EXHIBIT 10.1
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
Dated as of June 16, 2004
By and Among
BRILLIANT DIGITAL ENTERTAINMENT, INC.
("BDE"),
ALTNET, INC.
("ALTNET"),
DETERSHAN PTY. LTD.
("DETERSHAN"),
BIG SEVEN ENTERTAINMENT, LLC
("BIG SEVEN"),
And
XXXXXXX XXXXX
("X. XXXXX")
TABLE OF CONTENTS
PAGE
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1. Definitions...............................................................2
1.1 Certain Definitions..............................................2
1.2 Other Definitions................................................5
2. Deliveries to Escrow......................................................6
3. Big Seven Operations......................................................6
4. Proceeds from the Sale or Other Business Combination of Big Seven.........7
5. Management Fee............................................................7
6. Operating Indemnification and Insurance...................................7
7. Deliveries................................................................8
8. Further Assurances........................................................8
9. Representations and Warranties of X. Xxxxx................................8
9.1 Title to Membership Interests....................................9
9.2 Authority and Capacity; Enforceability...........................9
9.3 No Conflicts.....................................................9
9.4 Purchase for Investment..........................................9
9.5 Accredited Investor.............................................10
9.6 No Consents Required............................................10
9.7 Brokers.........................................................10
10. Representations and Warranties of X. Xxxxx About Big Seven...............10
10.1 Organization, Standing and Corporate Power......................10
10.2 Membership Interests............................................11
10.3 Subsidiaries; Other Interests...................................11
10.4 Financial Statements............................................11
10.5 Compliance with Laws and Other Instruments......................12
10.6 Contracts.......................................................12
10.7 No Conflicts....................................................12
10.8 Litigation and Proceedings......................................12
10.9 Inventory.......................................................13
10.10 Accounts Receivable.............................................13
10.11 Conduct of Business.............................................13
10.12 Assets. 13
10.13 Real Property...................................................13
10.14 Insurance.......................................................14
10.15 Tax Matters.....................................................14
10.16 Intellectual Property...........................................14
(i)
10.17 Permits........................................................ 14
10.18 Environmental Compliance Matters................................14
10.19 Employee Benefits...............................................15
10.20 Employee Relations..............................................15
10.21 No Consents Required............................................15
10.22 Brokers........................................................ 15
11. Representations and Warranties of BDE....................................15
11.1 Organization, Standing and Corporate Power......................15
11.2 Authority; Enforceability; Effect of Agreement..................15
11.3 Brokers.........................................................16
11.4 No Consents Required............................................16
11.5 Securities Reports..............................................16
12. Representations and Warranties of Altnet.................................16
12.1 Organization, Standing and Corporate Power......................16
12.2 Authority; Enforceability; Effect of Agreement..................16
12.3 Brokers.........................................................17
12.4 No Consents Required............................................17
13. Representations and Warranties of Detershan..............................17
13.1 Organization, Standing and Corporate Power......................17
13.2 Authority; Enforceability; Effect of Agreement..................17
13.3 Brokers.........................................................17
13.4 No Consents Required............................................17
14. Conduct and Transactions During the Escrow Period........................18
14.1 Conduct of Business.............................................18
14.2 Inspection of Records...........................................19
14.3 Resignation.....................................................19
14.4 Release.........................................................19
14.5 Non-Competition Agreement.......................................20
15. Further Agreements of the Parties........................................20
15.1 Confidentiality.................................................20
15.2 Tax Returns and Payments........................................21
15.3 X. Xxxxx Assistance.............................................21
15.4 Expenses........................................................21
15.5 Registration Rights.............................................21
16. Survival of Representations and Warranties; Indemnity....................22
16.1 Survival of Representations and Warranties......................22
16.2 Indemnification By X. Xxxxx.....................................22
16.3 Indemnification by BDE..........................................23
16.4 Limitation on Indemnification...................................23
16.5 Notice of Claim.................................................24
16.6 Direct Claims...................................................24
(ii)
16.7 Third Party Claims..............................................24
17. Miscellaneous............................................................25
17.1 Notices.........................................................25
17.2 Entire Agreement................................................26
17.3 Publicity.......................................................26
17.4 Assignment......................................................26
17.5 Waiver and Amendment............................................26
17.6 Governing Law...................................................26
17.7 Severability....................................................26
17.8 Captions........................................................26
17.9 Counterparts....................................................26
17.10 Costs and Attorneys' Fees.......................................27
17.11 Rights Cumulative...............................................27
17.12 Judicial Interpretation.........................................27
18. Events of Default and Remedies...........................................27
18.1 Events of Default...............................................27
18.2 Remedies........................................................28
(iii)
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (this "AGREEMENT"), dated
as of June 16, 2004, is by and among BRILLIANT DIGITAL ENTERTAINMENT, INC., a
Delaware corporation ("BDE"), ALTNET, INC., a Delaware corporation ("ALTNET"),
DETERSHAN PTY. LTD., an Australian company ("DETERSHAN"), BIG SEVEN
ENTERTAINMENT, LLC, a California limited liability company ("BIG SEVEN" or the
"Company"), and XXXXXXX XXXXX, an individual ("X. XXXXX" or "SELLER").
RECITALS
A. M. Toibb is the record and beneficial owner of 100% of the
Membership Interests (defined in SECTION 1.1) of Big Seven, which Membership
Interests constitutes 100% of the Equity Interests (defined in SECTION 1.1) of
Big Seven;
B. BDE is a developer of rich media advertising serving technologies,
software authoring tools and content for three dimensional, or 3D, animation on
the World Wide Web and, through its Altnet subsidiary. operates a peer- to-
peer- based content distribution network that allows for the secure and
efficient distribution of content, including, music, video, software and other
digital files to computer users;
C. Big Seven is a distributor of digital content, which by contract it
owns, controls or licenses, through on line peer-to-peer networks through
arrangements with BDE and Altnet;
D. Detershan provides the types of services described in Exhibit A to
the Confidential Agreement-Deal Memorandum dated as of February 26, 2003 by and
among BDE, Detershan and Big Seven (the "DEAL MEMORANDUM");
E. BDE, Altnet and Big Seven have agreed to a nonexclusive relationship
whereby they will produce, publish and distribute video content provided by Big
Seven as agreed upon by them and distributed through BDE's secure Altnet
Network;
F. The BDE, Altnet-Big Seven relationship has been the subject of
significant operating disputes and misunderstandings resulting in threatened
litigation among them and their Affiliates (as defined below);
G. BDE, Altnet, Big Seven, X. Xxxxx and their respective Affiliates (as
defined below) now desire to resolve, settle and terminate all claims by,
between and among them, now known or unknown, which each may have against the
other, on the terms and conditions set forth in this Agreement, including but
not limited to the claims associated directly or indirectly with the execution
and performance of the parties under the Deal Memorandum;
H. As part of the Settlement described in Recital G above, on the terms
and subject to the conditions set forth in this Agreement, X. Xxxxx desires to
sell to BDE, and BDE desires to purchase from X. Xxxxx, all of the Membership
Interests;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual recitals, covenants and
conditions in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, BDE, Altnet, Detershan, Big
Seven and X. Xxxxx agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINITIONS. All terms defined in this
Agreement shall have the defined meanings when used in this Agreement or in any
agreement, note, certificate, report or other document made or delivered
pursuant to this Agreement, unless otherwise defined or the context otherwise
requires. The following terms shall have the following meanings:
"ACTION" means any litigation, action, suit, proceeding,
arbitration or claim before any court or Governmental Authority, or
investigation by any Governmental Authority.
"AFFILIATE" shall mean, with respect to any specified Person,
(i) 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, (ii) any other Person who is a director, officer, partner or trustee of
the specified Person or a Person described in clause (i) of this definition, or
(iii) any Person of which the specified Person and/or any one or more of the
Persons specified in clause (i) or (ii) of this definition, individually or in
the aggregate, beneficially own 10% or more of any class of voting securities.
For purposes of this Agreement, Mr. And Xxx. Xxxxxx Xxxxx are not "Affiliates"
of the Company or Seller, but shall be "deemed to be" solely for purposes of
Section 16.3 of this Agreement.
"BEST KNOWLEDGE" with respect to any Person shall mean and
include (i) actual knowledge of the Person, including, the actual knowledge of
any of the officers or directors of such Person, and (ii) that knowledge which a
prudent businessperson could have obtained in the management of his business
after making reasonable inquiry, and after exercising reasonable diligence, with
respect thereto.
"BIG SEVEN IP" shall mean all IP that Big Seven owns, licenses
and/or uses.
"BUSINESS CONDITION" of any Person shall mean the financial
condition, results of operations, business, properties or prospects of such
Person.
"COMMITMENT" means (a) options, warrants, convertible
securities, exchangeable securities, subscription rights, conversion rights,
exchange rights, or other Contracts that could require a Person to issue any of
its Equity Interests or to sell any Equity Interests it owns in another Person;
(b) any other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
2
"COMMON STOCK" shall mean the common stock, par value $.001
per share, of BDE.
"CONTRACT" shall mean any written or oral note, bond,
debenture, mortgage, license, agreement, commitment, contract or understanding.
"ENVIRONMENTAL AND SAFETY LAWS" shall mean all applicable (i)
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, (ii) judicial and administrative
orders and determinations, (iii) contractual obligations and (iv) common law, in
each case as currently in effect, concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use production,
generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened release, control,
or cleanup of any hazardous or otherwise mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"EQUITY INTERESTS" means (a) with respect to a corporation,
any and all shares of capital stock and any Commitments with respect thereto,
(b) with respect to a partnership, limited liability company, trust or similar
Person, any and all units, interests or other partnership/limited liability
company interests, including but not limited to Membership Interests, and any
Commitments with respect thereto, and (c) any other equity ownership or
participation in a Person.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means, with respect to any Person, an
affiliate of such Person as determined under Section 414(b), (c), (m) or (o) of
the Code.
"ESCROW HOLDER" means Xxxxxx X. Xxxxxx & Associates, a
California limited liability company.
"EXPLOIT" shall mean manufacture, advertise, license, market,
merchandise, promote, publicize, sell, use, market, supply or distribute, and
"EXPLOITATION" and "EXPLOITED" shall have a correlative meaning.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HAZARDOUS SUBSTANCE" means those substances defined as
hazardous substances in 42 U.S.C. ss. 9601(14) and all other substances defined
as hazardous under other applicable Laws.
3
"IP" shall mean any and all United States and foreign: (a)
patents (including design patents, industrial designs and utility models) and
patent applications (including docketed patent disclosures awaiting filing,
reissues, divisions, continuations-in-part and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto; (b)
trademarks, service marks, trade names, trade dress, logos, business and product
names, slogans, and registrations and applications for registration thereof; (c)
copyrights (including software) and registrations thereof; (d) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential and technical information, manufacturing, engineering and technical
drawings, product specifications and confidential business information; (e)
intellectual property rights similar to any of the foregoing; and (f) copies and
tangible embodiments thereof (in whatever form or medium, including electronic
media).
"LAW" shall mean any federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy or rule of common law, in
effect as of the date hereof and as amended, and any judicial or administrative
interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent, decree or judgment.
"LIEN" shall mean any charge, equitable interest, lien,
mortgage, easement, right-of-way, pledge, security interest, or other similar
interest or right.
"MEMBERSHIP INTERESTS" means an ownership interest in Big
Seven, which includes a member's share of the profits and losses of Big Seven, a
member's right to receive distributions of Big Seven's assets, a member's right
to vote or participate in the management of Big Seven as permitted under Big
Seven's Organizational Documents, and a member's right to information concerning
the business and affairs of Big Seven, as provided in Big Seven's Organizational
Documents and under the provisions of the Xxxxxxx-Xxxxxx Limited Liability
Company Act.
"ORDER" means any order, judgment, injunction, award, decree,
writ, or similar action of any Governmental Authority.
"ORGANIZATIONAL DOCUMENTS" means the articles of
incorporation, certificate of incorporation, charter, bylaws, articles of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"PERSON" shall mean an individual or a partnership,
corporation, trust, association, limited liability company, Governmental
Authority or other entity.
"SECURITIES REPORTS" shall mean all reports, proxy statements
or registration statements (and all of the exhibits to any of the foregoing) of
BDE filed with the Securities Exchange Commission under Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933
or the rules or regulations promulgated thereunder.
"SUBSIDIARY" of any Person shall mean any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are owned directly or indirectly by such Person.
4
"TAX" or "TAXES" mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, sales, use, AD VALOREM, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, and
property taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign) and
shall include any transferee liability in respect of Taxes.
"TAX RETURN" or "TAX RETURNS" mean all returns, declarations,
reports, estimates, information returns and statements required to be filed in
respect of any Taxes.
"TRANSFER" shall mean sell, assign, transfer, pledge, grant a
security interest in, or otherwise dispose of, with or without consideration,
and "TRANSFERRED" shall have a correlative meaning.
