STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT") made as of November 12, 1998
among NewStar Media Inc., a California corporation (the "COMPANY"), Apollo
Partners, LLC and Xxxxxx Xxxxxxxxxx (each a "PURCHASER" and collectively the
"PURCHASERS").
WITNESSETH:
WHEREAS, the Company desires to sell, and Purchasers desire to
purchase, subject to the terms and conditions of this Agreement, shares of the
Common Stock of the Company, par value $.01 per share (the "COMMON STOCK");
WHEREAS, a special committee of the Board of Directors, at a meeting
held on November 12, 1998, approved the sale and issuance of Common Stock of the
Company to the Purchasers on the terms set forth in this Agreement;
WHEREAS, the Company and the Purchasers are parties to that certain
Stock Purchase Agreement, dated as of July 30, 1998 (the "Stock Purchase
Agreement");
WHEREAS, the Company and the Purchasers desire to adjust the purchase
price of the shares of Common Stock purchased by the Purchasers under the Stock
Purchase Agreement;
WHEREAS, a special committee of the Board of Directors, at a meeting
held on November 12, 1998, approved the adjustment in the purchase price of the
shares of Common Stock purchased under the Stock Purchase Agreement on the terms
set forth in this Agreement;
WHEREAS, this Agreement memorializes the agreement between the
Purchasers and the Company concerning the issuance and sale of Common Stock of
the Company as approved by the special committee on November 12, 1998 and the
adjustment of the purchase price of the shares of Common Stock purchased under
the Stock Purchase Agreement.
NOW, THEREFORE, in the consideration of the foregoing and the
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereby mutually agree as follows:
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SECTION 1
SALE AND PURCHASE OF THE COMPANY'S SECURITIES; CLOSING
1.1. SALE OF THE SECURITIES.
(a) Subject to the terms and conditions herein set forth, the
Company agrees to sell and issue to the Purchasers, and each Purchaser agrees to
purchase from the Company, Common Stock of the Company as follows:
(i) On the Closing Date (as hereinafter defined) Apollo
Partners, LLC ("Apollo") shall purchase 425,591 of Common Stock of the Company
for a purchase price of $0.719 per share or an aggregate of $305,999.93
(ii) On the Closing Date, Xxxxxx Xxxxxxxxxx ("LIGHTSTONE")
shall purchase 47,288 shares of Common Stock of the Company for $0.719 per share
or an aggregate of $34,000.07.
The shares being purchased hereunder are hereinafter
referred to as the "PURCHASED SHARES".
(b) In connection with the purchase of the Purchased Shares, each
Purchaser shall have the right to assign all or a portion of its rights (but not
its obligation) to purchase such Purchased Shares from the Company under this
Agreement to any person, provided such person submits to the Company at the
Closing a certificate setting forth the representations in Section 3 below. Any
such assignees shall be deemed a "Purchaser" hereunder.
(c) In connection with the sale and issuance of the Purchased
Shares, the Company agrees to register the Purchased Shares as set forth in the
form of Registration Rights Agreement annexed hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT").
1.2. CLOSING. The closing of the issuance and sale of the Purchased
Shares to the Purchasers (the "CLOSING") shall take place at the offices of the
Company on or before November 16, 1998 (the date on which the Closing actually
takes place being referred to as the "CLOSING DATE").
1.3. DELIVERY. At the Closing, the Company shall issue and deliver to
each Purchaser a certificate or certificates, registered in the name of the
Purchaser, representing the Purchased Shares being purchased by such Purchaser,
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against delivery to the Company of the Purchase Price therefor by wire transfer
and shall execute and deliver the Registration Rights Agreement.
1.4. ADJUSTMENT TO NUMBER OF SHARES PURCHASED. Notwithstanding anything
to the contrary contained herein, if, after the date of this Agreement and prior
to the Closing Date, the Company shall have issued Common Stock to persons other
than Apollo and Lightstone with the effect of increasing the net tangible assets
of the Company above $2,360,000 (a "Stock Issuance"), the number of shares of
Common Stock to be purchased by the Purchasers hereunder shall be determined in
accordance with the following formula:
Number of Shares = $2,700,000 - Net Tangible Assets
--------------------------------
$0.719
Where "Net Tangible Assets" is the net tangible assets of the Company based on
the Company's balance sheet as at September 30, 1998 and giving pro forma affect
to all Stock Issuances.
The number of shares of Common Stock to be purchased by Apollo shall equal 90%
of such adjusted number of shares and the number of shares of Common Stock to be
purchased by Lightstone shall equal 10% of such adjusted number of shares.
1.5 ADJUSTMENT OF PURCHASE PRICE
(a) In consideration of the purchase of the Purchased Shares by
Apollo and Lightstone, the Company hereby grants to Apollo and Lightstone the
option to, and upon exercise of such option agrees to, adjust the purchase price
of the shares of Common Stock purchased by Apollo and Lightstone under the Stock
Purchase Agreement. The purchase price shall be adjusted to equal $0.719 per
share.
(b) The adjustment to the purchase price shall be effective at
the option of Apollo and/or Lightstone on any date during the period commencing
on November 16, 1998 and ending on January 10, 1999. Apollo and/or Lightstone
shall also have the option of electing not to adjust the purchase price. If
Apollo and/or Lightstone do not notify the Company on or before January 10, 1999
that it and/or he elects to adjust the purchase price, the purchase price shall
not be adjusted.
(c) Upon notification by Apollo that it has elected to exercise
its option to adjust the purchase price, the Company shall issue 1,738,526
shares of Common Stock to Xxxxx Limited Partnership (an assignee of Apollo under
the Stock Purchase Agreement) and 1,738,526 shares of Common Stock to Xxxxxx
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Limited Partnership (an assignee of Apollo under the Stock Purchase Agreement).
