Document:

ex10-32.htm

    
 

    Exhibit
10.32

    FIRST
AMENDMENT

    TO

    FOURTH AMENDED AND RESTATED
LOAN AGREEMENT

     

    This
First Amendment to Fourth Amended and Restated Loan Agreement (this “First Amendment”) is made as
of the 31 day of December, 2008, by and among

     

    Brown
Brothers Harriman & Co., as Administrative Agent (hereinafter, the “Administrative Agent”), a
general partnership organized under the laws of the State of New York with
offices at 40 Water Street, Boston, Massachusetts 02109; and

     

    TD Bank,
N.A., as Documentation Agent (hereinafter, the “Documentation Agent”) a
national banking association with offices at 7 New England Executive Park,
Burlington, Massachusetts 01803; and

     

    Bank of
America, N.A., as Syndication Agent (hereinafter, the “Syndication Agent”), and,
together with the Administrative Agent and the Documentation Agent, the “Agents”), a national banking
association with offices at 100 Federal Street, Boston, Massachusetts
02110,

     

    as Agents
on behalf of Brown Brothers Harriman & Co., TD Bank, N.A., Bank of America,
N.A., and the other financial institutions which may hereafter become lenders to
the Loan Agreement (as defined below) (each such party a “Lender” and collectively the
“Lenders”),

     

    and

     

    Dynamics
Research Corporation (hereinafter, the “Lead Borrower”), a
Massachusetts corporation, with its principal executive offices at 60 Frontage
Road, Andover, Massachusetts, as agent for itself and each of

     

    DRC
International Corporation (“International”), a
Massachusetts corporation with its principal executive offices at 60 Frontage
Road, Andover, Massachusetts;

     

    H.J. Ford
Associates, Inc. (“H.J.
Ford”), a Delaware corporation with its principal executive offices at 60
Frontage Road, Andover, Massachusetts; and

     

    Kadix
Systems, LLC (“Kadix”),
a Virginia limited liability company with its principal executive offices at 60
Frontage Road, Andover, Massachusetts.

     

    (Each of
the Lead Borrower, International, H.J. Ford, and Kadix being sometimes
hereinafter referred to individually as a “Borrower” and collectively as
the “Borrowers”).

     

    Preliminary
Statements

     

    WHEREAS,
the Borrowers, the Lenders and the Agents are parties to a certain Fourth
Amended and Restated Loan Agreement dated as of August 1, 2008 (as may be
amended and in effect from time to time, the “Loan Agreement”);

     

    WHEREAS,
the Borrowers have requested that the parties hereto amend the Loan Agreement to
modify certain provisions of the Loan Agreement;
and

     

     

    - 1 -

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREAS,
the Agents and the Lenders each agree to modify and amend certain provisions of
the Loan Agreement, subject to the terms and conditions set forth
herein;

     

    NOW
THEREFORE, as an additional inducement for the Lenders to maintain the credit
facilities on the terms and conditions set forth in the Loan Agreement as
amended hereby, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Borrowers herby
covenant and agree with the Agents and the Lenders as follows:

     

    1.           Definitions.  Capitalized
terms used herein and not other­wise defined herein shall have the meanings
assigned to such terms in the Loan Agreement.

     

    2.           Amendments to Loan
Agreement.

     

    
      	
               
      

            	
              (a)

            	
              Article
      1 of the Loan Agreement is hereby amended by deleting the following
      definitions of “2008 Reserve” and “EBITDA” contained
    therein:

            

    

     

    ““2008 Reserve”: is defined in
Section 8-10.

     

    “EBITDA”: for any period, the
Consolidated Net Income of the Lead Borrower and its Subsidiaries for such
period adjusted by adding back thereto amounts deducted in computing such
Consolidated Net Income in respect of each of (a) Consolidated Interest Expense,
(b) provision for taxes in respect of income and profits of the Lead Borrower
and its Subsidiaries, (c) depreciation and amortization of the Lead Borrower and
its Subsidiaries, and (d) other non-cash expenses incurred pursuant to employee
equity compensation plans approved by Borrower’s board of directors, each as
determined in accordance with GAAP; provided, however, the
calculation of Consolidated Net Income for the periods ending September 30, 2008
and December 31, 2008 shall not include the 2008 Reserve.”