1.2 OTHER DEFINITIONS. The following terms shall have the
meanings given the terms in the Sections set forth below:
TERM SECTION
---- -------
Code.................................................... 10.19
Common Stock............................................ 2.0
Claim................................................... 16.5
Claim Notice............................................ 16.5
Big Seven Plans......................................... 10.19
Damages................................................. 16.2
Direct Claim............................................ 16.5
Disclosure Letter....................................... 9.0
Escrow Agreement........................................ 2.0
General Release......................................... 14.4
Indemnified Party....................................... 16.5
Indemnifying Party...................................... 16.5
Leased Real Property.................................... 10.13
Non-Competition Agreement............................... 2.0
Notices................................................. 17.1
BDE Indemnified Party................................... 16.2
BDE Indemnified Parties................................. 16.2
Real Property Leases.................................... 10.13
Securities Act.......................................... 9.4
X. Xxxxx Indemnified Parties............................ 16.3
5
TERM SECTION
---- -------
X. Xxxxx Indemnified Party.............................. 16.3
Third Party Claim....................................... 16.5
2. DELIVERIES TO ESCROW.
Concurrent with the execution and delivery of this Agreement,
X. Xxxxx shall deliver to Escrow Holder, evidence of ownership of all of the
outstanding Membership Interests in Big Seven which shall be held by the Escrow
Holder for delivery to BDE in accordance with the terms of this Agreement and
that certain Escrow Agreement by and among BDE, Big Seven and X. Xxxxx dated of
even date herewith and attached hereto as Exhibit A (the "ESCROW AGREEMENT") on
a date one year from the date of this Agreement unless an earlier delivery is
made in accordance with the terms of this Agreement and the Escrow Agreement,
and BDE shall deliver to Escrow Holder a stock certificate of BDE, registered in
the name of BDE, evidencing 6,666,667 treasury shares of Common Stock, par value
$.001 per share, of BDE, accompanied by a stock assignment separate from
certificate providing for the transfer of the treasury shares to X. Xxxxx, which
treasury shares and stock assignment shall be held by Escrow Holder for delivery
to X. Xxxxx in accordance with the terms of this Agreement and the Escrow
Agreement (the "ESCROWED COMMON STOCK") (unless BDE elects, pursuant to the
terms of the Escrow Agreement, to exchange all or part of the Common Stock for
cash in the amount of Fifteen Cents ($0.15) per share (as adjusted for stock
splits, reverse stock splits, etc.), in which event such cash shall be so
delivered to X. Xxxxx in lieu of the substituted shares of Common Stock) on a
date one year from the date of this Agreement unless an earlier delivery is made
in accordance with the terms of this Agreement and the Escrow Agreement. In the
event that either of the deliveries to Escrow Holder, described in this Section
2 of this Agreement and the Escrow Agreement, is not timely made in the manner
described herein and in the Escrow Agreement, this Agreement shall be terminated
and be void AB INITIO and shall be of no force or effect and all other
agreements which are contemplated by this Agreement, including but not limited
to (i) the Non-Competition Agreement by and between BDE and X. Xxxxx dated of
even date herewith and attached hereto as Exhibit B (the "NON-COMPETITION
AGREEMENT"), and (ii) any releases or covenants not to xxx or similar agreements
such as the Mutual General Release by and among BDE, Altnet, Detershan, Big
Seven and X. Xxxxx dated of even date herewith and attached hereto as Exhibit C
(the "MUTUAL GENERAL RELEASE"), shall be terminated automatically without any
action required on the part of any party hereto or thereto. Absent an
intervening event expressly described in this Agreement or the Escrow Agreement
as having a contrary effect or an accelerating effect, the Common Stock and the
Membership Interests shall be delivered by the Escrow Holder to X. Xxxxx and
BDE, respectively, on the date which is one year after the date of this
Agreement.
3. BIG SEVEN OPERATIONS.
From and after the date of this Agreement, so long as none of
BDE, Altnet, Detershan or their Affiliates has breached any provision of this
Agreement, the Escrow Agreement, or any agreement contemplated by this Agreement
until the earlier of (i) the termination of the Escrow and the delivery to X.
Xxxxx of the Common Stock and to BDE of the Membership Interests in Big Seven,
in accordance with the terms of this Agreement and the Escrow Agreement; (ii)
the sale of all or substantially all of the assets of Big Seven arranged by BDE;
or (iii) the consummation of a business combination of Big Seven and another
Person, (irrespective of whether Big Seven is the surviving entity) arranged by
BDE, BDE or a Subsidiary of BDE shall have all rights to operate (including the
right to appoint the manager and officers and other employees of Big Seven),
terminate, or to arrange for the sale of and sell all or
6
substantially all the operations and assets (including contracts) of Big Seven,
and X. Xxxxx, in his capacity as a member of Big Seven or otherwise, shall have
no such rights. From and after the date of this Agreement, as among BDE and its
affiliates, on the one hand, and X. Xxxxx, on the other, BDE or a Subsidiary of
BDE shall have the sole right to all profits and BDE and any such Subsidiary
shall have the sole obligation for all liabilities arising directly or
indirectly from the operations of Big Seven, and X. Xxxxx shall have no right to
any such profits and none of any such liabilities.
SUBJECT TO THE TERMS OF SECTION 3 OF THIS AGREEMENT, X. XXXXX
HEREBY EXPRESSLY AND IRREVOCABLY APPOINTS BDE AND ITS SUCCESSORS AND ASSIGNS AS
X. XXXXX'X PROXY AND ATTORNEY-IN-FACT TO VOTE X. XXXXX'X MEMBERSHIP INTERESTS
AND OTHER VOTING SECURITIES OF BIG SEVEN AND TAKE ANY AND ALL SUCH OTHER ACTION
THAT X. XXXXX COULD TAKE IN HIS CAPACITY AS A MEMBER OF BIG SEVEN AS BDE MAY
DIRECT IN CONNECTION WITH A TRANSACTION EFFECTED IN ACCORDANCE WITH THIS SECTION
3. SUCH APPOINTMENT OF BDE AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH AN
INTEREST AND SHALL BE VALID UNTIL TERMINATION OF THIS AGREEMENT.
4. PROCEEDS FROM THE SALE OR OTHER BUSINESS COMBINATION OF BIG
SEVEN.
Any proceeds which are received from the sale of the assets or
other business combination of Big Seven during the term of the Escrow Agreement
and for the twelve (12) month period following the termination of the Escrow
Agreement as contemplated herein and in the Escrow Agreement, shall be allocated
and paid as follows: (i) the first $1,000,000 (i.e., proceeds from $0 to
$1,000,000) of such proceeds shall be allocated and paid to BDE; (ii) the next
$180,000 of such proceeds (i.e., proceeds from $1,000,001 to $1,180,000) shall
be allocated and paid to X. Xxxxx; and (iii) all remaining proceeds (i.e.,
proceeds in excess of $1,180,000) shall be allocated and paid to BDE; provided,
however, that, at such time as such sale or business combination is consummated,
BDE agrees to cause the Escrow Holder to deliver to X. Xxxxx the Common Stock
(unless BDE elects the cash payment alternative set forth in the Escrow
Agreement, in which event BDE shall cause the Escrow Holder to deliver such
cash), and such delivery shall be a condition to the consummation of such
transaction.
5. MANAGEMENT FEE.
During the period commencing on the date of execution of this
Agreement and ending on the earlier of (i) one year from the date of this
Agreement, (ii) the termination of this Agreement pursuant to its terms, or
(iii) the termination of the Escrow Agreement, BDE shall pay to X. Xxxxx
monthly, on the last day of each calendar month (commencing with the month
during which this Agreement is executed and delivered, and pro rated for any
partial month), a management fee in the cash amount of Fifteen Thousand Dollars
($15,000).
6. OPERATING INDEMNIFICATION AND INSURANCE.
BDE and Altnet shall indemnify X. Xxxxx from any and all
losses, Damages or other liabilities, costs and expenses which he might
otherwise suffer or incur from action or
7
inaction by BDE or its Affiliates during the period of time that BDE has the
right to operate, terminate or cause the sale of Big Seven and its assets or
operations, all as set forth more fully in SECTION 16.3 of this Agreement and
BDE shall use its commercially reasonable efforts to, no later than thirty days
following the date hereof, obtain an insurance policy insuring X. Xxxxx against
losses or damages arising from such action or inaction by BDE, its Affiliates or
X. Xxxxx for a period of time commencing on the date of such insurance policy
and expiring not earlier than the date upon which the statute of limitations
expires with respect to any judicial or quasi-judicial action that may be taken
against X. Xxxxx with respect to the foregoing, which insurance policy shall be
of a type and in an amount reasonably satisfactory to X. Xxxxx. Notwithstanding
the foregoing, BDE shall not be required to spend more than Forty Thousand
Dollars ($40,000) per annum for such insurance policy, and to the extent such
insurance policy costs more than Forty Thousand Dollars ($40,000) per annum, it
shall be a condition to BDE's obligation to obtain such insurance that X. Xxxxx
pay the additional amount. Alternatively, for each year that BDE is obligated to
provide such insurance, and solely at the election of X. Xxxxx, for any reason
or no reason, X. Xxxxx may seek to obtain, and may obtain such insurance or
similar insurance from a different carrier, the terms and conditions of which
shall be to the sole satisfaction of M Toibb and BDE shall pay to M Toibb or, at
his request, directly to the insurance company of M Toibb's choice, on written
notice to BDE that M Toibb has determined to obtain such alternative insurance,
within a sufficient time period to allow M Toibb to make any necessary payment
to bind such insurance or pay any premium thereon. Upon such notice to BDE and
the payment by BDE of Forty Thousand Dollars ($40,000) to M Toibb or the
insurance company of his choice as directed by M Toibb, then BDE shall be
relieved of its responsibility to obtain insurance for such year until the time
for the annual renewal of such insurance policy, at which time BDE shall have
the obligations set forth above with respect to such ensuing year and for each
year thereafter until the passage of the statute of limitations with respect to
an claim which be made against X. Xxxxx as set forth above.
7. DELIVERIES.
Concurrent with the execution and delivery of this Agreement,
(i) BDE shall deliver to Big Seven and X. Xxxxx such documents and instruments
as such persons may reasonably request to evidence the satisfaction of all terms
of this Agreement; and (ii) Big Seven or X. Xxxxx, as the case may be, shall
deliver or cause to be delivered to BDE the resignation, effective as of the
date of this Agreement, of Big Seven's manager, the appointment of Xxxx Xxxxxx
as Big Seven's manager, and such documents and instruments as BDE may reasonably
request to evidence the satisfaction of all the terms of this Agreement.
8. FURTHER ASSURANCES.
From and after the date of this Agreement, each party to this
Agreement shall deliver or cause to be delivered, as appropriate, such further
certificates, consents and other documents as may be necessary to carry out the
terms of this Agreement.
9. REPRESENTATIONS AND WARRANTIES OF X. XXXXX.
Except as set forth in the disclosure letter delivered by X.
Xxxxx to BDE concurrently with the execution and delivery of this Agreement,
which letter shall refer to the
8
relevant Sections of this Agreement (the "DISCLOSURE LETTER"), X. Xxxxx
represents and warrants to BDE as follows:
9.1 TITLE TO MEMBERSHIP INTERESTS. X. Xxxxx is the sole
owner, beneficially and of record, and has good and marketable title to, all of
the Membership Interests, free and clear of all Liens (other than applicable
restrictions generally imposed by the securities laws of the United States and
the various states). On delivery to the Escrow Holder of the Assignment of
Membership Interests of Big Seven, duly executed by X. Xxxxx for transfer to
BDE, title to all of the Membership Interests of Big Seven will be free and
clear of any Liens (other than applicable restrictions generally imposed by the
securities laws of the United States and the various states). X. Xxxxx'x
Membership Interests are not subject to any purchase option, call, right of
first refusal, subscription or similar right under any provision of any Contract
to which X. Xxxxx is a party or by or to which X. Xxxxx or any of its assets or
properties may be bound or subject or otherwise. Other than this Agreement and
the Escrow Agreement, X. Xxxxx'x Membership Interests are not subject to any
voting trust agreement or any other Contract, arrangement, commitment or
understanding, including any Contract restricting or otherwise relating to the
voting, dividend rights or disposition of the Membership Interests. X. Xxxxx has
no outstanding contractual obligations or rights to purchase or otherwise
acquire, whether from Big Seven or otherwise, any Equity Interests of Big Seven.
9.2 AUTHORITY AND CAPACITY; ENFORCEABILITY. X. Xxxxx has
the full capacity and authority required to execute, deliver and perform his
obligations under this Agreement and to consummate the transactions contemplated
by this Agreement. This Agreement constitutes a valid and legally binding
obligation of X. Xxxxx, enforceable against X. Xxxxx in accordance with its
terms, except as enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally, or the availability
of equitable remedies.
9.3 NO CONFLICTS. The execution, delivery and performance
by X. Xxxxx of this Agreement and each other agreement and assignment to be
delivered by X. Xxxxx pursuant to this Agreement, the compliance by X. Xxxxx
with the terms and provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require X. Xxxxx to
obtain any consent, approval or action of, or make any filing with or give any
notice to, any Governmental Authority or any Person; (ii) violate, conflict with
or result in the breach of any of the terms of, result in a material
modification or acceleration of the effect of, otherwise cause the termination
of or give any other contracting party the right to terminate or a right of
first refusal, or constitute (or with notice or lapse of time or both,
constitute) a default under, any Contract to which X. Xxxxx is a party or by or
to which X. Xxxxx or any of X. Xxxxx'x respective assets or properties may be
bound or subject, or result in the creation of any Lien upon the assets or
properties of X. Xxxxx pursuant to the terms of any of these Contracts; or (iii)
violate any Law or Order against, or binding upon, X. Xxxxx or any of X. Xxxxx'x
respective assets or properties.
9.4 PURCHASE FOR INVESTMENT. X. Xxxxx is acquiring the
Common Stock for investment purposes only and not with a view to the sale or
distribution thereof in violation of any applicable federal or state securities
laws. X. Xxxxx acknowledges that the Common Stock to be acquired by X. Xxxxx
pursuant to this Agreement is not registered under the Securities Act
9
of 1933, as amended (the "SECURITIES ACT") and cannot be sold or otherwise
disposed of except in compliance with the Securities Act or in reliance upon an
exemption from the Securities Act. X. Xxxxx acknowledges that the certificate(s)
representing the Common Stock shall bear a legend in substantially the following
form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION."
9.5 ACCREDITED INVESTOR. X. Xxxxx is an "accredited
investor" as that term is defined in Rule 501(a) of the General Rules and
Regulations under the Securities Act.
9.6 NO CONSENTS REQUIRED. To the Best Knowledge of X.
Xxxxx, there are no Permits or other actions of, or filings with, any Person
required of X. Xxxxx in connection with the execution of, and the consummation
of the transactions contemplated by, this Agreement or any other agreement to be
delivered by X. Xxxxx pursuant to this Agreement that Big Seven or BDE is
obligated to pay.