Upon notification by Lightstone that he has elected to exercise his option to
adjust the purchase price, the Company shall issue 347,705 shares of Common
Stock to Lightstone. The shares to be issued upon exercise of such option are
referred to as the "OPTION SHARES", and together with the Purchased Shares are
referred to as the "Shares". The Option Shares shall be deemed shares issued
under the Stock Purchase Agreement and shall have all of the registration rights
of the shares issued under the Stock Purchase Agreement in accordance with the
Registration Rights Agreement, dated as of August 31, 1998, entered into in
connection therewith.
(d) This Section 1.5 shall supersede Section 1.4 of the Stock
Purchase Agreement.
SECTION 2
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers the following:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, and has all requisite corporate power and
authority to own and lease its properties and assets and to conduct its business
as currently conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property in the course of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole.
2.2. AUTHORIZATION. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to carry out the transactions contemplated hereby and thereby. The
terms and provisions of this Agreement and the Registration Rights Agreement
have been reviewed by a Special Committee of the Board of Directors composed of
independent directors of the Company. The members of the Special Committee have
unanimously recommended that this Agreement and the Registration Rights
Agreement be approved, authorized, executed and delivered. The execution,
delivery, and performance of this agreement and the Registration Agreement by
the Company have been duly authorized by all requisite corporate action, and
this Agreement has been, and the Registration Rights Agreement when executed and
delivered by the Company will be, duly executed and delivered by the Company and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and
general equitable principles.
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2.3. CAPITAL STOCK. The authorized shares of the Company consist of
20,000,000 shares of Common Stock and 2,000,000 shares of preferred stock, $.01
par value per share, of which 400,000 shares have been designated Series A
Preferred Stock, 5,000 shares have been designated Series B Preferred Stock, and
5,000 shares have been designated Series C Preferred Stock, 400,000 shares have
been designated Series D Preferred Stock and 1,500 shares have been designated
Series E Preferred Stock. There are no voting trusts or other agreements or
understandings known to the Company with respect to the voting of the capital
stock of the Company.
2.4. ISSUANCE OF THE SHARES. The sale, issuance and delivery of the
Shares in accordance with the terms of this Agreement have been authorized by
all necessary corporate action, and the Shares when sold, issued and delivered,
against the full payment of the purchase price will be duly and validly issued,
fully paid and nonassessable. The sale, issuance and delivery of the Shares are
not subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
2.5. CONSENTS AND APPROVALS. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of or declaration to or filing with any governmental authority, not made or
obtained, is required in connection with the execution or delivery of this
Agreement by the Company, the offer, sale, issuance or delivery of the Shares,
or the carrying out by the Company of the transactions contemplated hereby.
2.6. PRIVATE OFFERING. Neither the Company nor anyone acting on behalf
of the Company has offered the Shares for sale to, or solicited offers to buy
from, or otherwise approached or negotiated with, any individual or entity in
connection with the sale of such securities other than a limited number of
investors, including the Purchasers. Assuming the accuracy of each Purchaser's
representations contained in Section 3 of this Agreement, the offer, issuance
and delivery of the Shares are exempt from registration under the Securities Act
of 1933, as amended (the "1933 ACT"), and all action required to be taken prior
to the offer or sale of the Shares has been taken under the applicable state
securities laws.
2.7. NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery, and
performance by the Company of this Agreement and the Registration Rights
Agreement, and the performance by the Company of its obligations under such
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documents, and the sale, issuance and delivery of the Shares, will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Incorporation or By-laws, or any provision of any indenture,
agreement or other instrument by which the Company or any of its properties or
assets is bound or affected, or conflict with, result in a breech of, result in
or permit the termination of or acceleration of rights or obligations under, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
2.8. DISCLOSURE. Neither this Agreement nor any other document,
certificate, instrument or statement furnished or made to the Purchasers by or
on behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances under which they were made.
2.9. LITIGATION. Except as disclosed in the Company's public filings
and in Schedule 2.9, there are no (a) actions or suits individually in excess of
$50,000 or in the aggregate in excess of $250,000, or any proceedings or
investigations at law or in equity or by or before any governmental
instrumentality or other agency now pending or to the Company's knowledge,
threatened against or adversely affecting the Company, or (b) judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against or affecting the
Company, except as in all matters under (a) and (b), which are not reasonably
expected to result in a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole (a
"MAE"), or are covered by appropriate amounts of insurance.
2.10. SUBSIDIARIES. Except for NewStar Worldwide Inc., NewStar
Television Inc., Dove Four Point, Inc., Dove Audio, Inc., Dove Entertainment,
Inc., Dove Retail, Inc., Family Blessings Productions Inc. and Empire Burbank
Studios, the Company has no subsidiaries and does not own any interest directly
or indirectly, in any other corporation, partnership, joint venture or other
enterprise or entity.
2.11. INTELLECTUAL PROPERTY.
(a) To the best knowledge of the Company the Company, owns, is
licensed or otherwise has the right to all intellectual property relating to its
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audio titles, books, films and television products (the "Products") and all
rights to use all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and other rights (collectively, including with respect to
the intellectual property relating to the Products, the "RIGHTS") being used to
conduct its business as now operated. The Company has made available to the
Purchasers a complete set of all agreements permitting the Company to use the
Rights of the third parties or allowing third parties to use the Rights of the
Company.
(b) No Right or Product presently sold by or employed by the
Company, or which the Company contemplates selling or employing, infringes upon
the Rights that are owned by any third party except as would not result in a
MAE.
(c) No litigation is pending and no claim has been made against
the Company, or to the best of the Company's knowledge, is threatened,
contesting the right of the Company to sell or use any Right or Product
presently sold or employed by the Company, except as disclosed in the Company's
public filings or except which would result in a MAE.
(d) Except as disclosed in the Company's public filings, no
employee, officer or consultant of the Company has any proprietary, financial or
other interest in any Right owned or used by the Company which entitles such
person to the payment of an amount in excess of $10,000 with respect to any
single Right, or $25,000 with respect to all Rights in which such person has an
interest.
(e) The Company has taken reasonable measures to protect and
preserve the security, confidentiality and value of its Rights, including trade
secrets and other confidential information.
