AMENDED AND RESTATED LETTER AGREEMENT

 

                                                                    Exhibit 10.7

 

 

                      AMENDED AND RESTATED LETTER AGREEMENT

 

      This Amended and Restated Letter Agreement is entered into as of April 1,

2004, by and between CenterStaging Musical Productions, Inc. (the "Company") and

Howard Livingston (the "Executive").

 

      The Company and Executive wish to amend and restate the Letter Agreement

dated as of April 1, 2004, by and between the Company and Executive. This

Amended and Restated Letter Agreement supersedes the original Letter Agreement

as of the date hereof.

 

      In consideration of the promises and mutual covenants outlined herein, and

other good and valuable consideration, the receipt and sufficiency of which is

hereby acknowledged, it is mutually covenanted and agreed by and among the

parties as follows:

 

      1. Duties and Scope. Executive shall provide personal services to the

Company in such capacities and in such manner as follows (which services shall

be provided as an independent contractor/consultant until such time as Executive

advises the Company that he desires to become a full-time employee of the

Company, at which time such services shall be as an employee), as mutually

agreed upon from time to time by and between Executive and the Board. For

purposes of this Agreement, the term "employment" shall be deemed to mean

"engagement" as independent contractor/consultant until such time, if ever, that

Executive becomes an employee of the Company (at which time such term shall mean

employment).

 

            (a) Positions and Duties. During the Term, Executive shall render

such business and professional services in the performance of his duties,

consistent with Executive's position within the Company.

 

            (b) Obligations. During the Term, Executive shall perform his duties

faithfully and to the best of his ability and shall devote his business efforts

and time to the Company, to fulfill the objectives of the Company.

 

            (c) Other Activities. Executive shall devote his full business time

to the business and affairs of the Company, provided, however, that Executive

may: (i) perform personal, civil and charitable activities; (ii) may serve on

the boards of directors (and committees of such Boards) of other corporations

not competitive with the Company's business; and (iii) may provide consulting

services from time to time to third parties not directly in competition with the

Company provided that such consulting services do not interfere with the

performance of Executive's services and responsibilities to the Company pursuant

to this Agreement. Executive shall notify the Company in advance of undertaking

any proposed services under subparagraphs (ii) and (iii) above.

 

      2. Definitions. For purposes of this Agreement, the following terms shall

have the meanings set forth below:

 

 

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            (a) "Affiliate" shall mean, with respect to any specified Person,

(a) any other Person who, directly or indirectly, owns or controls, is under

common ownership or control with, or is owned or controlled by, such specified

Person, (b) any other Person who is a director, officer, partner or trustee of

the specified Person or a Person described in clause (a) of this definition or

any spouse of the specified Person or any such other Person, (c) any relative of

the specified Person or any other Person described in clause (b) of this

definition, or (d) any Person of which the Specified Person and/or any one or

more of the Persons specified in clause (a),(b) or (c) of this definition,

individually or in the aggregate, beneficially own 20% or more of any class of

voting securities or otherwise have a substantial beneficial interest.

 

            (b) "Board" shall mean the Board of Directors of the Company.

 

            (c) "Cause" shall mean, in the context of the termination of

Executive's employment by the Company, termination by vote of not less than 75%

of the members of the Board (excluding Executive if Executive is then a

Director) based on one or more of the following reasons:

 

                  (i) willful and repeated failure to comply with the lawful

directions of the Board;

 

                  (ii) gross negligence or willful misconduct in the performance

of Executive's duties to the Company;

 

                  (iii) commission of any act of fraud against the Company; or

 

                  (iv) participation in a fraud against the Company that

adversely affects the Company in a material way.

 

            (d) "Change of Control" shall mean:

 

                  (i) any "person" (as such term is used in Sections 13(d) and

14(d) of the Securities Exchange Act of 1934, as amended), other than any

Existing Shareholder or Shareholders, is or becomes the "beneficial owner" (as

defined in Rule 3d-3 under said Act), directly or indirectly, of securities of

the Company representing 50% or more of the total voting power represented by

the Company's then outstanding voting securities; or

 

                  (ii) the date of the consummation of a merger or consolidation

of the Company with any other corporation that has been approved by the

stockholders of the Company, other than a merger or consolidation which would

result in the voting securities of the Company outstanding immediately prior

thereto continuing to represent (either by remaining outstanding or by being

converted into voting securities of the surviving entity or the parent

corporation of the surviving entity) more than 50% of the total voting power

represented by the voting securities of the Company, the surviving entity or the

parent of the surviving entity, as applicable, outstanding immediately after

such merger or consolidation; or

 

                  (iii) the date the stockholders of the Company approve a plan

of complete liquidation of the Company; or

 

                  (iv) the date of the consummation of the sale or disposition

by the Company of all or substantially all of the Company's assets other than to

a Person of which the Existing Shareholders own directly or indirectly more than

50% of the total voting power represented by the voting securities of such

Person.