     

    and
substituting the following text therefore:

     

    ““2008 Reserve”: is that certain
pre-tax charge incurred in connection with the resolution of certain litigation
involving the Lead Borrower, as more particularly described in EXHIBIT 6-17 hereof; provided, that solely
for purposes of calculating EBITDA when determining (i) the Fixed Charge
Coverage Ratio in Section 8-7 and (ii) the Leverage Ratio in Section 8-9, in
each case for the quarterly periods listed below, such 2008 Reserve shall not
exceed the following for the measurement periods indicated:

     

    
      
        
          
            
              	
                      Trailing Four Quarter

                       Period Ended

                       

                    	
                      Maximum 2008 Reserve
  Amount

                    
	
                      September
      30, 2008

                       

                    	
                      $14,819,000.00

                    
	
                      December
      31, 2008

                       

                    	
                      $14,819,000.00

                    
	
                      March
      31, 2009

                       

                    	
                      $6,000,000.00

                    
	
                      June
      30, 2009

                       

                    	
                      $6,000,000.00

                    

            

          

        

      

    

     

     

    - 2 -

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “EBITDA”: for any period, the
Consolidated Net Income of the Lead Borrower and its Subsidiaries for such
period adjusted by adding back thereto amounts deducted in computing such
Consolidated Net Income in respect of each of (a) Consolidated Interest Expense,
(b) provision for taxes in respect of income and profits of the Lead Borrower
and its Subsidiaries, (c) depreciation and amortization of the Lead Borrower and
its Subsidiaries, (d) other non-cash expenses incurred pursuant to employee
equity compensation plans approved by Borrower’s board of directors, and (e) the
applicable 2008 Reserve, if any, actually incurred, each as determined in
accordance with GAAP.”

     

    
      	
               
      

            	
              (b)

            	
              Section
      6.27(b) of the Loan Agreement is hereby amended by deleting the following
      text appearing therein in its
entirety:

            

    

     

    “(b)           The
Borrowers do not have any contingent obligations or obligation under any Lease
or Capital Lease which is not noted in the Borrowers’ financial statements
furnished to the Lenders or has been otherwise disclosed in writing to the
Lenders prior to the execution of this Agreement.”

     

    and
substituting the following text therefore:

     

    “(b)           The
Borrowers do not have any contingent obligations, other than the 2008 Reserve,
or obligation under any Lease or Capital Lease which is not noted in the
Borrowers’ financial statements furnished to the Lenders or has been otherwise
disclosed in writing to the Lenders prior to the execution of this
Agreement.”

     

    
      	
               
      

            	
              (c)

            	
              Section
      8.10 of the Loan Agreement is hereby amended by deleting the following
      text appearing therein in its
entirety:

            

    

     

    “8-10
Net
Profit.  The
Borrowers shall earn a minimum Consolidated Net Income, as determined in
accordance with GAAP, of at least $1.00, measured quarterly as of the end of
each fiscal quarter of each fiscal year on a cumulative basis as and for each
such fiscal year, commencing with the fiscal year ending December 31, 2008;
provided, however, the
calculation of Consolidated Net Income for the periods ending June 30, 2008,
September 30, 2008 and December 31, 2008 shall not include a reserve for a
one-time pre-tax charge in an amount up to $8,900,000 (the “2008 Reserve”) in connection
with the resolution of certain litigation involving the Lead Borrower, as more
particularly described in paragraph 2 of EXHIBIT 6-17.”

     

    and
substituting the following text therefore:

     

    “8-10
Net
Profit.  The
Borrowers shall earn a minimum Consolidated Net Income, as
determined in accordance with GAAP, of at least $1.00, measured quarterly, as of
the end of each fiscal quarter.”

     

    
      	
               
      

            	
              (d)

            	
              Exhibit
      6-17 to the Loan Agreement is hereby deleted and replaced with the text
      attached hereto as Exhibit
      A.

            

    

     

    3.           Amendment
Fee.  In consideration of the Agents and the Lenders entering
into this First Amendment, the Borrowers shall pay to the Administrative Agent,
for the benefit of the Lenders, a fee (the “Amendment
Fee”) in the amount of Seventy Five Thousand Dollars ($75,000.00, to be
shared by the Lenders on a pro rata basis, as agreed among the Lenders) upon the
execution of this First 

    
 

    - 3 -

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Amendment,
which Amendment Fee shall be deemed fully earned as of the date hereof and shall
be distributed by the Administrative Agent to the Lenders.