2.12. UNDISCLOSED LIABILITIES. Except for the agreements and
obligations listed on the balance sheet for the Company included in its
Quarterly Report on Form 10-QSB for the three months ended September 30, 1997,
to the best of the Company's knowledge, the Company does not have any
outstanding liability except for liabilities incurred in the ordinary course of
business which are either for amounts less than $50,000 or are cancelable on not
more than 30 days notice. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party that could
reasonably be expected to result in a MAE.
2.13. TITLE TO PROPERTIES. The Company has good and marketable title to
all of its owned properties and assets, free and clear of all mortgages,
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pledges, security interests, liens, charges and encumbrances, except for
Permitted Encumbrances (as defined below). The Company enjoys peaceful and
undisturbed possession under all leases relating to real property and all other
leases (other than immaterial leases which can be replaced on substantially the
same terms) necessary for the operation of the business; and all such leases are
valid and subsisting and in full force and effect. As used herein, "PERMITTED
ENCUMBRANCES" means any mortgages, pledges, security interests, liens, charges
and other encumbrances (i) disclosed in the Company's public filings to the date
hereof or permitted under the Company's credit facility with The Chase Manhattan
Bank, (ii) liens for current taxes, assessment and other governmental charges
not overdue (other than liens, assessments or charges being contested in good
faith), (iii) mechanic's material men's and similar liens which may have arisen
in the ordinary course of business and which, in the aggregate, would not be
material to the financial condition of the Company, (iv) security interests
securing indebtedness not in default for the purchase price of or lease rental
payments on property purchased or leased under capital lease arrangements in the
ordinary course of business, and (v) minor imperfections of title, if any, not
material in amount and not materially detracting from the values or impairing
the use of the property subject thereto or impairing the operations or proposed
operations of the Company.
2.14. REAL PROPERTY. Other than the premises containing the Company's
headquarters located at 0000 Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, the
Company owns no real property.
2.15. TAXES.
(a) The Company has timely filed all federal, state and local
income tax returns and has timely filed with all appropriate governmental
agencies all sales, ad valorem, franchise and other tax, license, gross receipts
and other similar returns and reports required to be filed by the Company. The
Company has reported all taxable income and losses on those returns on which
such information is required to be reported, and paid or provided for the
payment of all taxes on said returns or taxes due pursuant to any assessment
received by it, including without limitation, any taxes by law to be withheld
and/or paid in connection with any officer's or employee's compensation or due
pursuant to any assessment received by it. There are no agreements for the
extension of time for the assessment or payment of any amounts of tax. The
Company had made available to the Purchasers for inspection copies of income tax
returns that are true and complete copies of the federal applicable state, local
or other income tax returns filed by the Company.
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(b) The Company had paid all tax liabilities of the Company
arising through the end of the taxable year ended December 31, 1997. All tax
liabilities of the Company arising after December 31, 1997 have been paid or
adequately disclosed and properly reserved for on the books and records and
financial statements of the Company. Except for current audits by the Internal
Revenue Service of Dove Four Point, Inc. for the 1994 tax year and Dove Audio
for the 1994 tax year, no federal or applicable state, local or other tax return
of the Company for any period has been or is currently under audit by the
Internal Revenue Service or any state, local or other tax authorities. Except
for an assessment by Michigan, for approximately $90,000, no claim has been made
by federal, state, local or other authorities relating to such returns or any
audit. For purposes of this section the word "timely" shall mean that such
returns were filed within the time prescribed by law for the filing thereof,
including the time permitted under any applicable extensions. The Company is not
aware of any facts which it believes would constitute the basis for the proposal
of any material tax deficiencies for any unexamined year. All taxes which the
Company is required by law to withhold and collect have been duly withheld and
collected, and has been timely paid over to the proper authorities to the extent
due and payable.
2.16. ENVIRONMENTAL MATTERS. The Company has complied with each and is
not in violation of any, federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage, transportation,
treatment or disposal of hazardous, toxic or polluting substances, except where
such noncompliance or violation could not reasonably be expected to result in a
MAE. The Company has obtained and adhered to all necessary permits and other
approvals necessary to store, dispose, and otherwise handle hazardous, toxic and
polluting substances, the failure of which to obtain or adhere to could not
reasonably be expected to result in a MAE. The Company has reported, to the
extent required by federal, state and local law, all past and present sites
where hazardous, toxic or polluting substances, if any, from the Company have
been treated, stored or disposed. The Company has not transported any hazardous,
toxic or polluting substances or arranged for the transportation of such
substances to any location which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the
Company for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under the
Compensation and Liability Act of 1980, as amended which claims would result in
a MAE.
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2.17. COMPLIANCE WITH LAW.
(a) The Company is not in default under any order of any court,
governmental authority or arbitration board or tribunal to which the Company was
subject or in violation of any laws, ordinances, governmental rules or
regulations (including, but not limited to, those relating to environmental,
safety, building, product safety or health standards or employment matters) to
which the Company is or was subject, in each case, that could reasonably be
expected to result in a MAE. The business is being conducted in compliance with
all applicable laws ordinances, rules and regulations applicable to the Company,
the non-compliance with which could reasonably be expected to have a MAE. The
Company has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, which failure could have a MAE.
(b) The Company has filed all documents (the "FILINGS") required
to be filed with the Securities and Exchange Commission (the "COMMISSION")
pursuant to the 1933 Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and true, correct and complete copies of the Filings have
been made available to the Purchasers. The Filings complied in all material
respects with the requirements of the 1933 Act and the Exchange Act, as
applicable, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
render the statement not misleading in the light of the circumstances in which
they were made. The Company has filed in a timely manner all reports required to
be filed since June 10, 1997. For purposes of this section the word "timely"
shall have the meaning given in Section 2.15
2.18. EMPLOYEE BENEFIT PLANS.
(a) The Company has complied and currently is in compliance, both
as to form and operation, with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Codes of 1954 and/or 1986,as amended respectively (the "CODE"), with
respect to each "employee benefit plan" as defined under Section 3(3) of ERISA
("PLAN") which the Company (i) has ever adopted, maintained, established or to
which the Company has ever been required to contribute or to which the Company
has ever contributed or (ii) currently maintains or to which the Company
currently contributes or is required to contribute or (iii) currently
participates in or is required to participate in or is required to participate
in, except in each case or all cases in the aggregate where such noncompliance
would not result in a MAE.
