EXHIBIT 10.31
IN THE CIRCUIT COURT OF THE
NINTH JUDICIAL CIRCUIT, IN AND
FOR ORANGE COUNTY, FLORIDA
CMI INTERNATIONAL
HOLDINGS, LTD.,
PLAINTIFF,
V. CASE NO: CI 99-3996
DIV. 34
LIGHTPOINT ENTERTAINMENT,
INC., A FLORIDA CORPORATION, HERBERT
BUTLER, INDIVIDUALLY, AND MARK
KYLE A/K/A KYLE MARK,
INDIVIDUALLY,
DEFENDANTS.
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SETTLEMENT STIPULATION
Plaintiff CMI INTERNATIONAL HOLDINGS, LTD. ("CMI") and Defendants
HERBERT BUTLER ("Butler") and MARK KYLE ("Kyle"), individually and as an alleged
general partner of Lightpoint Entertainment, an alleged Florida general
partnership, and Defendant LIGHTPOINT ENTERTAINMENT, INC. ("Lightpoint") hereby
stipulate and agree to settle this action but only if the terms and conditions
set forth herein have been satisfied within the required time limitations.
WHEREAS, CMI brought this action against Lightpoint, Butler, Kyle and
an entity believed not to exist known as Lightpoint Entertainment, a Florida
limited liability company, alleging the right to recover an amount exceeding
$2,000,000.00. CMI has asserted claims based on two promissory notes (the
"Notes"), one dated October 23, 1997 and one
dated December 16, 1997, and claims for reformation of the Notes, money lent and
unjust enrichment ("Note Action Claims");
WHEREAS, Lightpoint, Butler and Kyle deny that they owe any amount to
CMI and contend they have valid defenses to the Note Action Claims;
WHEREAS, CMI or its affiliate CMC Magnetics Corporation ("CMC") have
contended that they have rights under that certain Lightpoint Entertainment /
CMC Magnetics Distribution Agreement between CMC and Lightpoint effective July
1, 1998 ("Lightpoint Distribution Agreement");
WHEREAS, Lightpoint has contended that the Lightpoint Distribution
Agreement is void, invalid, and unenforceable and that it never had any force or
effect;
WHEREAS, Lightpoint, Butler and Kyle, on the one hand, and CMI and CMC,
on the other hand, now desire to settle this action, terminate any and all prior
agreements between them including but not limited to the Lightpoint Distribution
Agreement and resolve any and all legal and equitable claims, rights and
interests that each may have against the other but only if the terms and
conditions set forth herein have been satisfied within the required time
limitations;
WHEREAS, CMC is a party to this stipulation to acknowledge its
agreement to the terms hereof; and
WHEREAS VICTORY ENTERTAINMENT CORP. ("VEC") is the parent corporation
of Lightpoint and is a party to this stipulation to acknowledge its agreement to
the
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terms hereof and the requirement to perform the obligations which it is required
to perform hereunder.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged by Lightpoint, Butler,
Kyle, VEC, CMC and CMI (alternately referred to as "Party," individually, or
"Parties," collectively), the Parties agree as follows:
1. The above recitals are true and correct and are incorporated herein.
2. Within 10 business days of receipt of the first payment received by
VEC from the underwriters of VEC's initial public offering of common stock
("IPO" and "IPO Underwriters," as appropriate), in accordance with the terms of
an underwriting agreement to be entered into between VEC and the IPO
Underwriters relating to the IPO, but no later than December 31, 2000:
(A) VEC shall pay CMI one million US dollars (US$1,000,000.00) ("CMI
Payment") in cash or immediately available funds.
(B) VEC shall issue in the name of CMC the number of shares of VEC
common stock (the "CMC Shares") equal to 1,500,000 divided by eighty-five
percent (85%) of the IPO Price, subject to a six-month "Lock-up" period as
set forth in paragraph 4 hereof. The "IPO Price" as used herein means the
per share price at which shares of VEC common stock are offered and sold to
the public in the IPO pursuant to an effective registration statement (the
"IPO Registration Statement") under the Securities Act of 1933, as
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amended (the "Securities Act"). All such shares when issued shall be
validly issued, fully paid and non-assessable. VEC shall register (the
"CMC Registration Statement") the CMC Shares as set forth in and in
accordance with the terms and conditions of the attached EXHIBIT A.
3. If the CMC Registration Statement is not effective by the 180th day
following the date (the "IPO Date") of the first sale of the IPO shares to the
IPO Underwriter regardless of the reason therefor and regardless of whether the
CMC Registration Statement was effective at any time prior to such 180th day,
VEC agrees to pay CMC the additional sum of Five Hundred Thousand U.S. Dollars
(US$500,000) (the "Additional CMI Payment") as additional consideration (and not
as liquidated damages or a penalty) for the settlement being agreed to pursuant
to the terms and conditions set forth herein not later than ten (10) business
days after such 180th day, in cash or immediately available funds.