     

    4.           Conditions to
Effectiveness.  This First Amendment shall not be effective
until each of the following conditions precedent have been fulfilled to the
satisfaction of the Administrative Agent:

     

    
      	
               
      

            	
              (a)

            	
              This
      First Amendment shall have been duly executed and delivered by the
      Borrowers, the Administrative Agent and the Lenders and the Administrative
      Agent shall have received a fully executed copy
  hereof.

            

    

     

    
      	
               
      

            	
              (b)

            	
              The
      Administrative Agent shall have received such other documents,
      instruments, and certificates relating to the transactions contemplated by
      this First Amendment as may be reasonably requested by the Administrative
      Agent.

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Administrative Agent shall have received the Amendment Fee from the
      Borrowers.

            

    

     

    
      	
               
      

            	
              (d)

            	
              No
      default or Event of Default shall be continuing immediately after giving
      effect to the execution of this First
Amendment.

            

    

     

    5.           Ratification of Loan
Documents.  Except as specifically amended or modified in this
First Amendment, all of the terms and conditions of the Loan Agreement and each
of the other Loan Documents shall remain in full force and
effect.  Each of the Borrowers hereby ratifies, confirms, and
reaffirms all representations, warranties, and covenants contained
therein.  Each of the Borrowers hereby represents and warrants that,
on the date hereof, no default or Event of Default exists.  Each of
the Borrowers further acknowledges, confirms and agrees that the Borrowers do
not have any offsets, defenses, or counterclaims against the Agents or the
Lenders arising out of the Loan Agreement or the other Loan Documents, and to
the extent that any such offsets, defenses, or counterclaims may exist, each of
the Borrowers hereby WAIVES and RELEASES the Agents and the Lenders
therefrom.

     

    6.           Miscellaneous.

     

    
      	
               
      

            	
              (a)

            	
              This
      First Amendment may be executed in several counterparts and by each party
      on a separate counterpart, each of which when so executed and delivered
      shall be an original, and all of which together shall constitute one
      instrument.

            

    

     

    
      	
               
      

            	
              (b)

            	
              This
      First Amendment expresses the entire understanding of the parties with
      respect to the transactions contemplated hereby.  No prior
      negotiations or discussions shall limit, modify, or otherwise affect the
      provisions hereof.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Any
      determination that any provision of this First Amendment or any
      application hereof is invalid, illegal or unenforceable in any respect and
      in any instance shall not affect the validity, legality, or enforceability
      of such provision in any other instance, or the validity, legality or
      enforceability of any other provisions of this First
      Amendment.

            

    

     

    
      	
               
      

            	
              (d)

            	
              The
      Borrowers each warrant and represent that each such Borrower has consulted
      with independent legal counsel of such Borrower’s selection in connection
      with this First Amendment and is not relying on any representations or
      warranties of the Agents or the Lenders, or their respective counsels, in
      entering into this First Amendment.

            

    

     

     

    - 4 -

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (e)

            	
              Except
      as expressly provided herein, the amendments set forth herein shall be
      effective as of the date of this First
  Amendment.

            

    

     

     

    [Remainder
of this page left intentionally blank.  Signature page
follows.]

     

     

    - 5
-

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have duly executed this First Amendment as a sealed
instrument as of the date first set forth above.

     

    
      
        
          
            
              	 
      	
                      DYNAMICS
      RESEARCH CORPORATON

                    
	 
      	
                      (“Lead
      Borrower and Borrower”)

                    
	 
      	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      David Keleher

                    	 
      
	 
      	
                      Name:

                    	
                      David
      Keleher

                    	 
      
	 
      	
                      Title:

                    	
                      Senior
      Vice President - Finance, 

                    
	 
      	 
      	
                      CFO
      and Treasurer

                    	 
      
	 
      	 
      	 
      	 
      
	 
      	
                      DRC
      INTERNATIONAL CORPORATON

                    
	 
      	
                      (“Borrower”)

                    
	 
      	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      David Keleher

                    	 
      
	 
      	
                      Name:

                    	
                      David
      Keleher

                    	 
      
	 
      	
                      Title:

                    	
                      Vice
      President - Finance CFO 

                    
	 
      	 
      	 
      	 
      
	 
      	
                      H.J.
      FORD ASSOCIATES, INC.

