SETTLEMENT AGREEMENT AND RELEASE
Xxxxxxx X'Xxxxxxxx and Xxxxx X'Xxxxxxxx (together, the "Plaintiffs") on the
one hand, and Video Services Corporation, formerly known as International Post
Limited ("VSC"), and CABANA corp., a wholly owned subsidiary of VSC("Cabana"
and, together with VSC, the "Defendants") on the other hand, hereby knowingly
and voluntarily agree to enter into this Settlement Agreement and Release
("Agreement"), dated as of December 9, 1999, in order to resolve all outstanding
issues, including the Action (as defined below), and set forth all obligations
between the parties.
W I T N E S S E T H :
WHEREAS, each of the Plaintiffs had been employed by Cabana pursuant to the
terms of an employment agreement with Cabana, dated May 4, 1995 (the "Employment
Agreements");
WHEREAS, Cabana terminated each of the Plaintiffs' employment on August 14,
1997;
WHEREAS, the Plaintiffs commenced an action in the United States District
Court, Southern District of New York, on May 14, 1999, index no. 99 Civ. 3570,
against the Defendants (the "Action");
WHEREAS, the parties to this Agreement met on December 9, 1999 and reached
an agreement to settle the Action, and, pursuant to this Agreement, hereby
formalize such agreement to settle the Action;
WHEREAS, the parties to this Agreement wish to settle all outstanding
issues between them and dismiss the Action with prejudice pursuant to this
Agreement;
WHEREAS, except as provided herein, this Agreement shall replace and
supersede the Employment Agreements and any other employment agreements the
Plaintiffs may have had with Cabana and its parents or affiliates, and such
prior agreements shall have no further force or effect; and
WHEREAS, except as provided herein, this Agreement shall replace and
supersede the obligations set forth in the $2,540,000 ET Partnership 4%
Convertible Subordinated Note due May 4, 2003 (the "Note"), as well as all other
payment obligations that the Defendants may have to the Plaintiffs, ET
Partnership, and/or entities wholly owned or controlled by the Plaintiffs and/or
ET Partnership, and such prior obligations shall have no further force or
effect.
NOW THEREFORE,
1. Cancellation of the Note. Upon execution of this Agreement, the
Plaintiffs shall cause the Note to be marked "CANCELLED" and returned to VSC,
and the Note shall be of no further force or effect.
2. Payment Obligations of VSC. VSC shall make periodic payments to ET
Partnership, by check or wire transfer (in a manner directed by the Plaintiffs),
according to the following schedule: (a) $200,000 upon execution of this
Agreement; (b) $32,000 on the 15th of each consecutive month for forty (40)
months commencing on February 15, 2000; (c) $400,000 on July 15, 2000; and (d)
$100,000 on January 15, 2001. The above payment obligations shall replace any
and all payment obligations that the Defendants may have toward the Plaintiffs,
ET Partnership, and/or entities wholly owned or controlled by the Plaintiffs
and/or ET Partnership, including all payment obligations that the Defendants had
under the Note.
3. Failure to Make Timely Payments. In the event that VSC fails to make any
payment in accordance with the schedule set forth in Section-2, the Plaintiffs
shall notify VSC, in writing, of such failure. Upon receipt of such notice, VSC
shall have thirty (30) days to cure such failure (the "Cure Period"). If such
payment is not received within the Cure Period, the Plaintiffs shall notify VSC,
in writing, that all of the payments scheduled under Section 2 shall become
immediately due and payable unless such payment is received within five (5)
business days of VSC's receipt of such notice. If VSC fails to make payment
within such period, the entire amount set forth in Section 2 (minus all prior
payments) shall become immediately due and payable. In no event shall VSC be
permitted to "cure" more than four (4) times in total or more than two (2) times
in any calendar year. In the event that (i) the Plaintiffs have previously
initiated the Cure Period in accordance with this Section 3 on four (4) prior
occasions or two (2) prior occasions during a calendar year and (ii) VSC fails
to make a timely payment for a fifth time or a third time during such calendar
year, as the case may be, the entire amount set forth in Section 2 (minus all
prior payments) shall become immediately due and payable.
4. Inventions; Confidential Information; Non-Competition. Notwithstanding
any of the terms of this Agreement all obligations set forth in the Inventions,
Confidential Information, Non-Competition, and Breach of Provisions clauses
(paragraphs 7.1 - 7.4) of each of the Plaintiff's Employment Agreements shall be
extended and shall remain in effect through December 31, 2001 and shall apply in
the greater metropolitan areas of the cities of New York, Miami and Los Angeles.