Notwithstanding the foregoing, VEC shall not be obligated to pay CMC the
Additional CMI Payment if the CMC Registration Statement is not effective as of
the 180th day after the IPO Date as a proximate result of CMC's failure to
provide the information described in clause (b) of EXHIBIT A within a reasonable
period of time (not to exceed 15 business days) after receipt of written request
therefor from VEC; provided VEC requests such information not later than sixty
(60) days of the IPO Date, or, if the CMC Registration Statement is to be
declared effective sooner than 180 days from the IPO Date, not later than sixty
(60) days before the earlier date that VEC desires the CMC Registration
Statement to become effective.
4. CMC agrees that, without the prior written consent of VEC, which
will not be granted without the written consent of the IPO Underwriters, CMC
will not,
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during the period commencing on the date hereof and ending 180 days after the
IPO Date: (1) offer, pledge, announce the intention to sell, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, the entitlement to shares under
this stipulation or the shares issued pursuant to this stipulation or (2) enter
into any swap, option, future, forward or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the
entitlement to shares under this stipulation or the shares issued pursuant to
this stipulation, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of common stock or such other securities, in
cash or otherwise.
5. In connection with VEC's registration obligation with respect to the
CMC Shares, without the prior written consent of CMC, so long as CMC or any of
its Affiliates (as the term "Affiliates" is defined under Rule 144 promulgated
under the Securities Act) owns any CMC Shares, VEC shall not release any VEC
Shares owned by any VEC officers, directors or affiliates thereof from the
Lock-up Agreement to which such shares are subject, prior to that date which is
365 days from the effective date of the registration statement relating to the
IPO. The preceding sentence shall not apply if VEC shall pay the Additional CMI
Payment to CMI in accordance with Section 3 above. VEC represents and warrants
that as of the date of this Stipulation, a total of 5,368,500 VEC Shares are
owned by its officers, directors and its Affiliates and are subject to the
Lock-up Agreement in the form of the attached EXHIBIT B.
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6. In connection with the issuance to CMC by VEC of the CMC Shares, CMC
confirms that:
(A) CMC is an institutional "Accredited investor" (as defined in Rule
501 (a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the CMC
Shares, and CMC is able to bear the economic risk of its investment for an
indefinite period of time; and
(B) CMC is acquiring the CMC Shares for its own account for investment
and not with a view to distribution and with no present intention of
distributing the CMC Shares, except in accordance with the effective CMC
Registration Statement. CMC understands that the CMC Shares are being
issued to CMC in a transaction which is exempt from the registration
requirements of the Securities Act and, upon issuance, the certificates
evidencing the CMC Shares shall bear a customary restrictive legend.
7. VEC acknowledges and agrees that CMC's decision to invest in the CMC
Shares was made in reliance upon VEC's representations, warranties, covenants
and disclosures set forth herein and in that certain "Confidential Private
Placement Memorandum" dated August 30, 2000. VEC represents and warrants that no
representation or warranty of VEC set forth herein or in the Confidential
Private Placement Memorandum and no statement contained herein or therein,
contains any untrue statement of a material fact or
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omits to state all material facts which are necessary in order to make
statements contained herein and therein not misleading.
8. CMI, Lightpoint, Butler and Kyle agree concurrently herewith to
execute or cause their attorneys to execute joint stipulations for dismissal
with prejudice (the "Joint Stipulation(s)") from this case of each party
executing a Joint Stipulation, and providing that each party shall bear its own
costs and attorneys fees. The Joint Stipulations shall not be filed, but upon
execution shall immediately be delivered to J. Brock McClane, Esquire (the
"Escrow Agent") to be held in escrow, in accordance with the terms and
conditions of paragraph 14 hereof.
9. The Parties agree concurrently herewith to execute general releases
in the form attached hereto as composite EXHIBIT C (the "Releases") and to
immediately deliver the Releases to the Escrow Agent, to be held in escrow in
accordance with the terms and conditions of paragraph 14 hereof. The Releases
shall not be deemed to be delivered or effective except as provided in paragraph
14.
10. Upon the execution of this stipulation by all of the Parties, this
stipulation shall be filed with the Court whereupon the Parties agree that the
Court should enter an order approving the stipulation and abating the case until
December 31, 2000, or such earlier date, if any, as VEC officially withdraws its
IPO Registration Statement, unless the action is earlier dismissed pursuant to
the terms hereof.
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11. In the event the CMI Payment and issuance of the CMC Shares in the
amounts set forth in paragraph 2 are not received by CMI and CMC on or before
the earliest date specified for payment and issuance thereof in paragraph 2
hereof, CMI may forthwith proceed with this case without the necessity of
further order of the Court. In such case, the Releases and Joint Stipulations
shall be void and of no effect and shall be disbursed by the Escrow Agent
pursuant to the provisions of paragraph 14 hereof.
12. In the event the CMI Payment and issuance of the CMC Shares in the
amounts set forth in paragraph 2 are received by CMI and CMC, or Lynn J. Hinson,
Esquire in their behalf, on or before the earliest date specified for the
payment and issuance thereof in paragraph 2 hereof, CMI and/or CMC, directly or
through their counsel, Lynn J. Hinson, Esquire, shall notify the Escrow Agent of
their receipt.