                    
	 
      	
                      (“Borrower”)

                    
	 
      	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      David Keleher

                    	 
      
	 
      	
                      Name:

                    	
                      David
      Keleher

                    	 
      
	 
      	
                      Title:

                    	
                      Treasurer,
      CFO and Assistant 

                    
	 
      	 
      	
                      Secretary

                    	 
      
	 
      	 
      	 
      	 
      
	 
      	
                      KADIX
      SYSTEMS, LLC

                    
	 
      	
                      (“Borrower”)

                    
	 
      	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      David Keleher

                    	 
      
	 
      	
                      Name:

                    	
                      David
      Keleher

                    	 
      
	 
      	
                      Title:

                    	
                      Manager

                    	 
      

            

          

        

      

    

     

     

    [Signature Page to First
Amendment to

    Fourth Amended and Restated
Loan Agreement]

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    

      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	
                                  BROWN
      BROTHERS HARRIMAN & CO.

                                
	 
      	
                                  (“Administrative Agent and
      Lender”)

                                
	 
      	 
      	 
      	 
      
	 
      	
                                  By:

                                	
                                  /s/
      Daniel G. Head, Jr.

                                	 
      
	 
      	
                                  Name:

                                	
                                  Daniel
      G. Head, Jr.

                                	 
      
	 
      	
                                  Title:

                                	
                                  S.V.P.

                                	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                                  TD
      BANK, N.A.

                                
	 
      	
                                  (“Documentation Agent and
      Lender”)

                                
	 
      	 
      	 
      	 
      
	 
      	
                                  By:

                                	
                                  /s/
      Jeffrey R. Westling

                                	 
      
	 
      	
                                  Name:

                                	
                                  Jeffrey
      R. Westling

                                	 
      
	 
      	
                                  Title:

                                	
                                  SVP

                                	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                                  BANK
      OF AMERICA, N.A.

                                
	 
      	
                                  (“Syndication Agent and
      Lender”)

                                
	 
      	 
      	 
      	 
      
	 
      	
                                  By:

                                	
                                  /s/
      Thomas F. Brennan

                                	 
      
	 
      	
                                  Name:

                                	
                                  Thomas
      F. Brennan

                                	 
      
	 
      	
                                  Title:

                                	
                                  SVP

                                	 
      

                        

                      

                    

                  

                

              

            

          

        

      

    
      [Signature Page to First
Amendment to

      Fourth Amended and Restated
Loan Agreement]

    

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    EXHIBIT
A

    

    Exhibit
6-17

    

    DYNAMICS RESEARCH
CORPORATION

    

    Litigation

     

     

    1.  On
October 26, 2000, two former Company employees were indicted and charged with
conspiracy to defraud the U.S. Air Force and wire fraud, among other charges,
arising out of a scheme to defraud the federal government out of approximately
$10 million. Both men subsequently pled guilty to the principal charges against
them. On October 9, 2003, the U.S. Attorney filed a civil complaint in the U.S.
District Court for the District of Massachusetts against the Company based in
substantial part upon the actions and omissions of the former employees that
gave rise to the criminal cases against them. In the civil action, the U.S.
Attorney has asserted three claims against the Company.  These claims,
which cannot lead to multiple awards, are based on the False Claims Act, the
Anti-Kickback Act, and breach of contract for which the government estimates
damages at approximately $24 million, $20 million and $10 million, respectively.
The U.S. Attorney is also seeking recovery on certain common law claims and
equitable claims as well as for recovery of costs, and interest on the breach of
contract damages.  The maximum possible awardable amount of damages, based
on the governments’ claims, is estimated to be $26 million.  On February
14, 2007, the U.S. Attorney filed a motion for summary judgment as to liability
and as to damages in this matter. On March 31, 2008, the Court issued a
Memorandum on Summary Judgment Motion granting summary judgment in favor of the
Government on the breach of contract, False Claims Act and Anti-Kickback Act
claims but, due to substantial disputed facts, denied summary judgment on
damages. Regarding the alleged actual damages, the Company believes that it has
substantive defenses and intends to vigorously defend itself.  Upon
completion of the proceedings in District Court, the Company would consider
appealing the District Court’s decision granting summary judgment to the
Government depending on the outcome of the District Court proceedings, however,
the Company has reached a tentative agreement with the Government to settle the
case solely for the Breach of Contract claims for $15M, reduced by $5.8M for
estimated tax benefits, for an after-tax effect of $9.2M.