9.7 BROKERS. X. Xxxxx has not retained or otherwise
engaged or employed any broker, finder or any other person, or paid or agreed to
pay any fee or commission to any agent, broker, finder or other person, for or
on account of acting as a finder or broker in connection with this Agreement or
the transactions contemplated hereby that Big Seven or BDE is obligated to pay.
Notwithstanding the foregoing, X. Xxxxx agrees to pay any such fees, should such
fees be incurred in connection with this Agreement or the transactions
contemplated hereby.
10. REPRESENTATIONS AND WARRANTIES OF X. XXXXX ABOUT BIG SEVEN.
Except as set forth in the Disclosure Letter, X. Xxxxx,
represents and warrants to BDE as follows:
10.1 ORGANIZATION, STANDING AND CORPORATE POWER. Big Seven
is a limited liability company corporation duly organized, validly existing, and
in good standing under the Laws of the State of California. Big Seven has the
requisite power and authority necessary to own or lease its properties and to
carry on its businesses as currently conducted. Big Seven is not in breach of
any provision of its Organizational Documents. There is no written Operating
Agreement of Big Seven. There is no pending or threatened Action for the
dissolution, liquidation, insolvency, or rehabilitation of Big Seven. Big Seven
is qualified, licensed or domesticated as a foreign corporation or other entity
in all jurisdictions where the failure to be so
10
qualified, licensed or domesticated as a foreign corporation or other entity
could have a material adverse effect on the Business Condition of Big Seven. The
Articles of Organization of Big Seven were filed with the Secretary of State of
the State of California on February 28, 2003.
Prior to the execution of this Agreement, X. Xxxxx has
delivered to BDE or its attorneys true and complete copies of Big Seven's
Organizational Documents, each as amended to date.
10.2 MEMBERSHIP INTERESTS. X. Xxxxx'x Membership Interests
represent 100% of the Equity Interests in and to Big Seven. All of X. Xxxxx'x
Membership Interests have been duly authorized and are validly issued, fully
paid and non-assessable. There are no Certificates which represent the
Membership Interests. There are no Commitments of Big Seven outstanding or other
rights outstanding that give any Person the right to receive any benefits or
rights similar to any rights enjoyed by or accruing to the holders of Equity
Interests Big Seven. There are no options, warrants, agreements, convertible
securities, exchangeable securities, commitments or other rights outstanding
pursuant to which Big Seven may become obligated to purchase or redeem any
shares of capital stock or other securities of Big Seven. There are no
outstanding bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which Big Seven's members or managers may vote. X.
Xxxxx'x Membership Interests have not been issued in violation of, and X.
Xxxxx'x Membership Interests are not subject to, any purchase option, call,
right of first refusal, preemptive right, subscription or similar right under
any provision of applicable law, Big Seven's Organizational Documents, any
Contract to which Big Seven is a party or by or to which Big Seven or any of its
assets or properties may be bound or subject or otherwise.
10.3 SUBSIDIARIES; OTHER INTERESTS. Big Seven does not
control, directly or indirectly, any other Person or own, directly or
indirectly, any shares of capital stock or other securities of any other Person.
Big Seven does not have any Subsidiaries.
10.4 FINANCIAL STATEMENTS.
10.4.1 Big Seven has no Financial Statements.
10.4.2 As of the date of this Agreement, Big Seven
does not have any material liabilities, obligations or commitments of any
nature, whether accrued, absolute, contingent or otherwise, matured or
unmatured, which have not been disclosed to BDE in the Disclosure Letter.
11
10.5 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the
Best Knowledge of X. Xxxxx, Big Seven and its manager, are and at all times have
been in compliance in all material respects with (i) Big Seven's Organizational
Documents, and (ii) all applicable Laws and Orders relating to Big Seven or the
conduct of its business or operations or the use of its assets or properties. To
the Best Knowledge of X. Xxxxx, there are no bases or grounds for any Material
Action with respect to Big Seven relating to, or arising under, any Law or
Order, and Big Seven has not received and does not know of the issuance of any
written notice of any violation or alleged violation of any Law or Order by any
Governmental Authority.
10.6 CONTRACTS. The Disclosure Letter contains a true and
complete list of all Contracts to which Big Seven is a party or by or to which
any of its assets or properties are bound or subject. Big Seven has delivered or
made available to BDE true and complete copies of all of the Contracts set forth
in the Disclosure Letter. Except as set forth in the Disclosure Letter, all of
the Contracts referred to in the Disclosure Letter are valid and binding upon
Big Seven and, to the Best Knowledge of X. Xxxxx, on the other parties to the
Contracts in accordance with their terms. Except as set forth in the Disclosure
Letter, Big Seven is not in default in any material respect under any of the
Contracts, nor to the Best Knowledge of X. Xxxxx does any condition exist that
with notice or lapse of time or both would constitute a material default under
any Contract or that would give to any party to any Contract any right of
termination, first refusal, cancellation, acceleration or modification of any
Contract. Except as set forth in the Disclosure Letter, to the Best Knowledge of
X. Xxxxx, no other party to any Contract is in default under any Contract in any
material respect nor does any condition exist that with notice or lapse of time
or both would constitute a material default under any Contract.
10.7 NO CONFLICTS. The execution, delivery and performance
by X. Xxxxx of this Agreement and each other agreement to be delivered by X.
Xxxxx pursuant to this Agreement, the compliance by X. Xxxxx with the terms and
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require Big Seven to obtain any
consent, approval or action of, or make any filing with or give any notice to,
any Governmental Authority or any Person; (ii) violate or conflict with Big
Seven's Organizational Documents; (iii) violate, conflict with or result in the
material breach of any of the terms of, result in a material modification or
acceleration of the effect of, otherwise cause the termination of or give any
other contracting party the right to terminate or a right of first refusal, or
constitute (or with notice or lapse of time or both, constitute) a material
default under, any Contract, or result in the creation of any material Lien upon
the assets or properties of Big Seven pursuant to the terms of any Contract; or
(iv) violate, in any material respect, any Law or Order against, or binding
upon, Big Seven or any of its material assets or properties.
10.8 LITIGATION AND PROCEEDINGS. Except as set forth in
the Disclosure Letter, there is no pending or, to the Best Knowledge of X.
Xxxxx, threatened Action (or basis for any Action) to which Big Seven is a party
or involving any of Big Seven's assets or properties, and Big Seven is not
subject to any Order.
12
10.9 INVENTORY. Big Seven has no inventory.
10.10 ACCOUNTS RECEIVABLE. Except as set forth in the
Disclosure Letter, Big Seven has no accounts receivable.
10.11 CONDUCT OF BUSINESS. Since February 28, 2003, except
for this Agreement and changes contemplated by this Agreement, Big Seven has
conducted its business only in the ordinary course of business and there has not
been any: (i) purchase, redemption, retirement or other acquisition by Big Seven
of any Equity Interests of Big Seven; (ii) declaration or payment of any
dividend or other distribution or payment to any member of Big Seven in respect
of any Equity Interests of Big Seven; (iii) increase by Big Seven in the
compensation payable or to become payable by Big Seven to any member, manager,
officer or employee of Big Seven being paid $35,000 or more; (iv) payment of any
bonus, pension, retirement or insurance payment or arrangement to or with, or
advance or loan of any money to, any Person, or entry into any employment,
severance, loan or similar Contract with any Person, except for employment
agreements entered into in the ordinary course of business with Persons who are
not executive officers of Big Seven and who do not receive, on an annualized
basis, base compensation in excess of $35,000; (v) incurrence by Big Seven of
any indebtedness or trade payables other than indebtedness and trade payables
incurred by Big Seven in the ordinary course of business; or (vi) Transfer or
lease of any assets to, or entry into any agreement or arrangement with, an
Affiliate of Big Seven (other than payment of salaries to officers in the
ordinary course of business and consistent with past practice) or any of their
respective Affiliates.
10.12 ASSETS. Except for Liens set forth on the Disclosure
Letter, Big Seven has good and marketable title, or leasehold interests in or
legal right to use, all of its assets, in each case free and clear of any Liens,
other than (A) Liens for current taxes not yet delinquent, (B) Liens imposed by
Law, (C) easements and restrictions which are neither individually nor in the
aggregate material to Big Seven, or (D) Liens disclosed in the Disclosure
Letter. Each item of material tangible personal property of Big Seven is in good
operating condition and repair, ordinary wear and tear excepted, for the
requirements of the business of Big Seven as currently conducted.
10.13 REAL PROPERTY. Big Seven does not own or lease any
real property.
13
10.14 INSURANCE. Big Seven has no policies of insurance.
10.15 TAX MATTERS. Big Seven (i) has prepared and duly and
timely filed all Tax Returns required to be filed (subject to any extensions
applicable to the Tax Return, which extensions are described in the Disclosure
Letter) and all of these Tax Returns accurately reflect the Tax liability of Big
Seven in all material respects for the periods to which they relate, (ii) has
paid all Taxes shown to be due and payable on the Tax Returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter, or other notice received by it, and (iii) has properly accrued all Taxes
for the periods subsequent to the periods covered by the Tax Returns. Big
Seven's Tax Returns have not been examined by any appropriate taxing authority.
Big Seven has not executed or filed with the Internal Revenue Service or any
other taxing authority any agreement now in effect extending the period for
assessment or collection of any income or other Taxes. Big Seven is not a party
to any pending action or proceeding by any Governmental Authority for assessment
or collection of Taxes, and to the Best Knowledge of X. Xxxxx, no claim for
assessment or collection of Taxes has been asserted against Big Seven. Big Seven
has delivered or made available to BDE true and correct copies of all Tax
Returns with respect to all of the tax years filed by Big Seven since formation
and all communications relating to these Tax Returns. All Taxes which Big Seven
is required to withhold or collect, including without limitation, sales and use
taxes, have been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Authority.
10.16 INTELLECTUAL PROPERTY. Big Seven has no patents,
trademarks or copyrights other than those (a) gained by the use of the name "Big
Seven" and "Big Seven Entertainment" in commerce and in the course of its
business, and (b) licensed/owed via registration of the following domain names:
xxxxxxxxx.xxx, xxxxxxxxx.xxx, xxxxxxxxx.xxx, xxxxxxxxx.xx, and xxxxxxxxxx.xxx.
Big Seven has not received any written notice of infringement or other written
complaint to the effect that Big Seven or any of its Affiliates has violated or
infringed the IP or any other proprietary rights of others. To the Best
Knowledge of X. Xxxxx, neither Big Seven nor any of its Affiliates has
wrongfully Exploited any IP owned or licensed by any Person for which Big Seven
could suffer any Damages, and neither Big Seven nor any Person employed by or
affiliated with Big Seven has violated any confidential relationship which such
Person may have had with any third party for which Big Seven could suffer any
Damages. Except as set forth in the Contracts, no royalties, honoraria, damages
or fees are payable by Big Seven to other Persons by reason of the ownership or
use by Big Seven of any IP. No Affiliate of Big Seven owns or holds, directly or
indirectly, any interests in any Big Seven IP. To X. Xxxxx'x Best Knowledge, no
Person has interfered with, infringed upon, misappropriated, or otherwise
violated any IP right of Big Seven. Big Seven has not Transferred to any Person
any right to Exploit any Big Seven IP.
10.17 PERMITS. To the Best Knowledge of X. Xxxxx, Big Seven
has all Permits that are material to the conduct of Big Seven's business
including, without limitation, all Permits relating to compliance with
Environmental and Safety Laws. Big Seven has not received any notice from any
source to the effect that there is lacking any material Permit required in
connection with the current use or operation of the assets, properties or
business of Big Seven.
10.18 ENVIRONMENTAL COMPLIANCE MATTERS. To the Best
Knowledge of X. Xxxxx, Big Seven has complied in all material respects and is in
compliance in all material
14
respects with all Environmental and Safety Laws, and to X. Xxxxx'x Best
Knowledge, no facts, events or conditions relating to the past or present
facilities, properties or operations of Big Seven will give rise to any
liabilities pursuant to Environmental and Safety Laws, including, without
limitation, any relating to onsite or offsite releases or threatened releases of
Hazardous Substances, personal injury, property damage or natural resources
damage.
10.19 EMPLOYEE BENEFITS. Big Seven has no plans or other
arrangements involving direct or indirect compensation or benefits to directors,
officers or consultants or providing employee benefits to employees of Big
Seven, including, without limitation, all "employee benefit plans" as defined in
Section 3(3) of ERISA, or all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, or employment or executive compensation
agreements (collectively, the "BIG SEVEN PLANS").
10.20 EMPLOYEE RELATIONS. Big Seven never has employed any
person.
10.21 NO CONSENTS REQUIRED. There are no approvals,
authorizations, consents, orders or other actions of, or filings with, any
Person that are required to be obtained or made by Big Seven in connection with
the execution of, and the consummation of the transactions contemplated under,
this Agreement or to permit the continuation of the Contracts, upon the same
terms and conditions as are contained in such Contracts, following consummation
of the transactions contemplated by this Agreement.
10.22 BROKERS. Big Seven has not retained or otherwise
engaged or employed any broker, finder or any other person, or paid or agreed to
pay any fee or commission to any agent, broker, finder or other person, for or
on account of acting as a finder or broker in connection with this Agreement or
the transactions contemplated hereby.
11. REPRESENTATIONS AND WARRANTIES OF BDE.
BDE represents and warrants to X. Xxxxx as follows:
11.1 ORGANIZATION, STANDING AND CORPORATE POWER. BDE is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and corporate
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted.
11.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
11.2.1 BDE has full corporate power and corporate
authority to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized by all necessary
corporate action of BDE. This Agreement has been duly executed and delivered by
BDE and constitutes a valid and legally binding obligation of BDE and is
enforceable against BDE in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws relating to or affecting creditors' rights generally, or the
availability of equitable remedies.