13. The Parties hereby appoint J. Brock McClane, Esquire, as the Escrow
Agent in accordance with the terms of this Stipulation. J. Brock McClane,
Esquire hereby agrees to act as the Escrow Agent pursuant to the terms and
conditions of this Stipulation and executes this Stipulation as Escrow Agent to
acknowledge and agree to perform the duties and obligations as Escrow Agent. As
provided herein, CMI, Lightpoint, Butler and Kyle have agreed to deliver the
Joint Stipulations to the Escrow Agent to be held as provided herein. As also
provided herein, the Parties have agreed to deliver the Releases to the Escrow
Agent.
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14. Escrow Agent shall hold the Joint Stipulations and Releases and
shall not disburse, deliver or otherwise release from his possession except upon
the following conditions:
(A) If VEC pays CMI $1,000,000.00 US Dollars, in cash or immediately
available funds, and issues in the name of CMC the CMC Shares in the
amounts specified in paragraph 2 hereof on or before the earliest date
specified in paragraph 2 hereof for the payment and issuance thereof, and
Lynn J. Hinson, Esquire notifies the Escrow Agent in writing that the
$1,000,000.00 payment and CMC Shares have been received, the Escrow Agent
shall file the Joint Stipulations with the Court and deliver the Releases
in favor of the defendants to J. Brock McClane, Esquire in his capacity as
counsel for VEC and Lightpoint. Escrow Agent shall simultaneously deliver
the Release in favor of CMI and CMC to CMI and CMC.
(B) If VEC does not pay CMI $1,000,000.00 US Dollars in cash or
immediately available funds and does not issue in the name of CMC the CMC
Shares in the amounts specified in paragraph 2 hereof on or before the
earliest date specified in paragraph 2 hereof for the payment and issuance
thereof, Lynn J. Hinson, Esquire shall notify the Escrow Agent in writing
that the payment has not been received, and the CMC Shares have not been
delivered. Upon receipt of such notice, Escrow Agent shall deliver the
Joint Stipulations and the Release in favor of the defendants to Lynn J.
Hinson, Esquire, who shall immediately destroy the Joint Stipulations and
notify CMI and CMC of
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its destruction. Escrow Agent shall also deliver the Release in favor
of CMC and CMI to J. Brock McClane, Esquire, in his capacity as counsel
for VEC and Lightpoint. The Releases and Joint Stipulations shall be
deemed to have never been delivered or become effective, and shall be
void and of no further force and effect.
15. CMI represents and warrants to Lightpoint and VEC that the
performance of its obligations hereunder will not conflict with, result in a
breach of or violate any of the terms or provisions of, or constitute a default
under, any agreement to which CMI is a party or by which CMI is bound, nor will
it result in any violation of the provisions of its charter or bylaws.
16. Lightpoint and VEC represent and warrant to CMI and CMC that the
performance of their obligations hereunder will not conflict with, result in a
breach of, or violate any of the terms or provisions of, or constitute a default
under, any agreement to which Lightpoint or VEC is a party or by which
Lightpoint or VEC is bound, nor will it result in any violation of the
provisions of their respective charters or bylaws.
17. This Stipulation and the construction and enforcement thereof shall
be governed by Florida law.
18. This Stipulation, and any amendment, modification or other revision
to this Stipulation, shall not be effective or binding upon CMI, CMC, Lightpoint
or VEC (the "Primary Parties") unless each of them has executed and delivered
this Stipulation and all documents to be executed and delivered in connection
herewith as provided herein, and
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no amendment, modification or other revision to this Stipulation shall be
effective or binding upon any of the Primary Parties unless each of the Primary
Parties has executed and delivered a written document setting forth such
amendment, modification or other revision.
Similarly, this Stipulation, and any amendment, modification or other
revision to this Stipulation, shall not be effective or binding upon any of the
Primary Parties, on the one hand, and upon Kyle, on the other hand, unless each
of the Primary Parties and Kyle have executed and delivered this Stipulation and
all documents to be executed and delivered in connection herewith and, in the
case of any amendment, modification or other revision to this Stipulation,
unless Kyle and each of the Primary Parties has executed and delivered a
document setting forth such amendment, modification or other revision.
Similarly, this Stipulation, and any amendment, modification or other
revision to this Stipulation, shall not be effective or binding upon any of the
Primary Parties, on the one hand, and upon Butler, on the other hand, unless
each of the Primary Parties and Butler has executed and delivered this
Stipulation and all documents to be executed and delivered in connection
herewith and, in the case of any amendment, modification or other revision to
this Stipulation, unless Butler and each of the Primary Parties has executed and
delivered a document setting forth such amendment, modification or other
revision.
19. In the event of any legal or equitable action arising out of this
Stipulation, including, without limitation, the initiation of any legal action
by CMC to enforce the provisions of the attached Exhibit A, relating to VEC's
obligations with respect to the
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Registration of the CMC Shares, the prevailing party shall recover its
reasonable attorneys fees and court costs.
20. VEC's obligations hereunder to make the CMI Payment and to issue
the CMC Shares are conditioned on the consummation of the IPO on or before
December 31, 2000.