     

    2.  On
June 28, 2005, a suit, characterized as a class action employee suit, was filed
in the U.S. District Court for the District of Massachusetts alleging violations
of the Fair Labor Standards Act and certain provisions of Massachusetts General
Laws. The Company believes that its practices complied with the Fair Labor
Standards Act and Massachusetts General Laws. The Company intends to vigorously
defend itself and has sought to have the complaint dismissed from District Court
and addressed in accordance with the Company’s mandatory dispute resolution
program for the arbitration of workplace complaints. On April 10, 2006, the U.S.
District Court for the District of Massachusetts entered an order granting in
part the Company’s motion to dismiss the civil action filed against the Company,
and to compel compliance with its mandatory dispute resolution program,
directing that the parties arbitrate the aforementioned claims, and striking the
class action waiver which was part of the dispute resolution program. Following
the District Court’s decision, the plaintiffs commenced arbitration before the
American Arbitration Association, asserting the same claims as they asserted in
the District Court. On January 26, 2007 the Company filed an appeal with the
United States Court of Appeals for the Second Circuit appealing the portion of
the District Court’s decision that the class action waiver is not enforceable.
The U.S. Court of Appeals on November 19, 2007 concurred with the District
Court’s opinion that the matter should proceed in arbitration and remanded the
matter to the District Court.  The parties have informed the District
Court that they will proceed in arbitration as a class action. In the
arbitration, the Company has filed a Motion to Dismiss and/or for Summary
Disposition, asserting that

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    the
Company is entitled to use the “window of correction” provided by the Fair Labor
Standards Act’s regulations and that the arbitration should be dismissed without
further action in the arbitration.  The motion is was denied by the
arbitrator and the case will proceed to the discovery stage and assertions of
additional defense motions.CONFIDENTIAL SETTLEMENT AGREEMENT AND  

GENERAL RELEASE OF ALL CLAIMS

 

RECITALS

 

WHEREAS, 4Kids Entertainment, Inc. (“4Kids”) filed a Complaint against Fox Broadcasting Company (“Fox”) captioned 4Kids Entertainment Inc. v. Fox Broadcasting Company, Index No. 601232/08 in the Supreme Court of the State of New York, County of New York, which was later removed to the United States District Court for the Southern District of New York and captioned as 4Kids Entertainment Inc. v. Fox Broadcasting Company, No. 08-CV-4865 (the “Action”);  

WHEREAS, Fox filed an Answer and Counterclaims in the Action which set forth causes of action against 4Kids alleging, inter alia, damages associated with 4Kids’ failure to make contractual quarterly payments as due; 

WHEREAS, 4Kids and Fox entered into a contract on or about January 18, 2002 and amended and extended that contract from time to time, including without limitation on or about March 2, 2006 and August 3, 2007 (the contract and all amendments and extensions thereto and option notifications thereunder collectively constituting the “Term Sheet”); 

WHEREAS, 4Kids denies any and all allegations contained in the Counterclaims filed by Fox and believes it has meritorious defenses;  

WHEREAS, Fox denies any and all allegations contained in the Complaint filed by 4Kids and believes it has meritorious defenses;  

NOW, THEREFORE, 4Kids and Fox hereby agree to resolve any and all disputes between them on the terms and conditions set forth herein.

 

 

I.  DEFINITIONS

 

A.        “Action” means the action that is currently pending in the United States District Court for the Southern District of New York and captioned as 4Kids Entertainment Inc. v. Fox Broadcasting Company, No. 08-CV-4865 (S.D.N.Y.).

B.        “Settlement Agreement” means this Confidential Settlement Agreement and General Release of All Claims.              

C.        “4Kids” means 4Kids Entertainment, Inc. and all of its predecessors in interest, former, present and future subsidiaries, divisions, parents, predecessors, successors, and affiliated companies and each of its respective present and former officers, directors, employees, shareholders, successors, partners, employees, agents, representatives, insurers, assigns, servants, attorneys, assignees, heirs, and executors.