 

 

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            (e) "Company Group" shall mean the Company and each Person that is

consolidated with the Company for financial reporting purposes.

 

            (f) "Confidential Information" shall mean any and all information

concerning the business of the Company that Executive may receive or develop

during his engagement pursuant to this Agreement including, without limitation,

all documents, procedures, policies, programs, reports, plans, proposals,

technical information, know-how, systems and other information unique to the

Company, its customers or principals, received or developed by Executive.

 

            (g) "Executive Employment Agreements" shall mean the Amended and

Restated Letter Agreements, as further amended from time to time, between the

Company and each of Johnny Caswell, Jan Parent, Roger Paglia and Howard

Livingston.

 

            (h) "Existing Shareholders" shall mean: (i) Johnny Caswell, Jan

Parent, Roger Paglia and Howard Livingston; (ii) Affiliates of the individuals

named in (i); and (iii) members of the immediate families of the individuals

named in (i).

 

            (i) "Good Reason" shall mean the occurrence of one or more of the

following without the consent of Executive: (i) the Company or the Board assign

any duties to Executive substantially inconsistent with, or reflecting an

adverse change in, Executive's position, duties, responsibilities or status as a

senior executive officer of the Company; or (ii) the Company permanently

relocates its principal executive offices outside of Los Angeles County unless

such relocation was approved by either Executive in his capacity as director or

executive officer or by a majority of Johnny Caswell, Jan Parent, Roger Paglia

and Howard Livingston as directors (such majority determined based on which of

these individuals is then serving as a director); or (iii) the Company requires

that Executive perform his services other than at the Company's principal

executive offices, except for temporary assignments and ordinary business travel

consistent with Executive's duties and responsibilities.

 

            (j) "Inventions" shall mean all discoveries, developments, designs,

improvements, inventions, formulas, software programs, processes, techniques,

know-how, negative know-how, data, research, techniques, and technical data

(whether or not patentable or registrable under patent, copyright or similar

statutes and including all rights to obtain, register, perfect, and enforce

those proprietary interests) that are related to or useful in the Company's

present or future business or result from use of property owned, leased, or

contracted for by the Company. "Inventions" shall also include anything that

derives actual or potential economic value from not being generally known to the

public or to other persons who can obtain economic value from its disclosure or

use.

 

 

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            (k) "Proprietary Information" shall mean information (i) that is not

known by actual or potential competitors of the Company or is generally

unavailable to the public; (ii) that has been created, discovered, developed, or

otherwise become known to the Company or in which property rights have been

assigned or otherwise conveyed to the Company; and (iii) that has material

economic value or potential material economic value to the Company's present or

future business. "Proprietary Information" shall include trade secrets (as

defined under California Civil Code section 3426.1) and all other discoveries,

developments, designs, improvements, inventions, formulas, software programs,

processes, techniques, know-how, negative know-how, data, research, techniques,

technical data, customer and supplier lists, and any modifications or

enhancements of any of the foregoing, and all program, marketing, sales, or

other financial or business information disclosed to Executive by the Company,

either directly or indirectly, in writing or orally or by drawings or

observation, which has actual or potential economic value to the Company.

 

            (l) "Person" shall mean an individual or a corporation, limited

liability company, limited liability partnership, partnership, association,

trust or other entity.

 

            (m) "Reverse Merger" shall mean the merger of the Company with a

corporation (a "Reporting Corporation") obligated to file reports under Section

13 of the Securities Exchange Act of 1934, as amended, or the subsidiary of such

a corporation, pursuant to which the shareholders of the Company exchange their

shares for securities of the Reporting Corporation own, immediately following

the Reverse Merger, shares that would be entitled to cast a majority of the

outstanding votes in the general election of directors of the Reporting

Corporation.

 

            (n) "Rights" shall mean all patents, trademarks, service marks and

copyrights, and other rights pertaining to Proprietary Information, Inventions,

or both.

 

            (o) "Securities Act" shall mean the Securities Act of 1933, as

amended.