21. Upon the delivery of the CMI Payment to CMI in cash or immediately
available funds and the issuance of the CMC Shares in the name of CMC in the
amounts specified in paragraph 2 hereof on or before the earliest date specified
in paragraph 2 hereof, to the extent CMI and CMC have or claim any right, title
or interest, contingent or otherwise, to or in any intellectual property owned
or developed by Lightpoint Entertainment, Inc. or its affiliates including VEC,
Victory Distribution, Inc., Victory Animation Studios, Inc., Victory Television,
Inc. and Premium Entertainment Corp., and including any and all interest they or
any of them have or have had in any intellectual property associated with "The
Dooley and Pals Show," including but not limited to the trademarks of "Dooley"
and "Martie the Mighty Marshmallow Man," CMI and CMC relinquish, remise and
release such claims then and forever.
22. Upon the delivery of the CMI Payment to CMI in cash or immediately
available funds and the issuance of the CMC Shares in the name of CMC in the
amounts specified in paragraph 2 hereof on or before the earliest date specified
in paragraph 2 hereof,
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(a) the Lightpoint Distribution Agreement shall be terminated
automatically and without further notice or action, and
(b) Lightpoint and VEC shall be released from all prior contracts,
agreements and understandings between Lightpoint and VEC or either of
them, on one hand, and CMI and CMC or either of them, on the other
hand, of whatever nature, whether oral or written, including but not
limited to the Lightpoint Distribution Agreement, automatically and
without further notice or action. CMI and CMC shall be released from
all prior contracts, agreements and understandings between CMI and CMC
or either of them, on one hand, and Lightpoint and VEC or either of
them, on the other hand, of whatever nature, whether oral or written,
including but not limited to the Lightpoint Distribution Agreement,
automatically and without further notice or action. None of
Lightpoint, VEC, CMI or CMC shall have any further right or obligation
whatsoever under any prior contracts, agreements and understandings
terminated or from which Lightpoint or VEC are released by operation
of this paragraph, and any existing claim of CMI and CMC or either of
them, on the one hand, against Lightpoint and VEC or either of them,
on the other hand, under any prior contracts, agreements and
understandings, including but not limited to the Note Action Claims,
shall be and are forever barred, and any existing claim of Lightpoint
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and VEC or either of them, on the one hand, against CMI and CMC or
either of them, on the other hand, under any prior contracts,
agreements and understandings, including but not limited to the Note
Action Claims, shall be and are forever barred.
In the event Kyle does not sign this stipulation and fulfill all of his
obligations and requirements hereunder, all prior contracts, agreements and
understandings between Kyle, one the one hand, and CMC or CMI, on the other
hand, if any, pursuant to which Kyle may be liable, including but not limited to
any loan agreements or promissory notes shall be fully enforceable against Kyle.
In the event Butler does not sign this stipulation and fulfill all of
his obligations and requirements hereunder, all prior contracts, agreements and
understandings between Butler, on the one hand, and CMC or CMI, on the other
hand, if any, pursuant to which Butler may be liable, including but not limited
to any loan agreements or promissory notes shall be fully enforceable against
Butler.
In the event Lightpoint or VEC fail to execute this stipulation or the
CMI Payment is not delivered to CMI in cash or immediately available funds and
the CMC Shares issued in the name of CMC in the amounts specified in paragraph 2
hereof on or before the earliest date specified in paragraph 2, then this
stipulation shall not terminate the Lightpoint Distribution Agreement or release
any Party's obligation to any other Party or bar any Party's claims under any
prior contracts, agreements, and understandings including but not limited to the
Note Action Claims.
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This stipulation and the rights and obligations of the Parties
hereunder shall not be affected by this section.
23. This stipulation may be executed in two or more counterparts, and
copies of executed counterparts transmitted by fax shall be deemed originals for
all purposes.
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24. Time is of the essence in the performance of any and all
obligations of the Parties under this stipulation.
LIGHTPOINT ENTERTAINMENT, INC.
By:
-------------------------------------------------
Edgar N. Millington
Secretary
Dated: , 2000
-----------------------------------------
[NO SIGNATURE]
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Herbert Butler
Dated: , 2000
-----------------------------------------
[NO SIGNATURE]
- -----------------------------------------------------
Mark Kyle
Dated: , 2000
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VICTORY ENTERTAINMENT CORP.
By:
--------------------------------------------
Michael H. Gerber
Chairman
Dated: , 2000
----------------------------------------
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J. Brock McClane
Escrow Agent
Dated: , 2000
-------------------------------------
CMI INTERNATIONAL HOLDINGS, LTD.
By:
-------------------------------------------
Its:
Dated: , 2000
-------------------------------------
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CMC MAGNETICS CORPORATION
By:
-----------------------------------------------
Its:
----------------------------------------------
Dated: , 2000
-------------------------------------
- --------------------------------------------------
Lynn J. Hinson
Counsel for CMI International Holdings, Ltd.