15
11.2.2 The execution and delivery by BDE of this
Agreement do not, and compliance by BDE with the provisions hereof will not, (A)
conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Contract to which BDE or any of its Affiliates
is a party or otherwise bound, or to which any asset or property of BDE or any
of its Affiliates is subject; or (B) violate any Law applicable to BDE or any of
its Affiliates; or (C) result in the creation or imposition of any Lien on any
asset of BDE or any of its Affiliates.
11.3 BROKERS. BDE has not retained or otherwise engaged or
employed any broker, finder or any other person, or paid or agreed to pay any
fee or commission to any agent, broker, finder or other person, for or on
account of acting as a finder or broker in connection with this Agreement or the
transactions contemplated hereby.
11.4 NO CONSENTS REQUIRED. There are no approvals,
authorizations, consents, orders or other actions of, or filings with, any
Person that are required to be obtained or made by BDE in connection with the
execution of, and the consummation of the transactions contemplated under, this
Agreement, including, without limitation, the effective payment to X. Xxxxx of
the Purchase Price for the Membership Interests.
11.5 SECURITIES REPORTS. All Securities Reports filed or
required to be filed by BDE from and after January 1, 2003 have been filed
timely and none of such reports contain any untrue statement of a material fact
or omit to state a fact necessary to make any of the statements made therein be
not misleading. All such reports comply in all material respects with the
requirements of applicable federal and state securities laws.
12. REPRESENTATIONS AND WARRANTIES OF ALTNET.
Altnet represents and warrants to X. Xxxxx as follows:
12.1 ORGANIZATION, STANDING AND CORPORATE POWER. Altnet is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
corporate authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted.
12.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
12.2.1 Altnet has full corporate power and
corporate authority to enter into, execute and deliver this Agreement and
perform its obligations hereunder. This Agreement has been duly authorized by
all necessary corporate action of Altnet. This Agreement has been duly executed
and delivered by Altnet and constitutes a valid and legally binding obligation
of Altnet and is enforceable against Altnet in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally, or the availability of equitable remedies.
12.2.2 The execution and delivery by Altnet of this
Agreement do not, and compliance by Altnet with the provisions hereof will not,
(A) conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Contract to which Altnet is a party or otherwise
bound, or to which any asset or property of Altnet is subject; or
16
(B) violate any Law applicable to Altnet; or (C) result in the creation or
imposition of any Lien on any asset of Altnet.
12.3 BROKERS. Altnet has not retained or otherwise engaged
or employed any broker, finder or any other person, or paid or agreed to pay any
fee or commission to any agent, broker, finder or other person, for or on
account of acting as a finder or broker in connection with this Agreement or the
transactions contemplated hereby.
12.4 NO CONSENTS REQUIRED. There are no approvals,
authorizations, consents, orders or other actions of, or filings with, any
Person that are required to be obtained or made by Altnet in connection with the
execution of, and the consummation of the transactions contemplated under, this
Agreement.
13. REPRESENTATIONS AND WARRANTIES OF DETERSHAN.
Detershan represents and warrants to X. Xxxxx as follows:
13.1 ORGANIZATION, STANDING AND CORPORATE POWER. Detershan
is a corporation duly organized, validly existing and in good standing under the
laws of Australia and the State of California and has all requisite corporate
power and corporate authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted.
13.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
13.2.1 Detershan has full corporate power and
corporate authority to enter into, execute and deliver this Agreement and
perform its obligations hereunder. This Agreement has been duly authorized by
all necessary corporate action of Detershan. This Agreement has been duly
executed and delivered by Detershan and constitutes a valid and legally binding
obligation of Detershan and is enforceable against Detershan in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally, or the availability of equitable
remedies.
13.2.2 The execution and delivery by Detershan of
this Agreement do not, and compliance by Detershan with the provisions hereof
will not, (A) conflict with or result in a breach or default under any of the
terms, conditions or provisions of any Contract to which Detershan is a party or
otherwise bound, or to which any asset or property of Detershan is subject; or
(B) violate any Law applicable to Detershan; or (C) result in the creation or
imposition of any Lien on any asset of Detershan.
13.3 BROKERS. Detershan has not retained or otherwise
engaged or employed any broker, finder or any other person, or paid or agreed to
pay any fee or commission to any agent, broker, finder or other person, for or
on account of acting as a finder or broker in connection with this Agreement or
the transactions contemplated hereby.
13.4 NO CONSENTS REQUIRED. There are no approvals,
authorizations, consents, orders or other actions of, or filings with, any
Person that are required to be obtained or made by
17
Detershan in connection with the execution of, and the consummation of the
transactions contemplated under, this Agreement.
14. CONDUCT AND TRANSACTIONS DURING THE ESCROW PERIOD.
14.1 CONDUCT OF BUSINESS. During the period commencing on
the date of execution of this Agreement and ending on the earlier of (i) one
year from the date of this Agreement, (ii) the termination of this Agreement
pursuant to its terms, or (iii) the termination of the Escrow Agreement, BDE
shall:
14.1.1 not Transfer or agree to cause the Transfer
of the Membership Interests (other than as contemplated by this Agreement);
14.1.2 not cause or permit Big Seven to, or to
propose to, (a) amend Big Seven's Organizational Documents, (b) split, combine
or reclassify Big Seven's Equity Interests or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, the Equity Interests, or declare, set aside or make any dividend or other
distribution payable in cash, stock or property, or (c) directly or indirectly
redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise
acquire any of Big Seven's Equity Interests;
14.1.3 not cause or permit Big Seven to issue,
deliver or sell any Equity Interests of Big Seven (other than as contemplated by
this Agreement);
14.1.4 not cause or permit Big Seven to (A) adopt
any employee benefit plan, (B) amend any employee benefit plan in a manner that
increases the benefits thereunder or (C) make any loans to any Person in a
manner which would expose X. Xxxxx to any potential liability or damages
whatsoever;
14.1.5 not cause or permit Big Seven to incur or
assume any liabilities, obligations or indebtedness for borrowed money or
guarantee any such liabilities, obligations or indebtedness in a manner which
would expose X. Xxxxx to any potential liability or damages whatsoever;
14.1.6 not cause or permit Big Seven to sell, lease
or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of
its assets, other than as contemplated by this Agreement or which would be
undertaken in a manner which would expose X. Xxxxx to any potential liability or
damages whatsoever;
14.1.7 not cause or permit Big Seven to permit,
allow or suffer any of its assets to be subject to any Liens;
14.1.8 not cause or permit Big Seven to make or
agree to make any capital expenditures in a manner which would expose X. Xxxxx
to any potential liability or damages whatsoever;
14.1.9 not cause or permit Big Seven to incur any
fixed or contingent obligation or enter into any agreement, commitment or other
transaction or arrangement (other
18
than this Agreement and the documents and arrangements contemplated hereby) in a
manner which would expose X. Xxxxx to any potential liability or damages
whatsoever;
14.1.10 not cause or permit Big Seven to enter into
any agreement, arrangement or undertaking with respect to any employee relating
to the payment of any bonus, profit-sharing or special compensation or any
increase in the compensation payable to an employee (other than as required by
law or contract) in a manner which would expose X. Xxxxx to any potential
liability or damages whatsoever;
14.1.11 not cause or permit Big Seven to sell,
assign, license or transfer or agree to sell, assign, license or transfer (with
or without consideration) any of Big Seven IP or any interest therein in a
manner which would expose X. Xxxxx to any potential liability or damages
whatsoever;
14.1.12 not cause or permit Big Seven to enter into
any agreement, arrangement or undertaking with X. Xxxxx or any of their
respective Affiliates in a manner which would expose X. Xxxxx to any potential
liability or damages whatsoever;
14.1.13 not cause or permit Big Seven to maintain
its respective books, records and accounts in the usual, regular and ordinary
manner.
14.1.14 not cause or permit Big Seven to breach, in
any material respect, any of the Contracts.
14.2 INSPECTION OF RECORDS. During the Escrow Period, X.
Xxxxx shall cause Big Seven to allow the duly authorized officers, attorneys,
accountants and other representatives of BDE access at all reasonable times to
the records and files, correspondence, audits and properties, as well as to all
information in each case relating the business and affairs of Big Seven.
14.3 RESIGNATION. X. Xxxxx agrees to resign from all
manager, officer and other positions X. Xxxxx has with Big Seven, which
resignations shall take effective concurrently with the execution and delivery
of this Agreement.
14.4 RELEASE. Concurrent with the execution and delivery
of this Agreement, each of X. Xxxxx, Big Seven, BDE, Altnet and Detershan shall
deliver an executed copy of the Mutual General Release attached hereto as
EXHIBIT C (the "GENERAL RELEASE") whereby: (a) X. Xxxxx irrevocably and
unconditionally releases BDE, Altnet, Detershan and Big Seven and each of their
respective officers, directors, employees, agents and representatives from any
and all causes of action, Claims, actions or other Liabilities, known or unknown
(other than those arising under this Agreement or the agreements which are
exhibits hereto), that X. Xxxxx may have against such parties, (b) BDE, Altnet,
Big Seven and Detershan irrevocably and unconditionally release X. Xxxxx from
any and all causes of action, Claims, actions or other Liabilities, known or
unknown (other than those arising under this Agreement or the agreements which
are exhibits hereto) that BDE, Altnet, or Detershan may have against X. Xxxxx,
and (c) X. Xxxxx, Big Seven, BDE, Altnet and Detershan irrevocably and
unconditionally release Xxxxxx Xxxxx from any and all causes of action, Claims,
actions or other Liabilities, known or unknown (other than those arising under
this Agreement or the agreements which are exhibits
19
hereto) that X. Xxxxx, Big Seven, BDE, Altnet or Detershan may have against
Xxxxxx Xxxxx solely to the extent related, directly or indirectly, to Big Seven.
14.5 NON-COMPETITION AGREEMENT. Concurrent with the
execution and delivery of this Agreement, X. Xxxxx shall deliver to BDE an
executed copy of the Non-Competition Agreement.
X. Xxxxx shall not cause or permit any Lien to be unpaid on
the Membership Interests during the Escrow Period.
15. FURTHER AGREEMENTS OF THE PARTIES.
15.1 CONFIDENTIALITY.
15.1.1 The parties hereto hereby acknowledge to and
agree with the other that any and all information which has been disclosed by
one to the other, its directors, employees, consultants, agents and, if
applicable, equity holders during the discussions and negotiations leading to
the execution of this Agreement, and all information to be disclosed by one to
the other, its directors, employees, consultants and agents and, if applicable,
equity holders, during the period commencing on the date of execution of this
Agreement through the earlier of the Escrow Period or termination of this
Agreement, shall constitute confidential information and trade secrets of the
disclosing party, and as such are secret, confidential and unique and constitute
the exclusive trade secrets and property of such party. Such information has
been made known and available to the other party and its respective employees,
consultants and agents strictly in connection with the negotiation and execution
of this Agreement and the consummation of the transactions provided for herein.
Each party hereby acknowledges and agrees that any use or disclosure of any such
confidential information or trade secrets, other than pursuant to this
Agreement, would be wrongful and would cause irreparable injury to the other.
Accordingly, each party hereby expressly agrees, for itself and on behalf of its
shareholders and directors, if any, and its principal officers, managers,
employees, agents, consultants and representatives, that it and they will not at
any time prior to the date of this Agreement or at any time thereafter, use or
disclose, other than in accordance with the terms and provisions of this
Agreement, any of such confidential information or trade secrets. In addition,
X. Xxxxx agrees, for himself and for his Affiliates, officers, managers,
employees, agents, consultants and representatives, that such persons will not
at any time from and after the date of this Agreement use or disclose, other
than in accordance with this Agreement, any such confidential information which
either (i) concerns BDE or its respective business or operations or (ii) relates
to Big Seven or its business.
15.1.2 Notwithstanding anything contained in this
SECTION 15.1 to the contrary, any of the parties hereto may use or disclose such
confidential information or secrets of the other without restriction if such
information or secrets (i) were or are available to such party on a
non-confidential basis from a source other than the other party, or (ii) were or
become generally available to the public (other than as a result of an
impermissible disclosure by such party or its Affiliates); PROVIDED, that if
either party is requested or required (by oral question, interrogatories,
requests for information or documents, subpoena or similar process) to disclose
any of such information or secrets of the other, such disclosure be made without
liability
20
hereunder (although notice of such request or requirement shall be given to the
other party so that, if practicable, the other party may seek a protective order
against such disclosure).
15.1.3 Each party acknowledges that, in the event
of a violation by the other of the terms and provisions of this SECTION 15.1,
the remedies at law would not be adequate; and accordingly, in such event such
party may proceed to protect and enforce its rights under this SECTION 15.1 by a
suit in equity for specific performance and temporary, preliminary and permanent
injunctive relief from violation of any of the provisions of this SECTION 15.1
from any court of competent jurisdiction without the necessity of proving the
amount of any actual damages to the party resulting from the breach.
15.2 TAX RETURNS AND PAYMENTS. X. Xxxxx shall remain
liable for and shall pay to the applicable Governmental Authority all Taxes
relating Big Seven and its operations which have accrued but remain unpaid as of
the date of this Agreement, whether or not such Taxes are then due and payable,
and shall prepare all Tax Returns of Big Seven, if any, for all periods up to
the date of this Agreement. BDE shall be responsible for the preparation of all
Tax Returns of Big Seven and for the payment of any and all Taxes of Big Seven
from and after the date of this Agreement.
15.3 X. XXXXX ASSISTANCE. For a period of ninety (90) days
following the date of this Agreement, if and only to the extent reasonably
requested by BDE and BDE is not in default under this Agreement, X. Xxxxx shall
assist in the transition business operations of Big Seven to BDE and its
personnel in a timely and professional manner, including, but not limited to (i)
notifying clients, customers, business partners and employees of Big Seven of
BDE's acquisition of Big Seven; (ii) establishing business relationships between
BDE and parties to any Contracts of Big Seven, including making personal
introductions through in person meetings; and (iii) any other reasonable
requests of BDE to facilitate the transfer of Big Seven's business operations to
BDE.