(b) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated in or
been required to contribute to, or otherwise participated in or been required to
participate in, a "multi-employer plan" (as defined in Section 3 (37) of ERISA).
No amount is due or owing from the Company on account of a "multi-employer plan"
(as defined in Section 3(37) of ERISA) of on account of any withdrawal
therefrom.
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(c) Notwithstanding anything else set forth herein, the Company
has not incurred any material liability with respect to a Plan, including,
without limitation, under ERISA (including, without limitation, Title I or Title
IV or ERISA and other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied or reserved in full, and no event has occurred, and there exists no
condition or set of circumstances which could result in the imposition of any
material liability with respect to the Plan, including, without limitation,
under ERISA (including, without limitation, Title I or Title IV or ERISA), the
Code or other applicable law with respect to the Plan.
(d) The Company has not committed itself, orally or in writing,
to (i) provide or cause to be provided to any person now or at any time covered
by an Plan and payments or benefits, which are material either singly or in the
aggregate, in addition to, or in lieu of, those payments or benefits set forth
under any Plan, or (ii) continue the payment of, or accelerate the payment of,
benefits, which are material either singly or in the aggregate, under any Plan,
except as expressly set forth thereunder. Complete and correct copies of all
written arrangements described in the preceding sentence as in effect on the
date hereof have been made available to the Purchasers.
(e) Except for the Employment Termination Agreement with the
Viners, the employment agreements with Messrs. Xxxxxx and Xxxxxxxxxx and
agreements with various industry guilds, the Company has not committed itself,
orally or in writing, to provide or cause to be provided any severance or other
post-employment benefit, salary continuation, termination, disability, death,
retirement, health or medical benefit, or similar benefit to any person
(including, without limitation, any former or current employee) except as set
forth under any Plan, except for such benefits which individually or in the
aggregate are not material. Complete and correct copies of all written
arrangements described in the preceding sentence as in effect on the date hereof
have been made available to the Purchasers.
2.19. INSURANCE. All policies of liability, theft, fidelity, business
interruption, life, fire, product liability, workmen's compensation, health and
other forms of insurance held by the Company are valid and enforceable policies
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and are outstanding and duly in force and all premiums with respect thereto are
paid to date. To the best of the Company's knowledge, the amounts of coverage
under such policies of insurance for the assets and properties of the Company
are adequate against risks usually insured against by persons operating similar
businesses and operating similar properties.
2.20. REGISTRATION RIGHTS. Except as contemplated by or described in
the Registration Rights Agreement, as disclosed in the Stock Purchase Agreement
dated as of March 27, 1997 among Dove Entertainment, Inc. and the persons listed
therein and as contemplated by the agreements with Media Equities International,
Xxxxxxx Xxxxx and Xxxxxxx Xxxxxx, Apollo, Lightstone, Xxxxxxx Xxxxxxx, Xxxx
Xxxxxx, Xxxxxx Xxxxxxx, Tin Man, Leopold, Xxxxxxx & Xxxxx and Custom
Duplicating, no person has any right to cause the Company to effect the
registration under the 1933 Act of any of the Company's debt or equity
securities.
SECTION 3
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company the following:
3.1. AUTHORIZATION. Such Purchaser has all requisite power and
authority to execute this Agreement and the Registration Rights Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement by such Purchaser have been duly
authorized by all requisite corporate action, and this Agreement has been duly
executed and delivered by such Purchaser and the Registration Rights Agreement
when duly executed and delivered by such Purchaser will constitute its valid and
binding obligation, enforceable against such Purchaser in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and general equitable principles.
3.2. PURCHASE FOR INVESTMENT. The Shares are being acquired by such
Purchaser for its own account, not as a nominee or agent, for investment and not
with a view to resale or distribution within the meaning of the 1933 Act, and
the rules and regulations thereunder, and such Purchaser will not distribute the
Shares in violation or contravention of the 1933 Act. Such Purchaser is not
aware of any facts or circumstances that contradict the representation in the
first sentence of Section 2.6.
3.3. RESTRICTIONS ON TRANSFER. The Purchaser acknowledges that (a) the
Shares are not registered under the 1933 Act as of the Closing Date, (b) the
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Shares will not be transferable unless so registered or unless an exception for
such registration is applicable and (c) certificates representing the Shares
will bear a legend substantially in the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF, AND NO TRANSFER OF THE SECURITIES MAY BE MADE BY
THE COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM."
3.4. SOPHISTICATION: ACCESS TO INFORMATION.
(a) Such Purchaser represents and warrants to the Company, that
such Purchaser and if such Purchaser is a limited liability company each member
of such Purchaser (i) is an "accredited investor" as defined in the 1933 Act and
is financially able to purchase the Shares (ii) is fully capable of
understanding the type of investment being made pursuant to this Agreement, and
the risks involved in connection therewith, (iii) believes that the nature of
the Shares is consistent with their overall investment programs and financial
position, (iv) recognizes that there are substantial risks involved in their
purchase of the Shares, (v) is capable of bearing the economic risk of its
investment for an indefinite period of time and can afford a complete loss of
its investment, (vi) has adequate means of providing for their current liquidity
needs, (vii) has no need for liquidity of their investment, (viii) is not
expecting any short term income from their investment and (ix) has no reason to
anticipate any change in personal circumstances, financial or otherwise, which
may cause or require any sale of the Shares.
(b) Such Purchaser acknowledges to the Company that it has had
the opportunity to ask questions of and receive answers from the Company's
officers and directors concerning the terms and conditions of the (i) purchase
and delivery of the Shares and (ii) business and financial conditions of the
Company; and such Purchaser has received to its satisfaction, such additional
information about the business and financial conditions of the Company and the
terms and conditions of the purchase and delivery of the Shares, as it has
requested.