And CMC Magnetics Corporation
Dated: , 2000
-----------------------------------------
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EXHIBIT A
REGISTRATION PROCEDURES
The registration procedures set forth below will apply to the shares
(the "CMC Shares") of common stock, par value $.001 per share (the "Common
Stock"), of Victory Entertainment Corp. ("VEC") to be issued to CMC Magnetics
Corporation ("CMC") upon the consummation of VEC's initial public offering of
Common Stock (the "IPO"), as provided in the settlement stipulation (the
"Stipulation") to which this Exhibit A is attached. Terms used herein with an
initial capitalized letter, but not defined herein, shall have the meaning
ascribed thereto in the Stipulation.
(a) REGISTRATION PROCEDURES.
(i) VEC will prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "CMC Registration
Statement") covering the resale of the CMC Shares by CMC, which will be filed
with the (i.e., as a pre-effective amendment to the Form S-1) IPO registration
statement, and will use its best efforts to cause the CMC Registration Statement
to become effective at the time of the IPO but, in no event, later than 180 days
after the effective date of the IPO Registration Statement, and to cause the CMC
Registration Statement to remain effective until the earlier of (A) the date on
which CMC shall have sold or otherwise disposed of all the CMC Shares or (B) the
first date on which all of the CMC Shares can be sold by CMC under Rule 144(k)
of the Securities Act of 1933, as amended (the "Securities Act").
(ii) VEC shall notify CMC, in writing, promptly after VEC has received
notice of the time the CMC Registration Statement has become effective or any
supplement to any prospectus forming a part of the CMC Registration Statement
has been filed.
(iii) VEC will prepare and file with the Commission, and promptly
notify CMC of the filings of, such amendments and supplements to the CMC
Registration Statement and the prospectus contained therein as may be necessary
to keep the CMC Registration Statement effective for the entire period described
in clause (a)(i) above, and to comply with the provisions of the Securities Act,
with respect to the sale or other disposition of all CMC Shares covered by the
CMC Registration Statement.
(iv) VEC will advise CMC promptly after it has received notice or
obtained knowledge thereof of the issuance of any stop order by the Commission
suspending the effectiveness of the CMC Registration Statement or the initiation
or threatening of any proceeding for that purpose and promptly use its
reasonable best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued as promptly as possible.
During any period in which any such stop order shall be in effect,
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CMC agrees to discontinue its sale of the CMC Shares covered by the CMC
Registration Statement.
(v) VEC will prepare and promptly file with the Commission (and, if
necessary, state blue sky officials), and promptly notify CMC of the filing of
any amendment or supplement to the CMC Registration Statement or the prospectus
contained therein as may be necessary to correct any false statements or
material omissions, if, at the time when CMC is obligated to deliver a
prospectus relating to the registered CMC Shares under the Securities Act, any
event has occurred the result of which the CMC Registration Statement or any
prospectus contained therein must be amended in order that it does not contain
any untrue statement of a material fact, or omit to state a material fact
necessary to make the statements therein in light of the circumstances in which
they were made, not misleading.
Further, if at any time when CMC shall be obligated to deliver a
prospectus in connection with the sale of its registered CMC Shares, the
prospectus previously furnished CMC and then in effect may no longer be used
under the Securities Act, VEC will prepare promptly upon request such amendment
or amendments to the CMC Registration Statement and such prospectus as may be
reasonably necessary to permit compliance with the requirements of the
Securities Act and applicable blue sky laws.
(vi) If VEC common stock is then listed on any securities exchange or
quoted on the NASDAQ, VEC will use its best efforts to cause all CMC shares
covered by the CMC Registration Statement to be listed on such exchange or
quoted on the NASDAQ.
(vii) VEC will furnish to CMC such numbers of copies of the CMC
Registration Statement, the prospectus contained therein, including a
preliminary prospectus, and each amendment and supplement to the CMC
Registration Statement and the prospectus contained therein, in conformity with
the requirements of the Securities Act, and such other documents, as CMC may
reasonably request in order to facilitate the sale or other disposition of the
registered CMC Shares.
(viii) VEC will use its best efforts to register or qualify the CMC
Shares for sale under the securities or blue sky laws of such jurisdictions as
CMC may request, and do any and all other acts and things that may be necessary
under such securities or blue sky laws to enable CMC to consummate the sale or
other disposition of the CMC Shares in such jurisdictions; provided that VEC
will not in any event be required to keep any such registration or qualification
in effect after the expiration of the period during which VEC maintains the
effectiveness of the CMC Registration Statement and shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to subject itself to taxation in
any such jurisdiction.
(b) REQUIRED INFORMATION. VEC will not be required to file the CMC
Registration Statement or cause the CMC Registration Statement to become or
remain effective
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as described in (a) above unless and until CMC furnishes to VEC such information
regarding CMC and the CMC Shares and the intended method of disposition of such
CMC Shares as VEC reasonably requests, in writing, in order to satisfy the
requirements applicable to such registration. Promptly following the execution
and delivery of the Stipulation, VEC shall furnish CMC with all such written
requests and all questionnaires or other forms which CMC must complete or
furnish in order for VEC to timely meet its registration obligations. VEC shall
provide CMC's counsel representing CMC in connection with the Stipulation (or
such other legal counsel designated by CMC) with copies of all such written
requests, questionnaires or other forms given or furnished by VEC to CMC,
simultaneous with the delivery thereof to CMC.