15.4 EXPENSES. X. Xxxxx shall pay all of the costs and
expenses X. Xxxxx and Big Seven incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their counsel, accountants and other
professionals (including broker's fees). Notwithstanding the immediately
preceding sentence, on the date of this Agreement, BDE shall pay to X. Xxxxx the
amount of Fifty Thousand Dollars ($50,000), in immediately available funds, and
not later than June 30, 2004, BDE shall pay to X. Xxxxx an additional amount of
One Hundred Thousand Dollars ($100,000), in immediately available funds, which
may be utilized for payment of X. Xxxxx'x legal and other professional fees
incurred in connection with this Agreement and other agreements between BDE and
the Company. BDE shall pay all of its costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, the fees and expenses of its counsel,
accountants and other professionals (including broker's fees).
15.5 REGISTRATION RIGHTS. All of the Common Stock issued
pursuant to the terms of this Agreement shall be "REGISTRABLE Securities" or
such other definition of securities entitled to registration rights pursuant to
EXHIBIT D to this Agreement. X. Xxxxx shall be entitled to the registration
rights set forth in EXHIBIT D with respect to such Common Stock.
21
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
16.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement or made in any document
delivered pursuant to this Agreement by or on behalf of any party shall survive
the execution and delivery of this Agreement, regardless of notice of or any
investigation or right of investigation made prior to or after the date of this
Agreement by or on behalf of any party, and shall terminate and expire two years
following the date of this Agreement, after which date they shall be of no
further force or effect.
16.2 INDEMNIFICATION BY X. XXXXX. X. Xxxxx shall
indemnify, save and hold harmless BDE, Detershan, their respective Affiliates
(including Big Seven following the termination of the Escrow Agreement and the
delivery by the Escrow Holder to X. Xxxxx of the Common Stock (or cash in lieu
thereof in accordance with the Escrow Agreement)) and each of their respective
officers, directors, employees, agents and representatives, and each of their
successors and assigns (individually, a "BDE INDEMNIFIED PARTY" and
collectively, the "BDE INDEMNIFIED PARTIES") from and against any and all costs,
losses, claims, liabilities, fines, penalties, consequential damages (other than
lost profits), and expenses (including interest which may be imposed in
connection therewith and court costs and reasonable fees and disbursements of
counsel) ("DAMAGES") incurred in connection with, arising out of, resulting from
or incident to:
16.2.1 any material breach of, or any material
inaccuracy in any of, the representations or warranties made by X. Xxxxx in this
Agreement, any exhibit or schedule to this Agreement or any certificate,
instrument or writing delivered in connection with this Agreement or in
connection with any exhibit or schedule to this Agreement;
16.2.2 any material default in any agreements made
by X. Xxxxx in this Agreement, any exhibit or schedule to this Agreement or any
certificate, instrument or writing delivered in connection with this Agreement
or in connection with any exhibit or schedule to this Agreement;
16.2.3 all liabilities of or claims against BDE
Indemnified Parties of any nature, whether accrued, absolute, contingent or
otherwise, relating to any employee, sales representative or independent
contractor of Big Seven whose relationship with Big Seven was terminated prior
to the date of this Agreement and which liabilities or claims are based on any
Contract, or alleged Contract between Big Seven and such employee, sales
representative or independent contractor, or any policy or alleged policy of Big
Seven relating to its employees (other than any such claims of the BDE
Indemnified Parties or their Affiliates);
16.2.4 any Action, compromise, settlement,
assessment or judgment arising out of or incidental to any of the matters
indemnified against in this SECTION 16.2; PROVIDED, HOWEVER, that X. Xxxxx shall
not be obligated to indemnify a BDE Indemnified Party and hold it or him
harmless under this SECTION 16.2 with respect to any settlement of a claim to
which X. Xxxxx has not consented, which consent shall not unreasonably be
withheld. If, by reason of the claim of any third Person relating to any of the
matters subject to indemnification under this SECTION 16.2, a Lien, attachment,
garnishment or execution is placed upon any of the
22
property or assets of any BDE Indemnified Party, X. Xxxxx also shall, promptly
upon demand, furnish an indemnity bond satisfactory to BDE Indemnified Party to
obtain the prompt release of such lien, attachment, garnishment or execution.
16.3 INDEMNIFICATION BY BDE. BDE, Altnet and Detershan
shall jointly and severally indemnify, save and hold harmless X. Xxxxx, and his
Affiliates (including, for these purposes, Xx. Xxxxxx Xxxxx) and each of their
respective officers, directors, employees, attorneys, accountants, agents and
representatives, and each of their successors and assigns (individually, a "X.
XXXXX INDEMNIFIED PARTY" and collectively, the "X. XXXXX INDEMNIFIED PARTIES")
from and against any and all Damages incurred in connection with, arising out
of, resulting from or incident to:
16.3.1 any material breach of, or any material
inaccuracy in any of, the representations or warranties made by BDE, Altnet or
Detershan in this Agreement, any exhibit or schedule to this Agreement or any
certificate, instrument or writing delivered in connection with this Agreement
or in connection with any exhibit or schedule to this Agreement;
16.3.2 any material default in any agreements made
by BDE, Altnet or Detershan in this Agreement, any exhibit or schedule to this
Agreement or any certificate, instrument or writing delivered in connection with
this Agreement or in connection with any exhibit or schedule to this Agreement;
16.3.3 except to the extent attributable to a X.
Xxxxx Indemnified Party, any acts, omissions or events relating to the operation
of the business of Big Seven after the date of this Agreement; or
16.3.4 any Action, compromise, settlement,
assessment or judgment arising out of or incidental to any of the matters
indemnified against in this SECTION 16.3; PROVIDED, HOWEVER, that none of BDE,
Altnet or Detershan shall be obligated to indemnify a X. Xxxxx Indemnified Party
and hold it or him harmless under this SECTION 16.3 with respect to any
settlement of a claim to which BDE has not consented, which consent shall not
unreasonably be withheld. If, by reason of the claim of any third Person
relating to any of the matters subject to indemnification under this SECTION
16.3, a Lien, attachment, garnishment or execution is placed upon any of the
property or assets of any X. Xxxxx Indemnified Party, any or all of BDE, Altnet
or Detershan, as required, shall also, promptly upon demand, furnish an
indemnity bond satisfactory to such X. Xxxxx Indemnified Party to obtain the
prompt release of such lien, attachment, garnishment or execution.
16.4 LIMITATION ON INDEMNIFICATION. Neither BDE
Indemnified Parties nor X. Xxxxx Indemnified Parties shall be entitled to
recover under SECTIONS 16.2 or 16.3 unless a Claim for Damages has been
delivered to the Indemnifying Party on or prior to the second anniversary of the
date of this Agreement.
23
16.5 NOTICE OF CLAIM. If a claim for Damages (a "CLAIM")
is to be made by a party entitled to indemnification hereunder (an "INDEMNIFIED
PARTY") against the indemnifying party (the "INDEMNIFYING PARTY"), the
Indemnified Party shall give written notice (a "CLAIM NOTICE") to the
Indemnifying Party, which notice shall specify whether the Claim arises as a
result of a claim by a person against the Indemnified Party (a "THIRD PARTY
CLAIM") or whether the Claim does not so arise (a "DIRECT CLAIM"), and shall
also specify (to the extent that the information is available) the factual basis
for the Claim and the amount of the Damages, if known. If the Claim is a Third
Party Claim, the Indemnified Party shall provide the Claim Notice as soon as
practicable after such party becomes aware of any fact, condition or event which
such party has reason to believe will give rise to Damages for which
indemnification may be sought under SECTIONS 16.2 or 16.3. If any Action is
filed against any Indemnified Party, written notice thereof shall be given to
the Indemnifying Party as promptly as practicable (and in any event within 15
calendar days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnifying Party has
been damaged by such failure.
16.6 DIRECT CLAIMS. With respect to any Direct Claim,
following receipt of the Claim Notice from the Indemnified Party, the
Indemnifying Party shall have 30 days to make such investigation of the Claim as
is considered necessary or desirable. For the purpose of such investigation, the
Indemnified Party shall make available to the Indemnifying Party sufficient
information to substantiate the Claim, together with all such other
non-privileged information as the Indemnifying Party may reasonably request. If
both parties agree at or prior to the expiration of such 30-day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim. If the parties have not so agreed to the
validity and/or amount of the Claim, then the Indemnifying Party may pursue such
Claim in any court located in Los Angeles, California.
16.7 THIRD PARTY CLAIMS. With respect to a Third Party
Claim, if after receipt of the Claim Notice the Indemnifying Party acknowledges
in writing to the Indemnified Party that the Indemnifying Party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, the Indemnifying Party shall be entitled, if it so elects at
its own cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice, but, in any event, reasonably acceptable to the Indemnified
Party, to handle and defend the same unless the named parties to such action or
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and the Indemnified Party has been advised in writing
by counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, in which event the Indemnified Party shall be entitled,
at the Indemnifying Party's cost, risk and expense, to separate counsel of its
own choosing, and (iii) to compromise or settle such lawsuit or action, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld.
If the Indemnifying Party fails to assume the defense of such Claim
within 30 calendar days after receipt of the Claim Notice, the indemnified party
against which such Claim has been asserted will (upon delivering notice to such
effect to the Indemnifying Party)
24
have the right to undertake, at the Indemnifying Party's cost and expense, the
defense, compromise or settlement of such Claim on behalf of and for the account
and risk of the Indemnifying Party. If the Indemnified Party assumes the defense
of the Claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement. The
Indemnifying Party shall be liable for any settlement of any action effected
pursuant to and in accordance with this SECTION 16.7 and for any final judgment
(subject to any right of appeal) and the Indemnifying Party agrees to indemnify
and hold harmless an Indemnified Party from and against any Damages by reason of
such settlement or judgment. If there is a dispute as to the indemnification
obligations of any party under this SECTION 16.7, then the Indemnified Party may
bring an action against the Indemnifying Party in any court located in Los
Angeles, California.
17. MISCELLANEOUS.
17.1 NOTICES. All notices, requests, demands and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, facsimile
transmission (which must be confirmed) or by United States first class,
registered or certified mail, postage prepaid, to the following addresses:
(i) if to BDE or Altnet, to:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attn: Chief Executive Officer
(ii) if to Detershan, to:
Detershan Pty. Ltd.
X.X. Xxx 000
Xxxxxxxx XXX 0000
Xxxxxxxxx
Facsimile No. 011 612 9337 1406
Attn: Xxxx Xxxxxx
(iii) if to X. Xxxxx, to:
Xxxxxxx Xxxxx
0000 0xx Xxxxxx, #000
Xxxxx Xxxxxx, XX 00000
Facsimile No. (000) 000-0000
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United
25
States mails. Any party may from time to time change its address for further
Notices hereunder by giving notice to the other parties in the manner prescribed
in this Section.
17.2 ENTIRE AGREEMENT. This Agreement contains the sole
and entire agreement and understanding of the parties with respect to the entire
subject matter of this Agreement, and any and all prior discussions,
negotiations, commitments and understandings, whether oral or otherwise, related
to the subject matter of this Agreement are hereby merged herein.
17.3 PUBLICITY. X. Xxxxx agrees that it shall not make any
press release or other announcements with respect to the transactions
contemplated hereby without the express written consent of BDE. BDE shall be
entitled to make any press release or other announcements with respect to the
transactions contemplated hereby in its discretion without the consent or
approval of X. Xxxxx; provided that BDE will consult with X. Xxxxx with respect
to, and will provide X. Xxxxx with a copy of, the specific terms of any such
proposed press release or announcement by BDE or any of its Affiliates no fewer
than two (2) business days in advance of any such release or announcement.
17.4 ASSIGNMENT. No party may assign this Agreement, and
any attempted or purported assignment or any delegation of any party's duties or
obligations arising under this Agreement to any third party or entity shall be
deemed to be null and void, and shall constitute a material breach by such party
of its duties and obligations under this Agreement.
17.5 WAIVER AND AMENDMENT. No provision of this Agreement
may be waived unless in writing signed by all the parties to this Agreement, and
waiver of any one provision of this Agreement shall not be deemed to be a waiver
of any other provision. This Agreement may be amended only by a written
agreement executed by all of the parties to this Agreement.
17.6 GOVERNING LAW. This Agreement has been made and
entered into in the State of California and shall be construed in accordance
with the laws of the State of California without giving effect to the principles
of conflicts of law thereof.
17.7 SEVERABILITY. Whenever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
17.8 CAPTIONS. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
17.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
26
17.10 COSTS AND ATTORNEYS' FEES. If any action, suit,
arbitration or other proceeding is instituted to remedy, prevent or obtain
relief from a default in the performance by any party to this Agreement of its
obligations under this Agreement, the prevailing party shall recover all of such
party's attorneys' fees incurred in each and every such action, suit,
arbitration or other proceeding, including any and all appeals or petitions
therefrom. As used in this Section, attorneys' fees shall be deemed to mean the
full and actual costs of any legal services actually performed in connection
with the matters involved calculated on the basis of the usual fee charged by
the attorney performing such services and shall not be limited to "reasonable
attorneys' fees" as defined in any statute or rule of court.
17.11 RIGHTS CUMULATIVE. No right granted to the parties
under this Agreement on default or breach is intended to be in full or complete
satisfaction of any damages arising out of such default or breach, and each and
every right under this Agreement, or under any other document or instrument
delivered hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time.
17.12 JUDICIAL INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any Person by reason of the rule
of construction that a document is to be construed more strictly against the
Person who itself or through its agent prepared the same, it being agreed that
all parties have participated in the preparation of this Agreement.
