the titles, duties, salary or
other compensation of any employee of OSM, or
make any personnel decisions relating to the
hiring or firing of any employee of OSM.
8. MISCELLANEOUS.
(a) This Agreement shall inure to the benefit of, and shall
be binding upon, the successors and assigns of the Parties.
(b) Each Party agrees to execute such additional documents
or instruments as may be reasonably necessary or desirable in
order to carry out the provisions of this Agreement.
(c) Neither Party will directly or indirectly avoid or take
any action which would have the effect of avoiding the observance
or performance of any of the terms and conditions hereof and will
at all times in good faith assist in carrying out the provisions
of this Agreement and in taking all such action may be reasonably
necessary in order to carry out the intent of this Agreement.
(d) This Agreement may be signed in any number of
counterparts, each of which (when executed and delivered) shall
be an original, but all of which together shall constitute one
and the same instrument. It shall not be necessary when making
proof of this Agreement to account for any counterparts other
than a sufficient number of counterparts which, when taken
together, contain signatures of all of the Parties.
(e) All notices, demands, requests or other communications
required or permitted to be given in connection with this
Agreement shall be given in writing, shall be transmitted to the
appropriate Party by hand delivery, by certified mail, return
receipt requested, postage prepaid or by telegram, telex or other
electronic means and shall be addressed to the appropriate Party
at his or its address shown on the first page or signature page
hereof. Any Party may designate by written notice given to all
other Parties a new address to which any notice, demand, request
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<PAGE>
or other communication hereunder shall thereafter be given. Each
notice, demand, request or other communication transmitted in the
manner described in this Section shall be deemed to have been
given and received as follows: (i) four business days after
delivery to the addressee by certified mail, return receipt
requested, (ii) immediately when delivered by hand to the party
to whom such notice is to be given at its address set forth on
the first page herein, which address shall be sufficient in order
to effect the service of process against each such party, or such
other address for the party as shall be specified by notice given
pursuant hereto, or (iii) two business days after being sent by
priority delivery, next day by Federal Express or other similar
reputable overnight carrier.
(f) This Agreement constitutes the entire contract among the
Parties, and supersedes all existing contracts between or among
them, whether oral or written, with respect to the subject matter
hereof. No change, modification or amendment of this Agreement
shall be effective unless set forth in a writing signed by all of
the Parties.
(g) This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
(h) No delay or omission to exercise any right, power or
remedy accruing to any Party shall impair any such right, power
or remedy or shall be construed to be a waiver of or an
acquiescence to any breach hereof. Any waiver of any provision
hereof shall be effective only to the extent specifically set
forth in the applicable writing. All remedies afforded to any
Party under this Agreement, by law or otherwise shall be
cumulative and not alternative.
(i) No Party may assign, transfer, pledge or otherwise
encumber or dispose of any of his or its rights or obligations
under this Agreement, except as otherwise provided herein.
(j) If any provision of this Agreement shall be declared by
a court of competent jurisdiction to be invalid, unenforceable or
illegal for any reason, then, notwithstanding such invalidity,
unenforceability or illegality, the remaining provisions of this
Agreement shall remain in full force and effect in the same
manner and to the same extent as if the invalid, unenforceable or
illegal provision had not been contained herein.
(k) The Section headings contained herein are inserted for
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement
to be duly executed and delivered as of the day and year first
above written.
MARQUEE ENTERTAINMENT, INC.
By: /s/ Hal Brown
-----------------------------
Hal Brown, Chairman and CEO
Optionees
/s/ Patrick M. Griffith
- ---------------------------------
Patrick M. Griffith
/s/ Sylvie Griffith
- ---------------------------------
Sylvie Griffith
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SUBSCRIPTION FORM
TO BE EXECUTED BY OPTIONEE IF IT DESIRES TO EXERCISE THE WITHIN
OPTION
The undersigned hereby exercises the right to purchase the
OSM Shares subject to the within Option according to the
conditions thereof and herewith makes payment of the Exercise
Price of such OSM Shares in full.
------------------------------
Optionee
Dated:
--------------------
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