(c) EXPENSES OF REGISTRATION, VEC will pay or cause to be paid any and
all costs and expenses of VEC incurred in connection with the registration of
the CMC Shares, including, without limitation, all federal and state filing and
registration or qualification fees, legal and accounting fees and printing
expenses; PROVIDED, HOWEVER, that VEC will not be required to pay any brokerage
and underwriting discounts and commissions attributable to CMC's sale of its
registered CMC Shares or the fees and expenses of any financial, legal or
accounting advisors employed by CMC in connection with any such registration.
(d) INDEMNIFICATION. In connection with the registration by VEC of the
CMC Shares, VEC will indemnify and hold harmless CMC and each person, if any,
who controls CMC within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, the legal fees and other expenses reasonably
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the CMC Registration Statement or the final
prospectus (the "Prospectus") filed pursuant to Rule 424(b) under the Securities
Act (as amended or supplemented if VEC shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to CMC furnished to VEC in writing by or on
behalf of CMC expressly for use therein.
CMC will indemnify and hold harmless VEC, its directors, its officers
who sign the CMC Registration Statement and each person who controls VEC within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from VEC to CMC, but only with
reference to information relating to CMC furnished to VEC in writing by or on
behalf of CMC expressly for use in the CMC Registration Statement, the
Prospectus, any amendment or supplement thereto, or any
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preliminary prospectus; and provided further, that in no event shall CMC's
obligation of indemnification exceed the gross proceeds realized by CMC from the
sale of its registered VEC shares pursuant to such CMC Registration Statement.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to any of the
two preceding paragraphs of this clause (d), such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and such Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such proceeding. In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person and not the Indemnifying Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that no
Indemnifying Person shall, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for CMC and such control persons of CMC shall
be designated in writing by CMC, and any such separate firm for VEC, its
directors, its officers who sign the CMC Registration Statement and such control
persons of VEC shall be designated in writing by VEC. No Indemnifying Person
shall be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, each Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment, subject to the express limitations on indemnification
set forth hereinabove. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
EXHIBIT B
LOCK-UP AGREEMENT
May 17, 2000
VICTORY ENTERTAINMENT CORP.
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819
Re: VICTORY ENTERTAINMENT CORP. - INITIAL PUBLIC OFFERING
Ladies and Gentlemen:
The undersigned understands that Victory Entertainment Corp., a Florida
corporation (the "COMPANY"), proposes to enter into an Underwriting Agreement
(the "UNDERWRITING AGREEMENT") with the several underwriters (the
"UNDERWRITERS") to be named therein, providing for the initial public offering
(the "PUBLIC OFFERING") by the several Underwriters of common stock of the
Company (the "COMMON STOCK").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of the Company, which will not be
granted without the written consent of the Underwriters, the undersigned will
not, during the period commencing on the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS") and ending 365 days thereafter, (1)
offer, pledge, announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock, or any securities of the
Company which are substantially similar to the Common Stock, including, but not
limited to, (x) any securities convertible into or exercisable or exchangeable
for Common Stock or (y) any shares of Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission, or (2) enter into any
swap, option, future, forward or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock or any
securities of the Company which are substantially similar to the Common Stock,
including, but not limited to, any securities convertible into or exercisable or
exchangeable for Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. In addition, the undersigned agrees that,
without the prior written consent of Company, which will not be granted without
the written consent of the Underwriters, it will not, during the aforementioned
365-day period, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities of the Company
which
are substantially similar to the Common Stock, including, but not limited to,
any securities convertible into or exercisable or exchangeable for Common Stock.
Notwithstanding the foregoing, this Lock-Up Agreement shall not apply
to shares of Common Stock purchased by the undersigned in the Public Offering or
in the open market following the consummation of the Public Offering. In
addition, if the undersigned is an individual, he or she may transfer any Common
Stock either during his or her lifetime or on death by will or by intestacy (1)
to his or her immediate family, (2) to a trust or other entity the beneficiaries
or equity holders of which are exclusively the undersigned and/or a member or of
his or her immediate family or (3) as a charitable contribution; PROVIDED,
HOWEVER, that in any such case it shall be a condition to such transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the Common Stock transferred subject to the provisions of this Lock-Up
Agreement, and there shall be no further transfer of such Common Stock except in
accordance with this Lock-Up Agreement. For purposes of this Lock-Up Agreement,
"IMMEDIATE FAMILY" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor.
In furtherance of the foregoing, the Company and any duly appointed
transfer agent for the registration or transfer of the securities described
herein are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned hereunder shall be binding upon the successors, assigns, heirs or
personal representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement is not
executed on or before March 31, 2001, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this
Lock-Up Agreement.
The undersigned agrees to comply with any additional restriction or
condition on the disposition of the securities described herein which may be
required to qualify the offering of the shares in any jurisdiction in accordance
with the blue sky or securities laws of such jurisdiction.