5. Subordination.
5.1 Subordination to Senior Indebtedness. VSC's payment of the payments set
forth in Section 2 of this Agreement are expressly subordinated to the payment
in full of all amounts payable on, under or in connection with Senior
Indebtedness (as hereinafter defined) to the extent set forth in this Section 5.
The term "Senior Indebtedness" shall mean all present and future Indebtedness
(as hereinafter defined) of VSC and its subsidiaries that is not by its terms
expressly subordinated to this Agreement. The term "Indebtedness" means any item
which could be classified as debt on VSC's consolidated financial statements
prepared in accordance with GAAP, including, without limitation, (i) the
principal of or premium (if any) in respect of all indebtedness for money
borrowed and indebtedness evidenced by securities, debentures, bond or other
similar instruments (including purchase money obligations) for payment; (ii) all
capital lease obligations; (iii) all obligations issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement; (iv) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction; (v) all obligations of
third parties of the types referred to in clauses (i) through (iv) above and all
dividends of third parties for the payment of which, in either case, VSC or its
subsidiaries in the regular course of its business became responsible or liable
as obligor, guarantor or otherwise; and (vi) all obligations of third parties
secured by any lien on any property or asset of VSC or its subsidiaries.
Notwithstanding anything contained herein to the contrary, the term
"Indebtedness" does not include trade accounts payable.
5.2 Priority of Senior Indebtedness of Default. No payment with respect to
this Agreement shall be made by VSC or received by the Plaintiffs if: (a) there
is outstanding at the time such payment is to be made any Senior Indebtedness;
and (b) there exists at such time, or immediately after giving effect to such
payment there would exist, any default in the payment of principal of, or any
premium or interest on, any Senior Indebtedness or any other event of default
under the terms of any Senior Indebtedness then outstanding, which default has
not been waived or cured prior thereto; provided, however, that VSC shall resume
making payments with respect to this Agreement, which shall include any and all
past due payments not made because of this Section 5.2 or otherwise as well as
all payments that become due and payable during the interim period, on the first
anniversary of the date that notice of such default with respect to Senior
Indebtedness is first received by VSC if (i) the default is not the subject of
judicial proceedings and (ii) the maturity of the Senior Indebtedness for which
the default relates has not been accelerated. In the event VSC fails to make a
payment(s) to the Plaintiffs, or intends not to make a payment(s) to the
Plaintiffs, because of the provisions of this Section 5.2, VSC shall: (x)
promptly notify the Plaintiffs in writing that it has failed to make such
payment(s) or of its intention not to make such payment(s), as the case may be,
and (y) upon demand by the Plaintiffs, promptly provide the Plaintiffs with
publicly available information or non-public information permissible for
disclosure under the laws, rules, and regulations governing the release of
information by public companies that the Plaintiffs reasonably deem necessary
for purposes of establishing that the conditions of subsections (a) and (b), set
forth in this Section 5.2, have been satisfied.
5.3 Priority of Senior Indebtedness on Liquidation. Upon any payment or
distribution of assets of VSC of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or winding up or total
or partial liquidation or reorganization of VSC, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due in respect of any and all Senior Indebtedness
shall first be paid in full and payment or distribution of assets of VSC of any
kind or character, whether in cash, property or securities, to which the Holder
would be entitled shall be paid to the holders of Senior Indebtedness (pro rata
to each such holder on the basis of the respective amounts of Senior
Indebtedness held by such holders of Senior Indebtedness or on such other basis
as the holders of Senior Indebtedness or a court of competent jurisdiction shall
direct) to the extent necessary to pay all Senior Indebtedness in full after
giving effect to any concurrent payment or distribution to or from the holders
of Senior Indebtedness, before any payment or distribution is made to the
Plaintiffs.
5.4 Duties of the Plaintiffs to Holders of Senior Indebtedness. In the
event that any payment or distribution of assets of VSC of any kind or
character, whether in cash, property or securities, shall be received by the
Plaintiffs, in violation of Section 5.2 or Section 5.3, such payment or
distribution shall be (and shall be deemed to be) held in trust for the benefit
of, and shall be paid over or delivered to, the holders of such Senior
Indebtedness for application to the payment of all Senior Indebtedness remaining
unpaid (pro rata to each holder on the basis of the amount of Senior
Indebtedness held by such holder or on such other basis as the holders of Senior
Indebtedness or a court of competent jurisdiction shall direct) to the extent
necessary to pay all such Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Indebtedness.
5.5 Enforcement by Holders of Senior Indebtedness. The provisions of
Sections 5.2, 5.3 and 5.4 shall be for the benefit of the holders of Senior
Indebtedness and may be enforced directly by such holders against the Plaintiffs
without the necessity of joining VSC as a party.