D.        “4Kids Claim” or “4Kids Claims” means any and all claims, actions, causes of action, demands, cross-claims, counterclaims, obligations, contracts, indemnity, contribution, suits, debts, sums, accounts, controversies, rights, damages, costs, attorneys’ fees, losses, expenses, and damages and liabilities whatsoever (contingent, accrued, mature, direct, derivative, subrogated, personal, assigned, discovered, undiscovered, inchoate, or otherwise) which 4Kids ever had, now has or hereafter can, shall or may have in the future arising out of, relating to, resulting from, or in any way connected with the Term Sheet, including those claims and damages of which either Party is not aware and/or that either Party has not yet anticipated.  

E.        “Fox Claim” or “Fox Claims” means any and all claims, actions, causes of action, demands, cross-claims, counterclaims, obligations, contracts, indemnity, contribution, suits, debts, sums, accounts, controversies, rights, damages, costs, attorneys’ fees, losses, expenses, and damages and liabilities whatsoever (contingent, accrued, mature, direct, derivative, subrogated, personal, assigned, discovered, undiscovered, inchoate, or otherwise) which Fox ever had, now has or hereafter can, shall or may have in the future arising out of, relating to, resulting from, or in any way connected with the Term Sheet, including those claims and damages of which either Party is not aware and/or that either Party has not yet anticipated.  

F.        “Fox” means Fox Broadcasting Company and all of its predecessors in interest, former, present and future subsidiaries, divisions, predecessors, and successors, and each of their 

 

	
             
 	
            - 2 -
 

 

 

respective present and former officers, directors, employees, shareholders, successors, partners, employees, agents, representatives, insurers, assigns, servants, attorneys, assignees, heirs, and executors.

G.        “Release” means the Confidential Settlement Agreement and Release of All Claims set forth herein.

H.        “Parties” means 4Kids and Fox collectively and “Party” means one or more than one of them.

I.         “Programming” means the television broadcast content provided by 4Kids to Fox pursuant to the Term Sheet and broadcasted by Fox pursuant to the Term Sheet.

J.         Any capitalized terms not defined herein shall have the meaning ascribed to them in the Term Sheet.

	
            II.
 	
            REPRESENTATIONS AND WARRANTIES
 

A.        The Parties shall have mutual obligations to assist each other and cooperate in the performance of any acts required or contemplated by this Settlement Agreement in accordance with all legal principles.  

	
             
 	
            B.
 	
            Each Party to this Settlement Agreement represents and warrants that:
 

	
             
 	
            1.
 	
            it is the sole and exclusive owner of the rights, claims and causes of action herein released and that it has not heretofore assigned or transferred or purported to assign or transfer to any other person or entity any obligations, rights, claims, or causes of action herein released;
 

	
             
 	
            2.
 	
            it shall defend and hold the other Party harmless from and against any rights, claims, or causes of action asserted by any person that, if established, would be a breach of the above representations and warranties, and any and all loss, expense, attorneys’ fees, and/or liability arising directly or indirectly out of the breach of any of the above representations and warranties; and
 

 

	
             
 	
            - 3 -
 

 

 

	
             
 	
            3.
 	
            if any action is brought which, if established, would be a breach of any of the above representations and warranties, the Party making the representation or warranty shall appear in and defend the action on behalf of the affected beneficiary or beneficiaries of the representation or warranty, at that Party’s own sole cost and expense.
 

C.  The undersigned represent and warrant that each has the full right and authority to execute this Settlement Agreement on behalf of the company whom each purports to represent, and the full right and authority to bind the company to the obligations and other provisions of this Settlement Agreement.

	
            III.
 	
            CONSIDERATION
 

A.        The dispute between the Parties concerned $13,000,000.00  (THIRTEEN MILLION DOLLARS AND NO CENTS) (the “Outstanding Amount”) in installments of the Time Buy Fee which were due to have been paid in the second, third, and fourth calendar quarters of 2008, but which were not paid.