18. EVENTS OF DEFAULT AND REMEDIES.
18.1 EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an Event of Default under this Agreement:
18.1.1 any material breach of, or any material
inaccuracy in any of, the representations or warranties made by BDE, Altnet or
Detershan in this Agreement, any exhibit or schedule to this Agreement or any
certificate, instrument or writing delivered in connection with this Agreement
or in connection with any exhibit or schedule to this Agreement;
18.1.2 any material default in any agreements made
by BDE, Altnet or Detershan in this Agreement, any exhibit or schedule to this
Agreement or any certificate, instrument or writing delivered in connection with
this Agreement or in connection with any exhibit or schedule to this Agreement;
18.1.3 any material breach of, or any material
inaccuracy in any of the representations or warranties made by Big Seven or X.
Xxxxx in this Agreement, any exhibit or schedule to this Agreement or any
certificate, instrument, or writing delivered by either of them in connection
with this Agreement or in connection with any exhibit or schedule to this
Agreement (in the case of Big Seven, through the date of this Agreement); or
18.1.4 any material default in any agreements made
by Big Seven or X. Xxxxx in this Agreement, any exhibit or schedule to this
Agreement or any certificate, instrument or writing delivered by either of them
in connection with this Agreement or in
27
connection with any exhibit or schedule to this Agreement (in the case of Big
Seven, through the date of this Agreement).
18.2 REMEDIES. Upon the occurrence of any Event of
Default:
18.2.1 described in SECTION 18.1.1 or 18.1.2 above,
then M Toibb and Big Seven shall have all of the rights and remedies afforded
them under this Agreement or any, exhibit or schedule to this Agreement or any
certificate, instrument or writing delivered in connection with this Agreement
or in connection with any exhibit or schedule to this Agreement;
18.2.2 described in SECTION 18.1.1 or 18.1.2 above,
then Big Seven and X. Xxxxx also shall have any and all other rights and
remedies that such person may now or hereinafter possess at law, in equity or by
statute; PROVIDED, HOWEVER, that neither X. Xxxxx nor Big Seven shall have any
right to rescind, unwind, void or otherwise terminate or cause to be
ineffective, any of the provisions relating to the settlement of claims,
including but not limited to, the covenant not to xxx, set forth in this
Agreement and/or any of the provisions of the Mutual General Release;
18.2.3 described in SECTION 18.1.3 or 18.1.4 above,
then BDE, Altnet and Detershan shall have all of the rights and remedies
afforded them under this Agreement or any exhibit or schedule to this Agreement
or any certificate, instrument or writing delivered in connection with this
Agreement or in connection with any exhibit or schedule to this Agreement;
18.2.4 described in SECTION 18.1.3 or 18.1.4 above,
then BDE, Altnet and Detershan also shall have any and all other rights and
remedies that such persons now or hereinafter possess at law, in equity or by
statute; PROVIDED, HOWEVER, that none of such persons shall have the right to
rescind, void, unwind, or otherwise terminate or cause to be ineffective, any of
the provisions relating to the settlement of claims, including but not limited
to the covenant not to xxx, set forth in this Agreement and/or any of the
provisions of the Mutual General Release.
[Signatures On Following Page]
28
IN WITNESS WHEREOF, this Agreement has been made and entered into as of
the date and year first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a California corporation
By: /S/ XXXXX XXXXXXXXXX
--------------------------------------
Xxxxx Xxxxxxxxxx
Its: President and Chief Executive Officer
ALTNET, INC.,
a Delaware corporation
By: /S/ XXXXX XXXXXXXXXX
--------------------------------------
Xxxxx Xxxxxxxxxx
Its: President and Chief Executive Officer
DETERSHAN PTY. LTD,
an Australian company
By: /S/ XXXX XXXXXX
--------------------------------------
Name: Xxxx Xxxxxx
Its: Director
BIG SEVEN ENTERTAINMENT, LLC,
a California limited liability company
By: /S/ XXXXXXX XXXXX
--------------------------------------
Xxxxxxx Xxxxx
Its: Manager
/S/ XXXXXXX XXXXX
-----------------------
XXXXXXX XXXXX
S-1
EXHIBIT A
TO
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
Dated as of June 16, 2004
ESCROW AGREEMENT
THIS AGREEMENT ("Escrow Agreement") is made and entered into as of the
16th day of June, 2004, by and among Xxxxxxx Xxxxx ("X. Xxxxx"), Big Seven
Entertainment LLC ("Big Seven") (collectively and together with X. Xxxxx,
"Seller"), and Brilliant Digital Entertainment Inc. ("BDE" or "Buyer") with
reference to that certain Settlement Agreement and mutual Release dated as of
June 16, 2004 by and among BDE, Altnet, Inc., Detershan Pty. Ltd., Big Seven and
X. Xxxxx (the "Settlement Agreement"), and Xxxxxx Xxxxxx & Associates, a
California limited liability company ("Escrow Holder")." Capitalized terms which
are used herein and not defined herein shall have the meaning associated to such
terms as in the Settlement Agreement.
WHEREAS, Buyer and Seller have entered into the Settlement Agreement
dated as of June 16, 2004;
WHEREAS, the Settlement Agreement provides for a deposit by X. Xxxxx of
all the Membership Interests of Big Seven (the "X. Xxxxx Deposit") to be made
into an escrow account with Escrow Holder subject to transfer over to Buyer or
return to X. Xxxxx in accordance with the terms of this Escrow Agreement and the
Settlement Agreement; and
WHEREAS, the Settlement Agreement provides for a deposit by BDE of
6,666,667 shares of BDE Common Stock to be made into an escrow account with
Escrow Holder subject to transfer over to X. Xxxxx or return to BDE in
accordance with the terms of this Escrow Agreement and the Settlement Agreement
in exchange for one million dollars ($1,000,000) in cash at the election of BDE
(the "BDE Deposit") to be transferred over to X. Xxxxx.
WHEREAS, the parties have asked the Escrow Holder to take custody and
control of the X. Xxxxx Deposit and the BDE Deposit as an independent third
party such that Seller shall acquire no property rights with respect to the BDE
Deposit and Buyer shall acquire no property rights with respect to the X. Xxxxx
Deposit thereto, except in accordance with the terms of the Settlement
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable considerations, the receipt of which are hereby
acknowledged, the Parties hereto agree as follows:
1. ESCROW ESTABLISHED
Exhibit A-1
a. Buyer shall deposit with Escrow Holder Six Million
Six Hundred Sixty Six Thousand Six Hundred Sixty Seven (6,666,667) Shares of
Common Stock concurrent with the execution of delivery of the Settlement
Agreement, which Common Stock shall be held by the Escrow holder subject to the
terms of this Escrow Agreement and the Settlement Agreement. Such shares of BDE
Common Stock so deposited with Escrow Holder, are hereinafter referred to as the
"BDE Escrow Amount."
b. Seller shall deposit with Escrow Holder all of the
outstanding Membership Interests in Big Seven concurrent with the execution and
delivery of the Settlement Agreement, which Membership Interests shall be held
subject to the terms of this Escrow Agreement and the Settlement Agreement. Such
Membership Interests so deposited with the Escrow Holder are hereinafter
referred to as the "X. Xxxxx Escrow Amount."
c. The Escrow Holder hereby acknowledges receipt of the
BDE Escrow Amount deposited by Buyer and the X. Xxxxx Escrow Amount deposited by
X. Xxxxx and agrees to hold and deliver the same subject to the terms and
conditions of this Escrow Agreement.
d. Seller and Buyer hereby irrevocably authorize the
Escrow Holder to hold, transfer, deliver and otherwise act with respect to the
Escrow Amount as provided in this Escrow Agreement.
2. ESCROW ACCOUNT
a. The Escrow Holder shall hold the BDE Escrow Amount
and the X. Xxxxx Escrow Account in a financial institution (acceptable to BDE
and X. Xxxxx) safety deposit box in the name of Escrow Holder for the account of
BDE and X. Xxxxx, respectively, subject to the terms of this Escrow Agreement.
3. ESCROW TERMINATION
a. Upon receipt by the Escrow Holder of written notice
from Buyer (countersigned by Seller) of (i) the consummation of the sale of all
or substantially all of the assets of Big Seven in accordance with the
Settlement Agreement; (ii) the consummation of a business combination of Big
Seven and another Person (irrespective of whether Big Seven is the surviving
entity) in accordance with the Settlement Agreement; or (iii) the dissolution,
liquidation, cessation of operations or abandonment of the assets of Big Seven
within one year of the date of the Settlement Agreement; (collectively, the
"Distribution Notice"), the Escrow Holder shall turn over the BDE Escrow Amount
to Seller and the X. Xxxxx Escrow Amount to Buyer and this Escrow Agreement
shall terminate.
Exhibit A-2
b. In the event that the Escrow Holder has not received
a Distribution Notice from Seller by the close of business in Los Angeles,
California on the date which is one year from the date of the Settlement
Agreement, the Escrow Holder, without the need for any further instruction by
the parties, and without fail (irrespective of any instructions to the contrary
by either of the parties(other than an instruction in accordance with
subparagraph c. below) shall turn over the BDE Escrow Amount to Seller and this
X. Xxxxx Escrow Amount to Buyer. After such distributions, this Escrow Agreement
shall terminate
c. This Escrow Agreement shall terminate upon the
receipt by the Escrow Holder of written instructions jointly executed by Buyer
and Seller, which directs termination of this Escrow Agreement, or directs the
disposition of the BDE Escrow Amount and the X. Xxxxx. After any such
distributions, this Escrow Agreement shall terminate.
4. SUBSTITUTION OF BDE ESCROW AMOUNT
At any time prior to distribution of the BDE Escrow Amount to X. Xxxxx
by the Escrow Holder, BDE may deposit with the Escrow Holder cash in the amount
of one million dollars ($1,000,000) in exchange for the BDE Common Stock in the
possession of Escrow Holder and Escrow Holder immediately shall return to BDE
the shares of BDE Common Stock theretofore held by Escrow Holder as the BDE
Escrow Amount and such cash shall become the BDE Escrow Amount.
5. ESCROW FEES
One half of the Escrow fees and estimated expenses to be incurred by
Escrow Holder in connection with its acting in such capacity hereunder, shall be
paid by each of Buyer and Seller upon execution and delivery of this Escrow
Agreement. The remainder of the fees and costs of Escrow Holder, if any, shall
be paid by Buyer and Seller prior to any distribution of Escrow Amounts. Buyer
and Seller shall be jointly and severally liable to Escrow Holder for the
payment of such fees and expenses. The Escrow fees shall be $5,000.00.
6. MISCELLANEOUS
a. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
registered mail, return receipt requested, or hand delivered against receipt
showing time of delivery, if to Buyer or Seller, to the addresses set forth in
the Settlement Agreement; and, if to the Escrow Holder, to: Xxxxxx Xxxxxx &
Associates, 00000 Xxxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000, telephone
(000-000-0000), fax: (000-000 0000), or such other address as the parties shall
have furnished in writing in accordance with the provisions of this Section. Any
notice or other communication mailed by registered mail shall be deemed given at
the time of registration thereof.
b. It is agreed that the duties of the Escrow Holder are
only such as are herein specifically provided, and that it shall incur no
liability whatever except for negligence, willful misconduct or failure to have
acted in good faith.
c. The Escrow Holder shall be under no responsibility in
respect of any of the Escrow Amount deposited with it other than faithfully to
follow the terms hereof. The Escrow Holder shall not be required to defend any
legal proceedings which may be instituted against it in respect of the subject
matter hereof unless required so to do by Buyer and Seller, and, except as to
proceedings instituted by Seller or by Buyer, the Escrow Holder shall be
indemnified to its satisfaction against the cost and expense of such defense.
The Escrow Holder shall not be required to institute legal proceedings of any
kind. It shall have no responsibility for the genuineness or validity of any
document or other item deposited with it, and it shall be fully protected in
acting in accordance with any written instructions given it hereunder and
believed by it to have been signed by the proper parties.
Exhibit A-3
d. No amendment or modification of this Escrow Agreement
or waiver of its terms shall affect the rights or duties of the Escrow Holder,
unless written notice thereof, executed by Buyer and Seller, shall have been
timely given to the Escrow Holder, and to the extent such amount modifies or
amends the compensation or standard of care of the Escrow Holder, the Escrow
Holder has consented to such modification or amendment. If the Escrow Holder
does not so consent, Buyer and Seller shall agree upon a Successor Escrow Holder
who shall have all the rights and obligations of the Escrow Holder hereunder.
e. The Escrow Holder shall have no responsibility except
as to the performance of its express duties as set forth hereunder, and no
additional duties shall be inferred or implied.
f. The Escrow Holder shall not be liable for any good
faith action or omission in reliance upon the advice of its counsel.
g. The Escrow Holder is not required to take notice of
any other agreements or documents, except with respect to modifications or
amendments under paragraph 6 hereof.
h. Buyer and Seller, jointly and severally shall
indemnify the Escrow Holder for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, willful misconduct or bad
faith on the part of the Escrow Holder, and arising out of or in connection with
the acceptance or administration of this Escrow Holder.
i. This Escrow Agreement is being delivered in the State
of California, and shall be governed by and construed in accordance with the
laws of the State of California, without giving effect to its conflict of laws
rules. It shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs, executors and legal
representatives.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed under seal and delivered as of the date first written above.
Brilliant Digital Entertainment, Inc.,
a Delaware corporation
By: /S/ XXXXX XXXXXXXXXX
--------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
Big Seven Entertainment, LLC,
a California limited liability corporation,
By: /S/ XXXXXXX XXXXX
--------------------------------------
Name: Xxxxxxx Xxxxx
Title: Manager
Exhibit A-4
Xxxxxxx Xxxxx
/S/ XXXXXXX XXXXX
--------------------------------------
ESCROW HOLDER
Xxxxxx X. Xxxxxx & Associates LLC
a California limited liability company
By: /S/ XXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Exhibit A-5
EXHIBIT B
TO
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
Dated as of June 16, 2004
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "AGREEMENT") is made as of June
16, 2004, by and between BRILLIANT DIGITAL ENTERTAINMENT, a Delaware corporation
("BDE"), and XXXXXXX XXXXX, an individual ("X. XXXXX").