 

            (p) "Specified Termination Date" shall be June 30, 2009 or such

later date determined pursuant to this paragraph. The Specified Termination Date

shall be automatically extended for successive additional one year terms on each

June 30, beginning with June 30, 2005, each of which terms shall be added to the

end of the then existing term (taking into account any prior extensions or

failures to extend), unless either party notifies at least one month prior to

June 30 that he or it does not desire the additional one year term to be added

to the term of the Agreement. For example, unless either party notifies the

other to the contrary before June 1, 2005, the Specified Termination Date shall

be extended from June 30, 2009 to June 30, 2010. For further example, and

assuming the Specified Termination Date has been extended to June 30, 2010, if

one party notifies the other that it does not desire to extend the term of this

Agreement for an additional year and such notice is given before June 1, 2006,

the Specified Termination Date shall not be extended from June 30, 2010 to June

30, 2011.

 

            (q) "Term" shall mean the period commencing on the date of this

Agreement and ending upon termination of Executive's engagement pursuant to

Section 3 of this Agreement.

 

            (r) "Transfer" shall mean sell, transfer, assign, gift, create a

security interest in, or otherwise dispose of, with or without consideration.

 

            (s) "Weighted Average Available Cash" shall mean, for any month, the

weighted average cash and cash equivalents of the Company Group for such month.

 

 

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      3. Term and Termination. Executive's engagement by the Company shall

commence on the date of this Agreement and shall terminate upon the earliest to

occur of the following (such period being referred to in this Agreement as the

"Term"):

 

            (a) the Specified Termination Date;

 

            (b) upon the death of Executive;

 

            (c) upon delivery to Executive of written notice of termination by

the Company if Executive shall suffer a physical or mental disability which

renders Executive, in the reasonable judgment of the Board, unable to perform

his duties and obligations under this Agreement for either 90 consecutive days

or 180 days in any 12-month period;

 

            (d) upon not less than 90 days' prior written notice from Executive

to the Company (including notice of "retirement");

 

            (e) upon delivery to Executive of written notice of termination by

the Company (i) for Cause, or (ii) without cause following receipt of written

notice of termination from Executive pursuant to Section 3(d) of this Agreement;

 

            (f) upon delivery to Executive of written notice of termination by

the Company without cause;

 

            (g) upon not less than 30 days' prior written notice from Executive

to the Company for Good Reason, provided that the Company does not cure or

correct the condition or circumstances constituting Good Reason in that 30-day

period; or

 

            (h) upon a Change of Control, unless Executive elects to continue

his engagement pursuant to this Agreement by written notice to the Company prior

to the occurrence of the Change of Control.

 

      4. Compensation

 

            (a) Base Compensation. Until such time that Executive elects to

become a full time employee, Executive shall receive such fees as may be

mutually agreed to between the Company and Executive. During the Term and after

Executive elects to become a full-time employee, the Company shall pay Executive

as minimum compensation for his services a base salary at the annualized rate of

$300,000 through March 31, 2005, $330,000 from April 1, 2005 through June 30,

2006, and at the amount determined by the Board thereafter, but not less than an

increase of 10% per year (the "Base Salary"). The Base Salary shall be payable

in accordance with the Company's payroll practices but not less frequently than

monthly.

 

            (b) Bonus. In addition to the Base Salary, Executive shall be

entitled to an annual bonus (the "Bonus") for each fiscal year of the Company,

commencing with the fiscal year ending June 30, 2005. The Bonus shall be

determined by the Board of Directors, and shall be not less than 25% of

Executive's Base Salary as of the end the fiscal year. The Company shall pay the

Bonus within 90 days following the end of the fiscal year, provided that for any

fiscal year after the fiscal year ending June 30, 2005, if as of the end of the

fiscal year the Company's Weighted Average Available Cash for the last month of

the fiscal year is less than $2,000,000, the Company may defer payment of the

Bonus until 30 days following the last day of the first month thereafter on

which the Company has Weighted Average Available Cash of at least $2,000,000.

 

 

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            (c) Sign-on Bonus; Issuance of Shares

 

                  (i) Sign-on Bonus. The Company shall pay to Executive a

sign-on bonus of $100,000 upon Executive's election to become a full time

employee.

 

                  (ii) Issuance of Shares. The Company hereby issues and sells

to Executive, and Executive hereby purchases from the Company, 400 shares (the

"Shares") of the Company's Common Stock for $100. The Shares are immediately

vested and are not subject to forfeiture. All benefits and burdens of ownership

of the Shares shall pass as of April 1, 2004 without regard to the date of

delivery of the certificate evidencing the Shares. The Company shall also pay to

Executive a bonus of $62,000 to cover the federal and state income tax liability

of Executive relating to the acquisition of the Shares.

 

            (d) Representations. Executive represents and warrants to and agrees

with the Company as follows, with respect to t