In consideration of Fox’s promises, releases and other agreements as set forth in this Settlement Agreement, the sufficiency of which are hereby acknowledged, 4Kids agrees to pay a combined total amount of $12,250,000.00 (TWELVE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS) (pursuant to the terms outlined in this paragraph) as the “Settlement Amount.”  4Kids shall retain $750,000.00 (SEVEN HUNDRED FIFTY THOUSAND DOLLARS) (the “Retained Amount”) of the Outstanding Amount.  For avoidance of doubt, except for the payments set forth in this Settlement Agreement, 4Kids shall not be liable to Fox for the payment of any further installments of the Time Buy Fee due Fox under the Term Sheet.

The Settlement Amount shall be paid as follows: 

	
             
 	
            1.
 	
            4Kids shall wire transfer $6,000,000.00 (SIX MILLION DOLLARS AND NO CENTS) before 5:00 p.m. Eastern Time on November 14, 2008 (the “Initial Payment”); and 
 

 

	
             
 	
            - 4 -
 

 

 

	
             
 	
            2.
 	
            4Kids shall wire transfer an additional $3,125,000.00 (THREE MILLION ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS AND NO CENTS) before 5:00 p.m. Eastern Time on February 15, 2009 (the “Second Payment”); and.  
 

	
             
 	
            3.
 	
            4Kids shall wire transfer an additional $3,125,000.00 (THREE MILLION ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS AND NO CENTS) before 5:00 p.m. Eastern Time on March 15, 2009 (the “Third Payment”).
 

B.  The Initial, Second, and Third Payments shall be wire transferred to a bank account for which wiring instructions shall be provided to 4Kids’ counsel prior to the close of business (Pacific Time) on November 10, 2008. 

C.  In consideration of the mutual promises, releases and other agreements as set forth in this Settlement Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties mutually agree that the Term Sheet shall terminate at 11:59 p.m. on December 31, 2008, and that the parties shall have no further obligations thereunder after such time.  

D.  The Parties further mutually agree that Fox shall have no obligation to broadcast the Programming after December 28, 2008. 

E.  Fox agrees that it shall reimburse 4Kids for certain outstanding Nielsen ratings service invoices as well as any and all outstanding charges incurred by 4Kids for the Nielsen ratings service through December 28, 2008.

F.  Fox agrees that 4Kids may provide a total of two (2) promotional advertisement for 4Kids during the Programming to be broadcast either the weekend of December 20-21, 2008 and/or the weekend of December 27-28, 2008, informing viewers that some of 4Kids’ programs broadcast on Fox will be broadcast on The CW Network beginning the weekend on January 3, 2009.  These promotional spots shall not convey the specific time or date of the broadcasts on The CW Network.   Fox further agrees that between the date of this Settlement Agreement and December 28, 2008, Fox shall comply with the Term Sheet with respect to promotion of the Programming, provided, however that the only promotional advertisements permitted to refer to 

 

	
             
 	
            - 5 -
 

 

 

The CW or to the broadcasting of 4Kids’ programming on any Television Service other than Fox shall be the promotional advertisements referenced above to be broadcast on the weekends of December 20-21, 2008 and December 27-28, 2008, respectively.

G.  Fox agrees that during the period between the date of this agreement and December 28, 2008 it shall use commercially reasonable efforts to broadcast the Programming at a clearance rate consistent with the average clearance rate achieved during October 2008.

H.  4Kids shall execute a promissory note in the form of Exhibit A hereto (the “Installment Note”).  4Kids shall hand deliver the original executed Installment Note to Fox’s counsel Reed Smith LLP, Attn: John P. Hooper, Esq., 599 Lexington Avenue, New York, New York 10022, before 5:00 p.m. on November 10, 2008.   Upon complete and timely payment of the Initial, Second, and Third Payments, a duly authorized representative of Fox shall mark the Installment Note canceled and return the Installment Note to 4Kids.

I.   All payments outstanding pursuant to the Installment Note shall be immediately due and accelerated in the event of any default under the Installment Note. The Installment Note shall not be interest bearing, except upon the occurrence of a default. Upon the occurrence of a default, the Installment Note shall bear interest at the statutory rate of nine percent (9%) per annum.  Time is of the essence as to all payments required under the Installment Note.

J.   Upon the execution of this Settlement Agreement, each Party shall cause its counsel to execute the stipulation of dismissal with prejudice attached hereto as Exhibit B (the “Stipulation of Dismissal with Prejudice”) discontinuing the Action.   4Kids shall cause its counsel to deliver the executed copy of the Stipulation of Dismissal with Prejudice to Fox’s counsel, and Fox shall cause its counsel to file the Stipulation of Dismissal with Prejudice within ten (10) business days of the date of this Settlement Agreement.