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SECTION 4
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell, issue and deliver the Purchased
Shares on the Closing Date as specifically provided, is subject to the
fulfillment to its satisfaction of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct with the same effect as though made on and as of the Closing Date.
4.2. NO INJUNCTION. There shall not be any pending or threatened suit,
action or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation questioning the validity of this Agreement
or the transactions contemplated hereby.
SECTION 5
AFFIRMATIVE COVENANTS OF THE COMPANY
5.1. ANNOUNCEMENTS. The Purchasers acknowledge that the Company may be
required by law to make certain announcements regarding the transaction
contemplated hereby. The content of any such public announcement by either party
will be subject to review and approval of the other party, such delivery and
review of content constituting such public announcement shall be timely and
approval shall not be unreasonably withheld.
5.2. INDEMNIFICATION.
(a) The Company (together with its successors and assigns, the
"INDEMNIFYING PARTY") shall indemnify and hold harmless each Purchaser, its
principals, employees (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party) in any action or proceeding between
an Indemnifying Party and Indemnified Party (or Indemnified Parties) or between
an Indemnified Party (or Indemnified Parties) and any third party or otherwise,
or other liabilities (collectively, the "LIABILITIES") resulting from or arising
out of any breach of any representation or warranty, covenant or agreement of an
Indemnifying Party to such Indemnified Party in this Agreement, or any legal,
administrative or other actions (including actions brought by any equity holder
of the Company) or derivative actions brought by any third party claiming
through or in Indemnifying Party's name), proceedings or investigations whether
formal or informal), or written threats thereof, based upon, relating to or
arising out of any breach of any representation or warranty, covenant or
agreement of an Indemnifying Party to such Indemnified Party in this Agreement;
including the enforcement by any Indemnified Party of its rights hereunder. For
purposes of this Section 5.2, "losses" shall include, but not be limited to, a
diminution in value of the Purchased Shares resulting from or arising out of any
breach of any representation or warranty, covenant or agreements of an
Indemnifying Party in this Agreement.
14
(b) To the extent that such indemnification is unenforceable for
any reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of the Liabilities which shall be permissible under
applicable laws.
(c) In connection with the obligation of the Indemnifying Party
to indemnify for or contribute towards expenses as set forth above, the
Indemnifying Party further agrees, upon presentation of appropriate invoices
containing reasonable detail, to reimburse each Indemnified Party for all such
expenses (including fees, disbursements and other charges of counsel incurred by
an Indemnified Party in any action or proceeding between the Indemnifying Party
and such Indemnified Party, or Parties, and any third party otherwise) as they
are incurred by such Indemnified Party subject to an undertaking to reimburse
such amounts if determined not entitled to it.
5.3. FINANCIAL STATEMENTS AND REPORTS. For so long as the Purchasers
continue to hold in the aggregate at least 1% of the outstanding shares of
Common Stock, the Company shall furnish to the Purchasers the following
financial statements and reports:
(a) Within the period prescribed by the Securities and Exchange
Commission (the "COMMISSION"), an audited balance sheet, and related audited
statements of income, cash flows and shareholders' equity of the Company as of
and for such fiscal year prepared in accordance with GAAP, consistently applied,
and accompanied by the opinion of the Company's regularly engaged firm of
independent certified public accountants.
(b) Within the period prescribed by the Commission, a quarterly
balance sheet and statements of income, cash flows and stockholders' equity of
the Company as of and for such quarter and the year to date and as of and for
the corresponding periods of the preceding fiscal year. The interim statements
described above shall be unaudited, but prepared in accordance with GAAP,
subject only to normal year-end adjustments and shall be certified by the Chief
Financial Officer of the Company; and
(c) Promptly upon their becoming available, the Company shall
deliver to the Purchasers copies of (i) all financial statements, reports,
notices and proxy statements sent or made available to shareholders by the
15
Company, (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by the Company with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company to
the public concerning material developments in the business of the Company.
5.4. ACCESS. The Company shall during usual business hours and upon
reasonable notice, permit the Purchasers' duly authorized representatives to
visit and inspect the properties of the Company, to examine the stock register,
books and record of account and records of the proceedings of the incorporators,
stockholders and directors and to make copies or extracts therefrom, and to
discuss the Company's business with its officers and directors.
5.5. OTHER FILINGS AND DISSEMINATION OF MATERIAL. For so long as the
Purchasers continue to hold in the aggregate at least 1% of the outstanding
shares of Common Stock:
(a) The Company shall make and keep public information available
as those terms are understood and defined in Rule 144 promulgated under the 0000
Xxx.
(b) The Company shall file with the Commission in a timely manner
all reports and other documents as the Commission may prescribe under the
Exchange Act at any time.
(c) The Company shall furnish to the Purchasers a written
statement by the Company as to its compliance with the reporting requirements of
the Exchange Act as the Purchasers may reasonably request to avail itself of any
rule or regulation of the Commission allowing such holder to sell any such
securities without registration.
SECTION 6
NEGATIVE COVENANTS OF THE COMPANY
6.1. NEGATIVE COVENANTS.
(a) So long as the Purchasers continue to hold not less than an
aggregate of 750,000 shares of Common Stock, the Company hereby covenants and
agrees with the Purchasers that without the consent of the Purchasers, which
right of consent shall be exercised in good faith and in a commercially
reasonable manner,
16
(i) the Company will not;
(A) adopt an annual budget;
(B) incur any debt for borrowed money or sell and issue
any debt or equity securities other than
compensation for employees, directors and
consultants or pursuant to any options, warrants or
convertible securities outstanding on the date
hereof;
(C) change or alter its principal business or enter
into any new business (it being understood that
exploiting ancillary rights shall not be considered
new business).