RECITALS
A. M. Toibb is the sole member and manager of Big Seven Entertainment,
LLC, a California limited liability company ("BIG Seven"). BDE and X. Xxxxx are
parties to that certain Settlement Agreement and Mutual Release, dated June 16,
2004 (the "SAMR"), which SAMR provides for the settlement of all of the claims
of the parties thereto and the purchase by BDE of all of X. Xxxxx'x ownership
interest in Big Seven. All capitalized terms not herein defined have the meaning
set forth in the SAMR.
X. X. Xxxxx has, in consideration of BDE entering into the SAMR, which
would not have been entered into by BDE if X. Xxxxx was unwilling to execute
this Agreement, agreed to execute this Agreement and perform his obligations
hereunder.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and subject to the conditions set forth herein, the
parties agree as follows:
1. DEFINITIONS.
"ADULT CONTENT" means any films, videos, software,
photographs, images, sound recordings, audiovisual works, video games, websites,
or any other media now known or hereafter devised which contains scenes of a
graphic sexual nature typically rated as "NC-17," "unedited," "x," "xxx" or its
equivalent.
"ONLINE ADULT ENTERTAINMENT INDUSTRY" means the distribution,
advertising, promotion, transmittal, public display, marketing, sales or any
other means or method of Exploitation of Adult Content through electronic and
digitized delivery systems now known or hereafter devised, including but not
limited to cable, satellite, broadband, Internet, direct-order television
advertising, and wireless delivery systems.
"PERSON" shall mean an individual, corporation, trust, estate,
partnership, joint venture, association, limited liability company, governmental
bureau or other entity.
Exhibit B-1
"SUBSIDIARY" of any Person shall mean any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are owned directly or indirectly by such Person. For purposes of this Agreement,
Big Seven shall be a "Subsidiary" of BDE following the date of this Agreement.
2. NON-COMPETITION. During the term hereof, X. Xxxxx will not,
directly or indirectly, whether individually or as a member, officer, director,
investor, stockholder, employee or consultant of any Person, (i) engage,
anywhere in the United States of America, in the Online Adult Entertainment
Industry, or (ii) induce or attempt to induce (A) any employee of BDE or any of
its Subsidiaries, to leave the employ of BDE or any such Subsidiary to be
employed, directly or indirectly, by X. Xxxxx or any affiliate of X. Xxxxx or in
any way interfere adversely and unlawfully with the relationship between any
such employee and BDE or such Subsidiary, as the case may be, (B) any employee
of BDE or any of its Subsidiaries to work for, render services or provide advice
to or supply confidential business information or trade secrets of BDE or any
such Subsidiary to any third person, firm or corporation in which X. Xxxxx has a
direct or indirect ownership or contractual interest, or (C) any customer,
supplier, licensee, licensor or other business relation of BDE or any of its
Subsidiaries to cease doing business with BDE or any such Subsidiary or in any
way interfere unlawfully with the relationship between any such customer,
supplier, licensee, licensor or other business relation and BDE or any such
Subsidiary, as the case may be. The ownership by X. Xxxxx of four percent or
less of the outstanding capital stock of any corporation engaged in any business
which competes with BDE or any of its Subsidiaries in the Online Adult
Entertainment Industry, where the capital stock of the corporation is listed on
a national securities exchange or actively quoted on the Nasdaq National Market
or Nasdaq SmallCap Market, shall not be deemed a violation by X. Xxxxx of this
Agreement, PROVIDED that X. Xxxxx is not an officer, director or employee of, or
a consultant to, such corporation.
3. CONSIDERATION. As consideration for the covenants and
agreements of X. Xxxxx contained herein, BDE has agreed to execute the SAMR. X.
Xxxxx acknowledges that BDE has been materially induced to enter into the SAMR
in reliance on X. Xxxxx'x execution of this Agreement, such execution of this
Agreement being a condition precedent to BDE's obligation to consummate the
SAMR.
4. TERM AND TERMINATION. The term of this Agreement shall
commence on the date hereof and shall terminate on the second anniversary of
such date.
5. INJUNCTIVE RELIEF AND OTHER REMEDIES UPON BREACH BY X. XXXXX.
X. Xxxxx acknowledges and agrees that (i) the provisions of this Agreement are
reasonable and necessary to protect the legitimate interests of BDE, and (ii) in
the event of any breach by X. Xxxxx of any of X. Xxxxx'x covenants and
agreements contained herein, BDE would encounter extreme difficulty in
attempting to prove the actual amount of damages suffered by it as a result of
such breach, BDE would not have an adequate remedy at law in such event and,
therefore, in addition to any other remedy it may have at law or in equity in
the event of any such breach, BDE shall be entitled to seek and receive specific
performance and temporary, preliminary and permanent injunctive relief from
violation of any of the provisions of this Agreement from any court of
Exhibit B-2
competent jurisdiction without the necessity of proving the amount of any actual
damages to it resulting from such breach.
6. MISCELLANEOUS.
6.1 NOTICES. All notices, requests, demands and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, facsimile
transmission (which must be confirmed) or by United States first class,
registered or certified mail, postage prepaid, to the following addresses:
(i) if to BDE, to:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
(ii) if to X. Xxxxx, to:
Xxxxxxx Xxxxx
0000 0xx Xxxxxx, #000
Xxxxx Xxxxxx, XX 00000
Facsimile No. (000) 000-0000
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
6.2 ENTIRE AGREEMENT. This Agreement, the SAMR and the
exhibits and schedules thereto contain the sole and entire agreement and
understanding of the parties with respect to the entire subject matter of this
Agreement, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Agreement are hereby merged herein.
6.3 ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by X. Xxxxx.
6.4 WAIVER AND AMENDMENT. No provision of this Agreement
may be waived unless in writing signed by all the parties to this Agreement, and
waiver of any one provision of this Agreement shall not be deemed to be a waiver
of any other provision. This Agreement may be amended only by a written
agreement executed by all of the parties to this Agreement.
Exhibit B-3
6.5 GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of California without giving effect to the
principles of conflicts of law thereof.
6.6 SEVERABILITY. Whenever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
6.7 CAPTIONS. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
6.9 COSTS AND ATTORNEYS' FEES. If any Action is
instituted to remedy, prevent or obtain relief from a default in the performance
by any party to this Agreement of its obligations under this Agreement, the
prevailing party shall recover its reasonable attorneys' fees incurred in each
and every such Action, including, without limitation, any and all appeals or
petitions therefrom.
6.10 RIGHTS CUMULATIVE. No right granted to the parties
under this Agreement on default or breach is intended to be in full or complete
satisfaction of any damages arising out of such default or breach, and each and
every right under this Agreement, or under any other document or instrument
delivered hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time.
Exhibit B-4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a Delaware corporation
By: /S/ XXXXX XXXXXXXXXX
--------------------------------------
Xxxxx Xxxxxxxxxx
Its: President and Chief Executive Officer
/S/ XXXXXXX XXXXX
----------------------
Xxxxxxx Xxxxx
Exhibit B-5
EXHIBIT C
TO
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
Dated as of June 16, 2004
MUTUAL GENERAL RELEASE
This Mutual General Release (this "AGREEMENT") is made and entered into
as of June 16, 2004, by and among BRILLIANT DIGITAL ENTERTAINMENT, INC., a
Delaware corporation ("BDE"), ALTNET INC., a Delaware corporation and
majority-owned subsidiary of BDE ("Altnet"), DETERSHAN PTY. LTD., an Australian
company ("DETERSHAN"), BIG SEVEN ENTERTAINMENT, LLC, a California limited
liability company ("BIG SEVEN"), and XXXXXXX XXXXX, an individual ("X. XXXXX").
RECITALS
A. BDE, Altnet, Detershan, Big Seven and X. Xxxxx are parties to
that certain Settlement Agreement and Mutual Release, dated June 16, 2004 (the
"SAMR"), which SAMR provides for the settlement of claims by and among the
parties, through the execution and delivery of this Mutual General Release and
as part thereof of the purchase by BDE of all of X. Xxxxx'x ownership interest
in Big Seven. All capitalized terms not herein defined have the meaning set
forth in the SAMR.
B. The execution and delivery of this Agreement by the Parties is
an obligation of each of the parties under the SAMR.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and subject to the conditions set forth herein, the
parties agree as follows:
1. RELEASE BY BDE, ALTNET, DETERSHAN AND BIG SEVEN OF X. XXXXX.
1.1 BDE, Altnet, Detershan and Big Seven, for themselves
and for their respective subsidiaries, offices, directors, employees, legal
representatives, agents, successors-in-interest and assigns, irrevocably and
unconditionally releases and forever discharges X. Xxxxx and his legal
representatives, agents, successors-in-interest and assigns (none of which, for
the purpose of clarity, includes Mr. and Xxx. Xxxxxx Toibb) (each a "TOIBB
PARTY" and collectively, the "TOIBB PARTIES"), and each of them, from any and
all causes of action, claims, actions, rights, judgments, attorneys' fees,
obligations, damages, demands, accountings or liabilities of whatever kind and
character, whether now known or unknown, suspected or unsuspected, existing as
of the date hereof (collectively, "CLAIMS"), which any of BDE, Altnet, Detershan
or Big Seven have or may have against any of the Toibb Parties, and each of
them, other than Claims arising under or with respect to the SAMR or any other
agreement which is an exhibit to the SAMR.
Exhibit C-1
1.2 Each of BDE, Altnet, Detershan and Big Seven agrees
that each Toibb Party is a direct beneficiary with respect to each provision of
this Agreement applicable to such Toibb Party and may enforce each of these
provisions.
1.3 Each of BDE, Altnet, Detershan and Big Seven
represents and warrants to the Toibb Parties that it has not assigned nor
subrogated any of said rights, claims and causes of action referenced in this
Section 1, or authorized any other person or entity to assert any of these
claims on its behalf.
1.4 Each of BDE, Altnet, Detershan and Big Seven agrees
and covenants never to file a lawsuit, arbitration proceeding or any other
administrative proceeding against any Toibb Party for any causes of action,
claims, actions, rights, judgments, obligations, damages, demands, accountings
or liabilities of whatever kind and character released and discharged by such
party pursuant to this Agreement.
2. RELEASE BY X. XXXXX OF BDE, ALTNET, DETERSHAN AND BIG SEVEN.
2.1 X. Xxxxx, for himself and for his legal
representatives, agents, successors-in-interest and assigns, irrevocably and
unconditionally releases and forever discharges BDE, Altnet, Detershan and Big
Seven, and each of their respective subsidiaries, employees, directors,
officers, successors-in-interest and assigns (each a "BDE PARTY" and
collectively, the "BDE PARTIES"), and each of them, from any and all Claims
which X. Xxxxx has or may have against BDE Parties, and each of them, other than
(a) Claims arising under or with respect to the SAMR or any agreement which is
an exhibit to the SAMR, and (b) Claims arising from his ownership of equity
securities of BDE or him being a stockholder of BDE.
2.2 X. Xxxxx agrees that each BDE Party is a direct
beneficiary with respect to each provision of this Agreement applicable to such
BDE Party and may enforce each of these provisions.
2.3 X. Xxxxx represents and warrants to BDE Parties that
it has not assigned nor subrogated any of said rights, claims and causes of
action referenced in this Section 2, or authorized any other person or entity to
assert any of these claims on its behalf.
2.4 X. Xxxxx agrees and covenants never to file a
lawsuit, arbitration proceeding or any other administrative proceeding against
any BDE Party for any causes of action, claims, actions, rights, judgments,
obligations, damages, demands, accountings or liabilities of whatever kind and
character released and discharged by X. Xxxxx pursuant to this Agreement.
3. RELEASE OF X. XXXXX.
3.1 BDE, Altnet, Detershan, Big Seven and X. Xxxxx, for
themselves and for their respective subsidiaries, offices, directors, employees,
legal representatives, agents, successors-in-interest and assigns, irrevocably
and unconditionally releases and forever discharges Mr. and Xxx. Xxxxxx Toibb
and his legal representatives, agents, successors-in-interest and assigns (each
a "XXXXXX PARTY" and collectively, the "XXXXXX PARTIES"), and each of them, from
any and all Claims which any of BDE, Altnet, Detershan, Big Seven or X. Xxxxx
have or
Exhibit C-2
may have against any of the Xxxxxx Parties, and each of them, SOLELY to the
extent such Claims relate, directly or indirectly, to Big Seven's business or
operations or actions taken by any Xxxxxx Party in connection with the
negotiation and execution of the SAMR.
3.2 Each of BDE, Altnet, Detershan, Big Seven and X.
Xxxxx agrees that each Xxxxxx Party is a direct beneficiary with respect to each
provision of this Agreement applicable to such Xxxxxx Party and may enforce each
of these provisions.
3.3 Each of BDE, Altnet, Detershan, Big Seven and X.
Xxxxx represents and warrants to the Xxxxxx Parties that it has not assigned nor
subrogated any of said rights, claims and causes of action referenced in this
Section 3, or authorized any other person or entity to assert any of these
claims on its behalf.
3.4 Each of BDE, Altnet, Detershan, Big Seven and X.
Xxxxx agrees and covenants never to file a lawsuit, arbitration proceeding or
any other administrative proceeding against any Xxxxxx Party for any causes of
action, claims, actions, rights, judgments, obligations, damages, demands,
accountings or liabilities of whatever kind and character released and
discharged by such party pursuant to this Agreement.