5.6 Subrogation. After all Senior Indebtedness is paid in full, or a sum of
money sufficient for the payment thereof shall have been set aside for payment,
and until the payments set forth in Section 2 of this Agreement, the Plaintiffs
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of assets of VSC applicable to the Senior
Indebtedness to the extent that payments or distributions otherwise payable to
the Plaintiffs have been applied to the payment of Senior Indebtedness.
5.7 Subordination Unimpaired. It is understood that the provisions of this
Section 5 are intended solely for the purpose of defining the relative rights of
the Plaintiffs on the one hand and the rights of holders of Senior Indebtedness
on the other, and nothing contained herein, including, without limitation, any
act or failure to act by VSC or the failure of VSC to comply with the terms of
this Agreement, is intended to or shall impair the right of any holder of Senior
Indebtedness to enforce the subordination of the obligations under this
Agreement.
6. No Further Consideration. Each Plaintiff acknowledges that he or she is
not entitled to and agrees that he or she will not seek any further
consideration, including compensation, commissions, vacation pay or any other
payment or benefit, from the Defendants, except as provided herein.
7. Release. Each Plaintiff hereby irrevocably and unconditionally releases
and discharges the Defendants, BPET Partnership and any other entities formed by
the merger between Big Picture Editorial, Inc. and Even Time Limited, their
predecessors, successors and assigns, parents, affiliated entities, officers,
directors, employees, representatives, attorneys, and all persons acting by,
through, under or in concert with any of them (collectively, the "Releasees"),
from any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses (including attorneys' fees
and costs) of any nature whatsoever, known or unknown, which each of the
Plaintiffs have, ever have had, or ever in the future may have that are based on
acts or omissions occurring from the beginning of the world up to and including
the date this Agreement is fully executed, including but not limited to any
claims arising out of each of the Plaintiffs' employment or the termination of
that employment with Cabana based upon any theory of tort, contract or other
law, including discrimination based on race, sex, age, religion, national
origin, sexual orientation, disability or marital status under the Age
Discrimination in Employment Act, the Family and Medical Leave Act of 1993,
Title VII of the Civil Rights Act, as amended, the Americans with Disabilities
Act, the Employee Retirement Income Security Act, the New York Wage Payment
Laws, the New York State Human Rights Law, the New York State Labor Law, the New
York City Human Rights Law, and other analogous federal, state and local laws.
In exchange for the execution by the Plaintiffs of this Agreement, the
Releasees hereby release the Plaintiffs from any and all claims, causes of
action and demands of any kind whether known or unknown, which they have, ever
have had, or ever in the future may have that are based on acts or omissions
occurring from the beginning of the world up to and including the date this
Agreement is fully executed.
8. Indemnification. Notwithstanding any of the terms of this Agreement, the
Plaintiffs agree to indemnify and hold the Defendants, BPET Partnership and any
other entities formed by the merger between Big Picture Editorial, Inc. and Even
Time Limited, their successors and assigns, parents, affiliated entities,
officers, directors, employees, representatives, attorneys, and all persons
acting by, through, under or in concert with any of them (the "Indemnified
Parties") harmless from and against any claims, causes of action or damages
including without limitation losses, costs, including attorneys' fees,
liabilities and interest arising out of or relating to any alleged agreement
between or among either Plaintiff (or any entity that Plaintiffs acted on behalf
of, or purportedly acted on behalf of, in entering such alleged agreement(s))
and Xxxxxxx Xxxxxxxxxx, Xxx Xxxx, Xxxxxx Xxxxxxx, Xxx Xxxxxxx, Xxxxxxx
Xxxx-Xxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxx and/or Xxx Xxxxxxxxx.
9. Conditions of Indemnification. The obligations and liabilities of the
Plaintiffs under Section 8 hereof with respect to claims relating to third
parties shall be subject to the following terms and conditions:
(a) The Indemnified Parties will give the Plaintiffs prompt notice of any
such claims, and the Plaintiffs will assume the defense thereof by
representatives chosen by them in consultation with the Indemnified Parties.
(b) The Plaintiffs shall not, without the written consent of the
Indemnified Parties, settle or compromise any claim or consent to the entry of
any judgment that (i) does not include as an unconditional term thereof the
giving by the claimant to the Indemnified Parties a release from all liability
in respect of such claim or (ii) obligates the Indemnified Parties in any
manner.
(c) If the Plaintiffs, within a reasonable time after notice of any such
claim, fail to defend or, during such defense, the Indemnified Parties decide,
in good faith, that the Plaintiffs are not adequately defending such claims,
after notice to the Plaintiffs with a reasonable opportunity for the Plaintiffs
to cure any alleged inadequacy in the defense, the Indemnified Parties shall
have the right to undertake the defense, compromise or settle such claims at the
risk, cost and expense of the Plaintiffs.
