March 29, 1999
AIB Investments Pty Limited
Level 24, Gateway
0 Xxxxxxxxx Xxxxx
Xxxxxx, XXX, 0000
Xxxxxxxxx
Gentlemen:
In connection with your investment in Netter Digital Entertainment, Inc.
(the "Company") pursuant to that certain that certain Purchase Agreement, dated
as of March 29, 1999 by and between the Company and AIB Investments Pty.,
Limited. (the "Purchase Agreement") you agree as follows:
1. For a period commencing on the date hereof and extending through
the first to occur of (i) a Covenant Termination Event (as defined
below), and (ii) the second anniversary of the date of this letter, you
will not, nor will you permit any of your "affiliates" or "associates"
(as such terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), directly
or indirectly (except as provided in Paragraph 2 below) do any of the
following:
a. except as a result of a stock split, stock dividend or similar
recapitalization by the Company, directly or indirectly acquire,
offer to acquire, or agree to acquire by purchase, individually or
by joining a partnership, limited partnership, syndicate or other
"group" (as such term is used in Section 13(d)(3) of the
Exchange Act, such term to have such meaning throughout this
Agreement) (any such act, to "acquire"), any securities of the
Company entitled to vote in the election of directors of the
Company (collectively, "Voting Securities"), any securities
directly or indirectly convertible into or exchangeable for Voting
Securities, any direct or indirect rights, warrants or options to
acquire any Voting Securities or any right to vote any Voting
Securities if, immediately after such acquisition, you and your
affiliates and associates collectively would "beneficially own"
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act) in
excess of 30% of the fully diluted voting power of the Company's
outstanding Voting Securities.
b. For purposes of this letter, "Covenant Termination Event"
means any sale or other disposition of Voting Securities of the
Company by Xxxxxxx Xxxxxx if, after such sale or other
disposition, Xxxxxxx Xxxxxx and his affiliates and associates
would beneficially own in the aggregate less than 20% of the fully
diluted voting power of the Company's outstanding Voting
Securities.
2. Notwithstanding the provisions of paragraph 1 above to the contrary,
you and your affiliates and associates may purchase or otherwise
acquire beneficial ownership of any Voting Securities if (i) you
and/or your affiliates or associates are specifically invited or
permitted in writing to do so by the Board of Directors of the
Company, or (ii) such Voting Securities are acquired from Xxxxxxx
Xxxxxx and/or his affiliates or associates. For purposes of this letter,
any Voting Securities acquired by you from Xxxxxxx Xxxxxx and/or
his affiliates and associates will be disregarded and excluded from any
determination of the percentage of the fully diluted voting power of
the Company's outstanding Voting Securities beneficially owned by
you and your affiliates and associates
3. For purposes of this letter, all calculations of the fully diluted
outstanding Voting Securities shall assume the conversion or
exchange of all outstanding securities convertible into or
exchangeable for Voting Securities and the exercise of all outstanding
rights, warrants and options to purchase Voting Securities regardless
of whether such rights of conversion, exchange or purchase are then
exercisable.
4. This letter shall be governed and construed in accordance with the
internal, substantive laws of the State of New York without regard to
conflict of laws principles. No failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise of any such right, power or privilege.
This letter shall be binding upon, and inure to the benefit of each of
the parties hereto and their respective successors and assigns. In
addition to all other rights and remedies which either party hereto
may have hereunder, at law, in equity, by statute or otherwise, the
prevailing party in any litigation to enforce the provisions of this
letter shall be entitled to recover attorneys' fees and expenses and
court costs. This letter may be modified only by an agreement in
writing signed by all parties hereto. This letter constitutes the final
agreement of the parties concerning the matters herein and
supersedes all prior and contemporaneous agreements and
understandings, whether oral or written, between them respecting the
subject matter hereof. If any of the provisions of this letter are
determined to be illegal, invalid or otherwise unenforceable, in whole
or in part, they shall be deemed severable from, and shall in no way
affect the validity or enforceability of, the remaining provisions of
this letter.
5. You hereby recognize, acknowledge and agree that the agreements
and undertakings set forth herein relate to matters that are of a
special, unique and extraordinary character which gives them a
peculiar and special value impossible of replacement, and for the
breach of which the non-breaching party cannot reasonably or
adequately be compensated in damages, and that any breach by you
of any of the terms or provisions hereof will cause the Company
irreparable injury and harm. Therefore you hereby agree that, in
addition to any and all rights and remedies which the Company may
have at law, in equity, by statute or otherwise, the Company shall be
entitled to injunctive or other equitable relief to prevent the
continuing breach by you of each and all of the terms and provisions
hereof or to otherwise secure the enforcement of each and all of the
terms and provisions hereof.
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Please acknowledge your agreement to the foregoing by countersigning this
letter and the enclosed copy in the space provided below and returning the
executed copy to us.
Very truly yours,
NETTER DIGITAL ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxxx
Its: Chief Executive Officer
Received and consented to
the 29th day of March, 1999
AIB Investments Pty, Limited
By: /s/ Xxxxxxxx Xxxx
Its: Director