(ii) no executive officer of the Company will knowingly:
(A) hire any executive that earns in excess of $100,000
per year;
(B) make any changes or additions to the Company's
auditors, consultants or principal outside counsel;
(D) commence any litigation not in the ordinary course
of business or settle any litigation not in the
ordinary course of business or where the amount to
be paid by the Company is $25,000 or more;
(E) acquire any assets where the required payment by
the Company is in excess of $155,000 or sell or
license outside of the ordinary course of business
assets where the payment to the Company is in
excess of $155,000, including film, audio or
publishing rights;
(F) commence active pre-production for (I) any
television movie-of-the-week, special or
mini-series, unless the license fee payable (or
previously paid) for such program by the U.S.
broadcast or cable network together with bankable
foreign licenses is at least equal to the budgeted
negative cost (including all normal and customary
production budget items including for functions
performed by the Company and including a customary
contingency of 10%, minus $250,000 and the Company
17
reasonably believes that additional revenues from
uncommitted territories is reasonably likely to
generate revenues in excess of $250,000 in the two
years from the date of commencement of such
pre-production, (II) any episodic television series
unless the budgeted negative cost (including all
normal and customary production budget items
including for functions performed by the Company
and including a customary contingency of 10%) per
episode is less than $150,000 and at least 80% of
such negative cost will be funded by a U.S.
broadcast or cable network and the Company
reasonably believes that additional revenues from
uncommitted territories is reasonably likely to
generate revenues in excess of the unfunded amount
within two years from the date of commencement of
such production; or (III) engage in the production
of a theatrical feature film, except to the extent
the Company's commitments are less than $250,000
and the Company reasonably believes that expected
revenue from such film will be in excess of all
costs relating thereto, including the amount of the
Company's commitment;
(G) issue any financial press releases or publicly
issue or otherwise publicly discuss the Company's
projected financial results (it being understood
that the foregoing is not intended to restrict
comments in general terms as to the anticipated
success of any particular project).
(b) For purposes of this Section 6.1 only, Apollo and Lightstone
jointly shall from time to time designate a person (a "Representative") by
written notice to the Company, who shall have the authority as between the
Company and the Purchasers to give or withhold the Purchasers' consent as
contemplated in this Section 6.1, which Representative shall, until further
notice, be Xxxxxx Xxxxxxxxxx.
6.2. REMEDY. In the event that the Company breaches any of the
covenants set forth in Section 6.1, and such breach is continuing unremedied for
a period of thirty (30) days after notice thereof is given to the Company by
both of Apollo and Lightstone, then the Company shall immediately upon written
demand by both of Apollo and Lightstone take all steps necessary or appropriate
to elect its Board of Directors two additional directors nominated by both of
Apollo and Lightstone, including calling a special meeting for such purpose,
18
which directors shall continue to serve until the earlier of the annual meeting
of the shareholders of the Company next following the cure of the breach which
gave rise to the exercise of rights under this Section 6.2, or until the
Purchasers no longer own at least 750,000 common shares. If shareholder approval
shall be required for such election of such additional directors, whether for an
approval of an amendment to the Company's By-Laws or otherwise, such appointment
shall be subject to such shareholder approval and the Company shall use its best
efforts to obtain such shareholder approval. The rights afforded to the
Purchaser hereunder shall arise each time there is a breach of the covenants set
forth in section 6.1 and shall be severable with respect thereto, provided in no
event shall this Section entitled the Purchasers to have more than two
additional directors designated at any one time.
SECTION 7
MISCELLANEOUS
7.1. PAYMENT OF EXPENSES: COUNSEL. The Company shall pay all expenses,
including the reasonable fees and expenses of the Purchasers' counsel (if any),
incurred by the Company and/or the Purchasers in connection with the sale,
issuance and delivery of the Shares pursuant to this Agreement and the
execution, delivery and performance of this Agreement.
7.2. TRANSFER OF TAXES. The Company will pay, and hold the Purchasers
harmless against, liability for the payment of any transfer or similar taxes
payable in connection with the initial sale, issuance and delivery of the
Shares.
7.3. BROKER OR FINDER. The parties individually represent and warrant
that, to the best of their individual knowledge, no broker or finder has acted
for it in connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company shall
indemnify the Purchasers and the Purchasers shall indemnify the Company against,
and hold it harmless from, any claim, liability, cost or expense (including
reasonable attorneys' fees and expenses) resulting from any agreement,
arrangement or understanding made by the Company or the Purchasers, as the case
may be.
7.4. GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with laws of the State of New York, without reference
to conflict of law provisions.
19
7.5. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party or to the other:
To the Company: NewStar Media Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
The Purchasers: Apollo Partners Ltd.
0 Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Xxx Xxxxxxxxxx
NewStar Media
0000 Xxxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
With a required
copy to: Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Xxxx Xxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
7.6. ENTIRE AGREEMENT. This Agreement including the Appendix, Schedules
and Exhibits hereto, contain the entire agreement and understanding among the
parties with respect to the subject matter hereof and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof.
All references herein to this Agreement shall specifically include, incorporate
and refer to the Appendix, Schedules and exhibits attached hereto which are
hereby made a part hereof. There are no representations, promises, warranties,
covenants, undertakings or assurances (express or implied) other than those
expressly set forth or provided for herein and in the other documents referred
to herein. This Agreement may not be modified or amended orally, but only by a
writing signed by the parties.
20
7.7. SEVERABILITY. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall, to the
extent permitted by applicable law, be narrowed or replaced, to the extent
possible, with a judicial construction in such jurisdiction that effects the
intent of the parties regarding this Agreement and such unenforceable, invalid
or conflicting part. To the extent permitted by applicable law, notwithstanding
the unenforceability, invalidity or conflict with applicable law of any part of
this Agreement, the remaining parts shall be valid, enforceable and binding on
the parties.
7.8. HEADINGS. The headings of the Sections of this Agreement are
reinstated for convenience of reference only and shall not be considered a part
hereof.