To enable the Company and the Underwriters to enforce the foregoing,
the undersigned hereby consents to the placing of restrictive legends consistent
with this Lock-Up Agreement upon the certificates evidencing the securities
described herein and to the entry of stop-transfer orders consistent with this
Lock-Up Agreement on the books and records of the transfer agent of such
securities with respect to any such securities registered in the name of the
undersigned or beneficially owned by the undersigned. The Company agrees to
instruct the transfer agent to place such legends and enter such stop-transfer
orders and not to transfer
-2-
any such securities without the consent of the Company and the Underwriters as
set forth herein.
The undersigned understands that the Underwriters will be entering into
the Underwriting Agreement and proceeding with the Public Offering in reliance
upon this Lock-Up Agreement.
-3-
THIS LOCK-UP AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.
Very truly yours,
Fill in Name
(1)By:
------------------------------
Name:
Title:
Accepted as of the date
first set forth above:
VICTORY ENTERTAINMENT CORP.
By:
----------------------------------------
Name:
Title:
- --------
(1) To be filled in if this Lock-Up Agreement is being signed on behalf of
a corporation, partnership, trust or other entity.
-4-
EXHIBIT C
GENERAL RELEASE - PLAINTIFFS SIDE
KNOW ALL MEN BY THESE PRESENTS:
In consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, CMI International Holdings, Ltd., CMC Magnetics Corporation and
Bob Wong, for themselves and their successors and assigns (collectively,
"Releasors"), do hereby irrevocably and unconditionally remise, release, acquit,
satisfy, and forever discharge all persons and entities identified on the
attached Exhibit 1 and their respective assigns, heirs, devisees and attorneys
(collectively, "Releasees") of and from all past, present and future claims,
demands, obligations, actions, causes of action, rights, damages, costs,
attorneys' fees, expenses, complaints, charges, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, losses, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, and liabilities, whether known or unknown, whether based
in law or equity, whether based in tort, contract or other theory of recovery,
and whether for compensatory, punitive or other damages, that Releasors ever
had, now have or may at any time in the future have against Releasees by reason
of any matter, cause or thing whatever from the beginning of the world to the
day of these presents.
Notwithstanding the foregoing, it is understood and agreed that this
Release is being executed pursuant to the Settlement Stipulation (the
"Settlement Stipulation") made by and between Lightpoint Entertainment, Inc.,
Herbert Butler, Mark Kyle, Victory Entertainment Corp., CMI International
Holdings, Ltd. and CMC Magnetics Corporation. The obligations of the parties
expressly set forth in the Settlement Stipulation, including but not limited to
Exhibit A thereto, are specifically EXCEPTED from this Release. Furthermore,
notwithstanding any other provision hereof, J. Brock McClane is not released
from his obligations, duties and responsibilities as Escrow Agent as provided by
the Settlement Stipulation.
This Release shall be NULL and VOID unless CMI International Holdings,
Ltd. receives the payment of $1,000,000.00 US Dollars (US One Million) in cash
or immediately available funds and CMC Magnetics Corporation receives the CMC
Shares as provided by the Settlement Stipulation in the amounts specified in
paragraph 2 hereof on or before the earliest date specified in paragraph 2
hereof.
Notwithstanding any other provision hereof, if either Herbert Butler or
Mark Kyle fails to sign the Settlement Stipulation, he shall not be released
hereby.
The persons signing below individually or on behalf of their respective
entities warrant that they have read this release and know the contents thereof,
have discussed it with their attorneys, and sign the same as their own free act.
LIGHTPOINT ENTERTAINMENT, INC.
By:
---------------------------
Edgar N. Millington
Secretary
VICTORY ANIMATION STUDIOS, INC.
By:
---------------------------
Its:
-----------------------
VICTORY DISTRIBUTION, INC.
By:
---------------------------
Its:
-----------------------
VICTORY TELEVISION, INC.
By:
---------------------------
Its:
-----------------------
VICTORY INTERNET PRODUCTIONS, INC.
By:
---------------------------
Its:
-----------------------
PREMIUM ENTERTAINMENT CORP.
By:
---------------------------
Its:
-----------------------
VICTORY ENTERTAINMENT CORP.
By:
---------------------------
Michael H. Gerber
Chairman
[NO SIGNATURE]
- ------------------------------
Herbert Butler
[NO SIGNATURE]
- ------------------------------
Mark Kyle
LIGHTPOINT ENTERTAINMENT, LLC (DL)
By:
---------------------------
Its:
-----------------------
CMI INTERNATIONAL HOLDINGS, LTD.
By:
---------------------------
Its:
-----------------------
CMC MAGNETICS CORPORATION
By:
---------------------------
Its:
-----------------------
[NO SIGNATURE]
- ------------------------------
Bob Wong
EXHIBIT "1"
VICTORY ANIMATION STUDIOS, INC.
VICTORY ENTERTAINMENT CORP.
VICTORY DISTRIBUTION, INC.
VICTORY TELEVISION, INC.
VICTORY INTERNET PRODUCTIONS, INC.
LIGHTPOINT ENTERTAINMENT, INC.