(d) If a claim(s) is brought by any or all of the eight individuals listed
in Section 8 above and/or their representatives that may materially and
adversely effect the Indemnified Parties other than as a result of money damages
or other money payments, the Indemnified Parties shall have the right, after
consultation with the Plaintiffs, to defend, at the reasonable cost and expense
of the Plaintiffs, and to compromise or settle such claims with the consent of
the Plaintiffs, which consent shall not be unreasonably withheld.
(e) The Plaintiffs, on the one hand, and the Indemnified Parties, on the
other hand, agree to render to each other such assistance as they may reasonably
require of each other and to cooperate in good faith with each other in order to
ensure the proper and adequate defense of any claim, action, suit or proceeding
brought by any third party. Where counsel has been selected by the Plaintiffs,
the Indemnified Parties shall be entitled to rely upon the advice of such
counsel in the conduct of the defense.
10. Dismissal of the Action. Upon the execution of this Agreement, the
parties shall execute and file a stipulation of voluntary dismissal of the
Action, with prejudice.
11. No Waiver. Nothing in this Agreement shall be deemed to waive any
future claims of the parties to this Agreement in the event any of them breaches
any of the terms of this Agreement or engages in other wrongdoing.
12. Representations of the Plaintiffs. The Plaintiffs represent and warrant
that:
(a) they are the sole partners of ET partnership and
(b) neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with, or result in the breach of,
any agreement, relationship or understanding that the Plaintiffs and/or ET
Partnership may have with any third-party.
13. Company Property. Each Plaintiff acknowledges that he or she has
delivered to Cabana all keys, passes, computer disks, computer equipment,
computer passwords or codes, programs and instruction booklets, proprietary
materials, files and other property in his or her possession or control
belonging to Cabana.
14. Non-Disclosure. Each Plaintiff agrees that he or she will not divulge
the existence of or any term of this Agreement except to members of his or her
immediate family and attorney (and then only upon that person's agreement not to
divulge the existence or terms of this Agreement to anyone). The Defendants
agree not to divulge the existence of or any term of this Agreement except to
its or their attorneys, accountants, employees who for business reasons need to
be aware of the terms hereof, or regulatory, governmental or quasi-governmental
agencies, including disclosures required under the securities laws. The parties
agree that disclosure of this Agreement may be necessary in order to enforce it
or any of its terms.
15. No Disparagement. Each of the parties hereto agrees that he, she, or it
will not make any statement, disparaging or otherwise, to any individual
regarding the business, clients or financial condition of any other party,
without the prior written consent of that party. Each party acknowledges that
his, her or its failure to abide by the terms of this paragraph shall constitute
a material breach of this Agreement.
16. No Admission. Nothing contained in this Agreement nor the fact that the
parties have signed this Agreement shall be considered an admission by any party
hereto.
17. Severability. If any of the provisions contained in this Agreement
should be proven unlawful or unenforceable, that provision or provisions will be
considered as never written, but that will not affect the validity of the
remaining terms and conditions of this Agreement.
18. No Oral Changes; Applicable Law. This Agreement constitutes the entire
agreement between the parties. Any amendments to or changes in the obligations
created by this Agreement shall not be effective unless reduced to writing and
signed by each of the parties. This Agreement shall be construed under the
internal laws of the State of New York, without regard for principles of
conflicts of law, and any actions relating to this Agreement must be instituted
in the State of New York.
19. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective heirs, personal representatives,
successors and assigns.
20. Knowing and Voluntary. Each Plaintiff warrants that he or she is fully
competent to enter into this Agreement and acknowledges that he or she has been
advised to consult with an attorney prior to signing this Agreement, that he or
she has read and understands this Agreement, and that he or she has signed this
Agreement freely and voluntarily.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
be one and the same document.
PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS. To signify their agreement to the terms of this Agreement, the
parties have executed this Agreement on the dates set forth below.
/s/Xxxxxxx X'Xxxxxxxx /s/Xxxxx X'Xxxxxxxx
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Xxxxxxx X'Xxxxxxxx Xxxxx X'Xxxxxxxx
Sworn to before me this Sworn to before me this
15 day of February, 2000 15 day of February, 2000
/s/Yael Caucet /s/Yael Caucet
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Notary Public Notary Public
Video Services Corporation CABANA corp.
/s/Xxxxx X. Xxxxxxxxxx /s/Xxxxxx X. Xxxxxxxx
------------------------- -------------------------
By: By:
Sworn to before me this Sworn to before me this
15 day of February, 2000 15 day of February, 2000
/s/Xxxxxxxxx Xxxxxxxx /s/Xxxxxxxxx Xxxxxxxx
------------------------- -------------------------
Notary Public Notary Public