7.9. COUNTERPARTS. This agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date set forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By: /s/ XXXX XXXXXX
-------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By: /s/ XXXXXXXX X. XXXXX
/s/ XXXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
/s/ XXX XXXXXXXXXX
------------------------------------------
Xxxxxx Xxxxxxxxxx
S-1
SCHEDULE 2.9
Saskatchewan Film and Video Development Corporation and The Edge Productions
Corp. x. Xxxx Audio, Inc. (United Xxxxxx Xxxxxxxx Xxxxx Xxxxxxx Xxxxxxxx xx
Xxxxxxxxxx 00-0000 GHK (SHx))
Xxxxx Xxxxx x. Xxxx Audio, Inc.; Dove Books; Dove Entertainment, Inc. (Los
Angeles Superior Court BC194869)
Creditors' House v. NewStar Media Inc. (Los Angeles Municipal Court 98E05530)
National Commercial Recovery x. Xxxx Audio (Los Angeles Municipal Court
98K08000)
Xxxxxxx v. Buena Vista Television, Inc. et al. (U.S.D.C. No. CV 98-0218 DT
(VAPx))
R.R. Xxxxxxxx Receivable v. NewStar Inc. (Los Angeles Superior Court BC187902)
Time Warner City Cable Advertising, Inc. x. Xxxx Entertainment (Xxxxxxx Hills
Municipal Court 90 C 00639)
Xxxxxx Xxxxxxx v. Xxxxxxx Xxxxx and Xxxx Entertainment (Los Angeles Superior
Court BC183507)
Mattken Corp. V. NewStar Media (Los Angeles Superior Court BC 191736)
Palisades Pictures LLC, Nothing to Lose Productions Inc., CUB Films, Xxxx
Xxxxxxxx, Xxxx Xxxxx and Xxxx Xxxx x. Xxxx International, Inc., Dove Audio, Inc.
and NewStar Media Inc. (Los Angeles County Superior Court BC 194069)
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of November 12, 1998, by and
among NewStar Media Inc., a California corporation (the "COMPANY"), and Apollo
Partners, LLC and Xxxxxx Xxxxxxxxxx, as Purchasers (each a "PURCHASER" and
collectively, the "PURCHASERS").
WHEREAS, the Purchasers are acquiring securities of the Company
pursuant to a Stock Purchase Agreement dated the date hereof among the Company
and the Purchasers (the "STOCK PURCHASE AGREEMENT"; capitalized terms used in
this Registration Rights Agreement without definition shall have the meanings
ascribed thereto in the Stock Purchase Agreement).
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties hereto agree as
follows:
1. REGISTRATION RIGHTS
1.1 (a) The Company shall as expeditiously as practicable, but in any
event not later than December 31, 1998, prepare and file with the Securities and
Exchange Commission (the "COMMISSION") one or more registration statements
(individually and collectively, the "REGISTRATION STATEMENT") under the
Securities Act of 1933 (the "1933 ACT"), providing for the registration of the
Shares (together with all shares of Common Stock issued in connection therewith,
including by way of a stock split or other adjustment or stock dividend, the
"REGISTRABLE SECURITIES") for sale by the Purchasers, then holding such
securities (including with respect to Apollo Partners, LLC., its principals who
for the purpose of this Agreement shall be included in the term "PURCHASER").
Thereafter, the Company shall use its reasonable best efforts to cause such
Registration Statement to be declared effective not later than February 26,
1999. If at any time after the Registration Statement becomes effective, the
Registration Statement is not available for sales by any Purchaser, then the
Company shall, as expeditiously as possible, prepare and file with the
Commission, to the extent required, an amendment or new registration statement
in order to afford such Purchaser the benefit of the registration contemplated
in this Section 1.1, and shall use its reasonable best efforts to have such
amendment or new registration statement declared effective as promptly as
practicable.
(b) Notwithstanding the foregoing, in the event that the Company
proposes to undertake an underwritten public offering immediately prior to the
filing of or during the pendency or effectiveness of the Registration Statement,
each Purchaser will be obligated to either (x) join the underwritten offering
with respect to all or a portion of the Registerable Securities requested by
such Purchaser to be included therein (subject to the approval of the managing
underwriter, which may exclude such shares entirely or require pro rata cut-back
with other selling shareholders, and/or (y) execute a "lock-up" agreement with
respect to the sale or other disposition of any Registrable Securities not so
included or permitted to be included for a period commencing with the filing of
the related registration statement and ending 90 days after the effective date
of the related Registration Statement, but in any event not more than 135 in the
aggregate.
1.2. REGISTRATION PROCEDURES.
(a) The Registration Statement may be in any form for which the
Company then qualifies or which counsel for the Company deems appropriate;
(b) Before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to counsel selected
by the Purchasers, copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel, and after the filing of
the Registration Statement, the Company will promptly notify the Purchasers of
any stop order issued or, to the knowledge of the Company, threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
(c) The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the registration statement
effective for so long as any of the Registrable Securities remain owned by a
Purchaser, and so long as such registration is necessary to permit the public
resale thereof without any limitation on the amount of such sales pursuant to
Rule 144 under the Securities Act or otherwise, and comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities
during such period in accordance with the intended methods of disposition set
forth in the registration statement;
(d) The Company shall furnish to each Purchaser, before filing
the Registration Statement, if requested, copies of the Registration Statement
as proposed to be filed, and thereafter furnish to each Purchaser such number of
copies of the Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in the
registration statement (including each preliminary prospectus) and such other
document as the Purchasers may reasonably request in order to facilitate the
disposition of the Registrable Securities;
-2-
(e) The Company shall use its commercially reasonable efforts to
register or qualify the Registerable Securities covered by such Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Purchasers shall reasonably request (provided that the Company shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then qualified to do business) and do any and all
other acts or things which may be necessary or advisable to enable such seller
to consummate the public sale or other disposition in such jurisdictions of such
Registrable Securities;
(f) The Company shall notify the each Purchaser, at any time when
a prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Purchasers prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) The Company shall furnish, at the request of each Purchaser
on the date that the Registration Statement becomes effective, (a) an opinion,
dated such date, of the independent counsel representing the Company for the
purposes of such registration, addressed to the Purchasers, stating that such
registration statement has become effective under the 1993 Act; and (b) a
letter, dated such date, from the independent certified public accountants of
the Company addressed to the Purchasers making such request, stating that they
are independent certified public accountants within the meaning of the 1933 Act,
and that in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or the
prospectus, or any amendment or supplemental thereto, comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act,
and covering such other matters (including information as to the period ending
not more than five (5) business days prior to the date of such letter) with
respect to the registration, if independent certified public accountants are
normally requested to provide comfort on such matters, as such Purchaser may
reasonably request.