4. MUTUAL RELEASE. It is the intention of each of the parties to
this Agreement that this Agreement shall be effective as a full and final accord
and satisfaction and release of all of the claims and judgments specifically
released pursuant to SECTIONS 1, 2 and 3 of this Agreement. Each of the parties
hereby acknowledges that it has read and is familiar with California Civil Code
Section 1542 which states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Each of the parties does hereby expressly waive and relinquish all
rights and benefits which it has or may have under California Civil Code Section
1542 (or any similar law of any other country, state, territory or jurisdiction)
to the fullest extent that it may lawfully waive such rights and benefits. In
connection with the waiver and relinquishment set forth in this SECTION 4, each
of the parties acknowledges that it is aware that it may hereafter discover
facts in addition to and/or different from those now known or believed to be
true with respect to the subject matter of this Agreement, but that
notwithstanding that fact, it is their respective intention hereby to fully,
finally, and forever release all of the claims released herein, known or
unknown, suspected or unsuspected, which now exist, may in the future exist or
heretofore have existed between each respective party, on the one hand, and
those parties, persons and entities granted releases by it, on the other hand,
and that in furtherance of such intention, the releases given herein shall be
and remain in effect as full and complete releases, notwithstanding the
discovery or existence of any such additional or different facts.
Exhibit C-3
5. MISCELLANEOUS.
5.1 NOTICES. All notices, requests, demands and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, facsimile
transmission (which must be confirmed) or by United States first class,
registered or certified mail, postage prepaid, to the following addresses:
(i) if to any BDE Party other than Detershan, to:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attn: Chief Executive Officer
(ii) if to Detershan, to:
Detershan Pty. Ltd.
X.X. Xxx 000
Xxxxxxxx XXX 0000
Xxxxxxxxx
Facsimile No. 011 612 9337 1406
Attn: Xxxx Xxxxxx
(iii) if to any Toibb Party, to:
Xxxxxxx Xxxxx
0000 0xx Xxxxxx, #000
Xxxxx Xxxxxx, XX 00000
Facsimile No. (000) 000-0000
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
5.2 ENTIRE AGREEMENT. This Agreement contains the sole
and entire agreement and understanding of the parties with respect to the entire
subject matter of this Agreement, and any and all prior discussions,
negotiations, commitments and understandings, whether oral or otherwise, related
to the subject matter of this Agreement are hereby merged herein.
5.3 ASSIGNMENT. No party may assign this Agreement, and
any attempted or purported assignment or any delegation of any party's duties or
obligations arising under this Agreement to any third party or entity shall be
deemed to be null and void, and shall constitute a material breach by such party
of its duties and obligations under this Agreement.
Exhibit C-4
5.4 WAIVER AND AMENDMENT. No provision of this Agreement
may be waived unless in writing signed by all the parties to this Agreement, and
waiver of any one provision of this Agreement shall not be deemed to be a waiver
of any other provision. This Agreement may be amended only by a written
agreement executed by all of the parties to this Agreement.
5.5 GOVERNING LAW; JURISDICTION. This Agreement has been
made and entered into in the State of California and shall be construed in
accordance with the laws of the State of California without giving effect to the
principles of conflicts of law thereof.
5.6 SEVERABILITY. Whenever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
5.7 CAPTIONS. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
5.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
5.9 COSTS AND ATTORNEYS' FEES. If any action, suit,
arbitration or other proceeding is instituted to remedy, prevent or obtain
relief from a default in the performance by any party to this Agreement of its
obligations under this Agreement, the prevailing party shall recover all of such
party's attorneys' fees incurred in each and every such action, suit,
arbitration or other proceeding, including any and all appeals or petitions
therefrom. As used in this Section, attorneys' fees shall be deemed to mean the
full and actual costs of any legal services actually performed in connection
with the matters involved calculated on the basis of the usual fee charged by
the attorney performing such services and shall not be limited to "reasonable
attorneys' fees" as defined in any statute or rule of court.
5.10 JUDICIAL INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any Person by reason of the rule
of construction that a document is to be construed more strictly against the
Person who itself or through its agent prepared the same, it being agreed that
all parties have participated in the preparation of this Agreement.
(Signatures On Following Page)
Exhibit C-5
IN WITNESS WHEREOF, this Agreement has been made and entered into as of
the date and year first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a Delaware corporation
By: /S/ XXXXX XXXXXXXXXX
-------------------------------------
Name: Xxxxx Xxxxxxxxxx
Its: President and Chief Executive Officer
ALTNET INC.,
a Delaware corporation
By: /S/ XXXXX XXXXXXXXXX
-------------------------------------
Name: Xxxxx Xxxxxxxxxx
Its: President and Chief Executive Officer
DETERSHAN PTY. LTD.,
an Australian company
By: /S/ XXXX XXXXXX
--------------------------------------
Name: Xxxx Xxxxxx
Its: Director
BIG SEVEN ENTERTAINMENT, LLC,
a California limited liability company
By: /S/ XXXXXXX XXXXX
--------------------------------------
Name: Xxxxxxx Xxxxx
Its: Manager
XXXXXXX XXXXX
/S/ XXXXXXX XXXXX
--------------------------------------
Xxxxxxx Xxxxx
Exhibit C-6
EXHIBIT D
TO
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
Dated as of June 16, 2004
REGISTRATION RIGHTS
1. DEFINITIONS. Undefined capitalized terms in this EXHIBIT C are
defined in the Settlement Agreement and Mutual Release. The following terms have
the indicated meanings:
"BOARD OF DIRECTORS" means the Board of Directors of BDE or any duly
constituted committee of that Board which has been delegated the authority to
take the specific action in question.
"ELIGIBLE OFFERING" means any public offering of Common Stock by BDE
other than: (i) any registration relating solely to the sale of securities to
participants in a Common Stock plan, (ii) any registration relating to corporate
reorganization or other transaction under Rule 145 of the Act, (iii) any
registration on any form (other than Form X-0, X-0 or S-3) which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities, and
(iv) any registration in which the only Common Stock being registered is Common
Stock issuable upon conversion of debt securities which are also being
registered.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC (or any other federal agency at the
time administering the Securities Exchange Act of 1934, as amended) promulgated
thereunder.
"BDE" means Brilliant Digital Entertainment, Inc., a Delaware
corporation.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or document by the SEC.
"REGISTRABLE SECURITIES" means (i) the Common Stock issued to X. Xxxxx
pursuant to the terms of the Agreement, (ii) any Common Stock issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above, and (iii)
any Common Stock issued by way of a stock split of the shares referenced in (i)
or (ii) above.
"SEC" means the Securities and Exchange Commission.
2. PIGGYBACK REGISTRATIONS. From and after the date of the
Agreement, BDE shall notify X. Xxxxx in writing at least twenty (20) days prior
to filing any registration statement under the Securities Act for purposes of
effecting an Eligible Offering, and will afford X. Xxxxx
Exhibit D-1
an opportunity to include in such registration statement all or any part of the
Registrable Securities then held by X. Xxxxx. If X. Xxxxx desires to include in
any such registration statement all or any part of the Registrable Securities he
holds, X. Xxxxx shall, within ten (10) days after receipt of the above-described
notice from BDE, so notify BDE in writing, and in such notice shall inform BDE
of the number of Registrable Securities X. Xxxxx wishes to include in such
registration statement. If X. Xxxxx decides not to include all of his
Registrable Securities in any registration statement thereafter filed by BDE, X.
Xxxxx shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statements
as may be filed by BDE with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
3. UNDERWRITING. If a registration statement under which BDE
gives notice under SECTION 2 of this EXHIBIT C is for an underwritten offering,
then BDE shall so advise X. Xxxxx. In such event, the right of X. Xxxxx'x
Registrable Securities to be included in a registration pursuant to SECTION 2 of
this EXHIBIT C shall be conditioned upon X. Xxxxx'x participation in such
underwriting and the inclusion of X. Xxxxx'x Registrable Securities in the
underwriting to the extent provided herein. If X. Xxxxx is proposing to
distribute his Registrable Securities through such underwriting, X. Xxxxx shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriter(s) selected for such underwriting. Notwithstanding
any other provision of this Agreement, if the managing underwriter(s)
determine(s) in good faith that marketing factors require a limitation of the
number of shares to be underwritten, then the managing underwriter(s) may
exclude shares (including Registrable Securities) from the registration and the
underwriting, and the number of shares that may be included in the registration
and the underwriting shall be allocated, first, to BDE, second to the holders of
any other registration rights granted by BDE prior to the date of this
Agreement, and third, to X. Xxxxx. If X. Xxxxx disapproves of the terms of any
such underwriting, X. Xxxxx may elect to withdraw therefrom by written notice to
BDE and the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
4. EXPENSES. BDE shall pay all expenses incurred in connection
with a registration pursuant to SECTION 2 of this EXHIBIT C (excluding
underwriters' or brokers' discounts and commissions), including, without
limitation all federal and "blue sky" registration and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for BDE and
the fees and disbursements of special counsel for X. Xxxxx.
5. BDE'S OBLIGATIONS. Whenever required to effect the
registration of any Registrable Securities under this Exhibit C, BDE shall, as
expeditiously as reasonably possible:
5.1 prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such registration statement to become effective,
PROVIDED, HOWEVER, that BDE shall not be required to keep any such registration
statement effective for more than ninety (90) days;
5.2 prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as
Exhibit D-2
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement;
5.3 furnish to X. Xxxxx such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by X. Xxxxx that are included in such registration;
5.4 use all reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by a majority in interest of X. Xxxxx, provided that BDE shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions;
5.5 in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering;
5.6 at such time as X. Xxxxx'x Registrable Securities are
covered by such registration statement, notify X. Xxxxx at any time when a
prospectus relating thereto is required to be delivered under the Securities 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 a majority in interest of X.
Xxxxx prepare and file an amendment to any such prospectus as may be necessary;
5.7 cause all Registrable Securities registered hereunder
to be listed on each securities exchange on which similar securities issued by
BDE are then listed;
5.8 provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Registration
Statement; and
5.9 in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in the registration statement for sale
in any jurisdiction, use its commercially reasonable efforts promptly to obtain
the withdrawal of such order.
6. X. XXXXX'X OBLIGATIONS.
6.1 It shall be a condition precedent to the obligations
of BDE to take any action pursuant to SECTION 2 of this EXHIBIT C that X. Xxxxx
shall furnish to BDE such information regarding such X. Xxxxx, the Registrable
Securities held by X. Xxxxx and the intended method of disposition of such
securities, as shall be required to timely effect the registration of its
Registrable Securities.
Exhibit D-3
6.2 X. Xxxxx agrees that upon receipt of written notice
of a Blackout Period from the Chief Executive Officer or Chairman of the Board
of Directors, X. Xxxxx will not offer or sell Registrable Securities or engage
in any transaction involving or relating to Registrable Securities during the
time period set forth in such notice (such Blackout Period not to exceed 30
days) and will not disclose the contents of such notice until the Blackout
Period has ended. For purposes of this SECTION 6 of this EXHIBIT C: "BLACKOUT
PERIOD" shall mean the occurrence of a material event which may be, in the good
faith opinion of the Board of Directors, materially adverse to BDE's financial
condition, business or operations or may require a disclosure which is not in
BDE's best interest in light of the existence of (A) any material acquisition or
financing activity involving BDE, including a proposed public offering of debt
or equity securities, (B) an undisclosed material event, the public disclosure
of which would have a material adverse effect on BDE, and (C) a proposed
material transaction involving BDE and a material portion of its assets.
7. DELAY OF REGISTRATION. X. Xxxxx shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this EXHIBIT C.
8. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this EXHIBIT C:
8.1 BY BDE. To the extent permitted by law, BDE will
indemnify and hold harmless X. Xxxxx, any underwriter (as defined in the
Securities Act) for X. Xxxxx and each person, if any, who controls X. Xxxxx or
X. Xxxxx'x underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"):
8.1.1 any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
8.1.2 omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading; or
8.1.3 violation or alleged violation by BDE of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and BDE will reimburse X. Xxxxx or his underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
SECTION 8.1. shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of BDE
Exhibit D-4
(which consent shall not be unreasonably withheld), nor shall BDE be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration X. Xxxxx, his underwriter or any
controlling person of X. Xxxxx.
9. BY X. XXXXX. To the extent permitted by law, X. Xxxxx will
indemnify and hold harmless BDE, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls BDE
within the meaning of the Securities Act, or any underwriter, against any
losses, claims, damages or liabilities (joint or several) to which BDE or any
such director, officer, controlling person, or underwriter may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by X. Xxxxx expressly for use
in connection with such registration; and X. Xxxxx will reimburse any legal or
other expenses reasonably incurred by BDE or any such director, officer,
controlling person, or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this SECTION 8.2 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of X. Xxxxx, which consent shall not
be unreasonably withheld; and PROVIDED FURTHER, that the total amounts payable
in indemnity by X. Xxxxx under this SECTION 8.2 in respect of any Violation
shall not exceed the net proceeds received by X. Xxxxx in the registered
offering out of which such Violation arises.
10. NOTICE. Promptly after receipt by an indemnified party under
this SECTION 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this SECTION 8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this SECTION 8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this SECTION 8.
11. DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of BDE and X. Xxxxx are subject to the condition that, insofar as
they relate to any Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended
Exhibit D-5
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
12. SURVIVAL. The obligations of BDE and X. Xxxxx under this
SECTION 8 shall survive the completion of any offering of Registrable Securities
in a registration statement.
13. SETTLEMENT. No indemnified party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
14. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause BDE to
register Registrable Securities pursuant to SECTION 2 may not be assigned by X.
Xxxxx.
15. TERMINATION OF REGISTRATION RIGHTS. X. Xxxxx shall not be
entitled to exercise any right provided in this EXHIBIT C hereof subsequent to
the time at which all Registrable Securities held by X. Xxxxx (and any
Affiliates of X. Xxxxx with whom X. Xxxxx must aggregate their sales under Rule
144) can be sold in any three month period without registration in compliance
with Rule 144 of the Act.
Exhibit D-6