PREMIUM ENTERTAINMENT CORP.
LIGHTPOINT ENTERTAINMENT, a Florida Limited Liability Company
LIGHTPOINT ENTERTAINMENT, LLC, a Delaware Limited Liability Company
HERBERT BUTLER
MARK KYLE
ALL CURRENT OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND CONSULTANTS OF
VICTORY ANIMATION STUDIOS, INC., VICTORY ENTERTAINMENT CORP., VICTORY
DISTRIBUTION, INC., VICTORY TELEVISION, INC., VICTORY INTERNET PRODUCTIONS,
INC., LIGHTPOINT ENTERTAINMENT, INC., PREMIUM ENTERTAINMENT CORP. AND MCCLANE
TESSITORE
EXHIBIT C (CONT'D)
GENERAL RELEASE - DEFENDANTS' SIDE
KNOW ALL MEN BY THESE PRESENTS:
In consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, all persons and entities identified on the attached Exhibit 1, for
themselves and their successors and assigns (collectively, "Releasors"), do
hereby irrevocably and unconditionally remise, release, acquit, satisfy, and
forever discharge CMI International Holdings, Ltd., CMC Magnetics Corporation
and Bob Wong and their respective assigns, heirs, devisees and attorneys
(collectively, "Releasees") of and from all past, present and future claims,
demands, obligations, actions, causes of action, rights, damages, costs,
attorneys' fees, expenses, complaints, charges, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, losses, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, and liabilities, whether known or unknown, whether based
in law or equity, whether based in tort, contract or other theory of recovery,
and whether for compensatory, punitive or other damages, that Releasors ever
had, now have or may at any time in the future have against Releasees by reason
of any matter, cause or thing whatever from the beginning of the world to the
day of these presents.
Notwithstanding the foregoing, it is understood and agreed that this
Release is being executed pursuant to the Settlement Stipulation (the
"Settlement Stipulation") made by and between Lightpoint Entertainment, Inc.,
Herbert Butler, Mark Kyle, Victory Entertainment Corp., CMI International
Holdings, Ltd. and CMC Magnetics Corporation. The obligations of the parties
expressly set forth in the Settlement Stipulation, including but not limited to
Exhibit A thereto, are specifically EXCEPTED from this Release.
This Release shall be NULL and VOID unless CMI International Holdings,
Ltd. executes and has filed with the Ninth Judicial Circuit Court of Florida in
Case No. CI-99-3996 a joint stipulation of dismissal of Lightpoint
Entertainment, Inc. from the case with prejudice in accordance with paragraph 8
of the Settlement Stipulation.
The persons signing below individually or on behalf of their respective
entities warrant that they have read this release and know the contents thereof,
have discussed it with their attorneys, and sign the same as their own free act.
LIGHTPOINT ENTERTAINMENT, INC.
By:
---------------------------
Edgar N. Millington
Secretary
VICTORY ANIMATION STUDIOS, INC.
By:
---------------------------
Its:
-----------------------
VICTORY DISTRIBUTION, INC.
By:
---------------------------
Its:
-----------------------
VICTORY TELEVISION, INC.
By:
---------------------------
Its:
-----------------------
VICTORY INTERNET PRODUCTIONS, INC.
By:
---------------------------
Its:
-----------------------
PREMIUM ENTERTAINMENT CORP.
By:
---------------------------
Its:
-----------------------
VICTORY ENTERTAINMENT CORP.
By:
---------------------------
Michael H. Gerber
Chairman
[NO SIGNATURE]
- ------------------------------
Herbert Butler
[NO SIGNATURE]
- ------------------------------
Mark Kyle
LIGHTPOINT ENTERTAINMENT, LLC (DL)
By:
---------------------------
Its:
-----------------------
CMI INTERNATIONAL HOLDINGS, LTD.
By:
---------------------------
Its:
-----------------------
CMC MAGNETICS CORPORATION
By:
---------------------------
Its:
-----------------------
[NO SIGNATURE]
- ------------------------------
Bob Wong
EXHIBIT "1"
VICTORY ANIMATION STUDIOS, INC.
VICTORY ENTERTAINMENT CORP.
VICTORY DISTRIBUTION, INC.
VICTORY TELEVISION, INC,
VICTORY INTERNET PRODUCTIONS, INC.
LIGHTPOINT ENTERTAINMENT, INC.
PREMIUM ENTERTAINMENT CORP.
LIGHTPOINT ENTERTAINMENT, a Florida Limited Liability Company
LIGHTPOINT ENTERTAINMENT, LLC, a Delaware Limited Liability Company
HERBERT BUTLER
MARK KYLE
ALL CURRENT OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND CONSULTANTS OF
VICTORY ANIMATION STUDIOS, INC., VICTORY ENTERTAINMENT CORP., VICTORY
DISTRIBUTION, INC., VICTORY TELEVISION, INC., VICTORY INTERNET PRODUCTIONS,
INC., LIGHTPOINT ENTERTAINMENT, INC., PREMIUM ENTERTAINMENT CORP. AND MCCLANE
TESSITORE