-3-
(h) The Company shall make available for inspection by the
Purchasers and any attorney, accountant or other professional retained by any
Purchaser or any underwriter (collectively, the "INSPECTORS"), all financial and
other records, permanent corporate documents and properties of the Company
(collectively, the "RECORDS") as are reasonably necessary to enable them to
exercise due diligence, and cause the Company's officers, directors, and
employees to supply all information reasonably requested by such Inspectors in
connection with the registration statement. The Purchasers further agree that
they will, upon learning that disclosure of such Records is sought in a court of
component jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(i) The Company shall otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders, as soon as reasonably
practicable an earnings statement satisfying the provisions of Section 11(a) of
the 1933 Act and covering a period of twelve months, beginning within three
months after the effective date of the Registration Statement;
(j) The Company shall use its commercially reasonable efforts to
cause all Registrable Securities to be listed on each securities exchange (if
any) on which similar securities issued by the Company are then listed; and
(k) The Company shall provide a transfer agent and registrar for
all of the Registrable Securities not later then the effective date of such
Registration Statement.
1.3. DISCONTINUANCE OF DISPOSITION. The Purchasers, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 1.2 (f) shall forthwith discontinue disposition of the Registrable
Securities until the Purchaser receives copies of the supplemented or amended
prospectus contemplated by Section 1.2 (f) or until it is advised in writing
(the "ADVICE") by the Company that the use of the prospectus may be resumed and
has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus.
1.4. INFORMATION TO BE FURNISHED BY PURCHASERS. Each Purchaser all
furnish to the Company such information and execute such documents regarding the
Registrable Securities held by such Purchaser and the intended method of
disposition thereof as the Company shall reasonably request in connection with
the action to be taken by the Company.
-4-
1.5. EXPENSES OF REGISTRATION. The Company shall pay all expenses
incurred by the Company in complying with Section 1.1 and 1.3 (other than the
underwriter's discounts and commissions and fees and expenses of special counsel
to the Purchasers, if any), including, without limitation, all registration and
filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees, and disbursements of
counsel to the Company, and of the Company's independent public accountants.
1.6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Purchaser,
its executive officers, directors and controlling persons (within the meaning of
the 0000 Xxx) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 0000 Xxx) with respect to a
Registration Statement pursuant to Section 1.1 against any losses, claims,
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or allegedly untrue statement of any material fact contained in a registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse any of them for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable hereunder in any such case if any such loss, claim, damage or
liability arise out of or is based upon any untrue statement or allegedly untrue
statement or omission or alleged omission made in such registration statement,
prospectus or amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company for such purpose by such
Purchaser or by its representative.
(b) Each Purchaser shall indemnify and hold harmless the Company,
its executive officers, directors and controlling persons (within the meaning of
the 0000 Xxx) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 0000 Xxx) with respect to a
registration statement pursuant to Section 1.1 against any losses, claims,
-5-
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, in reliance upon and in
conformity with written information furnished to the supplement thereof, in
reliance upon and in conformity with written information furnished to the
Company by each Purchaser or by its representative, and will reimbursement any
of them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending, any such, loss, claim, damage,
liability or action.
(c) A party's obligation to indemnify (the "indemnifying party")
and the other party's rights to indemnity and payment (the "indemnified party")
under Section 1.6 is contingent upon the indemnified party (i) giving the
indemnifying party prompt written notice of such claim; (ii) allowing the
indemnifying party to have sole right to control and direct the investigation,
preparation and defense of any such claim or action and all negotiations for its
settlement or compromise; and (iii) providing reasonable assistance to the
indemnifying party, such assistance to be solely at the cost and expense of the
indemnifying party. The indemnified party, at its own expense, shall be entitled
to participate in the defense and to receive copies of all pleadings and other
papers in connection with the claim.
(d) If for any reason the indemnification provided for in the
preceding Sections 1.6 (a) and 1.6 (b) is unavailable to an indemnified party as
contemplated by those sections, then the indemnifying party will contribute to
the amount paid or payable to the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that no Purchaser will not be required to contribute in an amount
greater than the difference between the net proceeds received by such Purchaser
with respect to the sale of any Registrable Securities and all amounts already
contributed by such Purchaser with respect to such claims.
1.7. UNDERWRITING AGREEMENT. If the Registrable Securities are to be
sold pursuant to a registration statement in an underwritten offering in which
no shares of the Company are being sold for the account of the Company, the
Company agrees to enter into an underwriting agreement with the underwriter or
underwriters (who shall be subject to the approval of the Company) containing
customary representations and warranties with respect to the business and
operations of the Company, including without limiting the generality of the
foregoing, customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
-6-
2. MISCELLANEOUS
-------------
2.1. OWNER OF REGISTRABLE SECURITIES. The Company may deem and treat
the person in whose name the Registrable Securities are registered as the
absolute owner thereof for all purposes whatsoever.
2.2. SUCCESSORS. This Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of each Purchaser, and the term
"Purchaser" shall be deemed to be include each such holder of Registrable
Securities. This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors and assigns.
2.3. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without regard
to such state's conflicts of law principles.
2.4. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party to the other:
To the Company: NewStar Media Inc.
0000 Xxxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The Purchasers: Apollo Partners Ltd.
000 0xx Xxxxxx
Xxxxx #0000
Xxx Xxxx, XX 00000
Xxx Xxxxxxxxxx
NewStar Media
0000 Xxxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
-7-
With a required
copy to: Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Xxxx Xxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
2.5. FULL AGREEMENT. This Agreement sets forth the entire understanding
of the parties with respect to transactions contemplated hereby, and shall not
be modified or amended except by written agreement of all parties hereto.
2.6. HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
2.7. COUNTERPARTS. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
-8-
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By:
-------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By:
-------------------------------------
Xxxxxxxx Xxxxx
Manager
----------------------------------------
Xxxxxx Xxxxxxxxxx
-9-