	
            IV.
 	
            SECURITY FOR PAYMENT
 

A.        In order to secure payment by 4Kids to Fox of the First Payment due by no later than 5:00 p.m. Eastern Time on November 14, 2008; of the Second Payment due by no later than  5:00 p.m. Eastern Time on February 15, 2009; and of the Third Payment due by no later than  5:00 p.m. Eastern Time on March 15, 2009, 4Kids hereby grants to Fox a security interest in the 

 

	
             
 	
            - 6 -
 

 

 

Contract Rights and Accounts arising from the sale by 4Kids of any and all national advertising time during the Programming during the fourth calendar quarter of 2008. Said Contract Rights and Accounts and the proceeds from any and all sales thereof shall hereinafter be referred to as the “Q4 Ad Proceeds.”

B.        4Kids agrees that upon execution of this Settlement Agreement, 4Kids shall establish a separate bank account (“Q4 Ad Proceeds Account”) at J.P. Morgan Chase in which the Q4 Ad Proceeds shall be deposited. 4Kids shall not draw on the Q4 Ad Proceeds except to pay the installments of the Settlement Amount due on February 15, 2009 and March 15, 2009. Upon the payment in full by 4Kids of the Settlement Amount to Fox, Fox’s security interest in the Q4 Ad Proceeds shall terminate and 4Kids shall have the right to withdraw any and all amounts in said Q4 Ad Proceeds Account. 4Kids shall also have the right to deposit any Q4 Ad Proceeds received on or after payment in full of the Settlement Amount to Fox in such other bank accounts as 4Kids shall elect. Upon such termination of Fox’s security interest in the Q4 Ad
Proceeds, Fox shall execute and deliver to 4Kids such documents as 4Kids may reasonably request to evidence such termination.

C.        4Kids shall execute such UCC-1 Financing Statements and other forms or filings as may be reasonably requested by Fox and take whatever other action is requested by Fox to perfect Fox’s security interests in the Q4 Ad Proceeds and the Q4 Ad Proceeds Account. Fox shall have the right to record its security interest in any and all locations as may be required by law or deemed necessary by Fox.  Fox may, at any time and without further authorization from 4Kids, file executed counterparts or copies of this Settlement Agreement as part of the filing of a financing statement.  4Kids hereby appoints Fox as 4Kids’ attorney-in-fact to execute and deliver on behalf of 4Kids any and all financing statements or other documentation that may be necessary or desirable for Fox to perfect Fox’s security interest in the Q4 Ad Proceeds. 

D.        Upon the occurrence of an Event of Default (as defined in the Installment Note attached hereto as Exhibit A), in addition to any other rights or remedies provided at law or in equity, Fox shall have the right, at its sole option, to avail itself of its rights pursuant to its security interest in the Q4 Ad Proceeds.

 

	
             
 	
            - 7 -
 

 

 

E.        4Kids warrants and represents that based upon its present revenue projections, it expects that the aggregated total of the Q4 Ad Proceeds will meet or exceed the $6,250,000.00 (Six Million Two Hundred Fifty Thousand Dollars and No Cents) combined amount of the Second Payment and Third Payment. 

	
            V.
 	
            RELEASES
 

 

A.        Effective immediately upon the execution of this Settlement Agreement and receipt of the executed Installment Note, Fox fully, finally and completely releases, holds harmless and discharges 4Kids from and for any and all manner of claims, liabilities, actions, causes of action, suits, debts, sums of money, petitions, accounts, obligations, reckonings, contracts, agreements, executions, promises, damages, liens, judgments and demands whatsoever, both at law and in equity, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, past, present or future, mature or unmatured, including without limitation, any tort claim or claim for emotional distress, bad faith, extra-contractual, exemplary, damage multipliers, and/or punitive damages, whether based on federal, state or local law, statute, ordinance,
regulation, contract, common law, or any other source in any court action, tribunal, arbitration, mediation, before any administrative body, state agency or regulatory entity or organization, that Fox in any capacity ever had, could have had, now has, may have, or hereafter can, shall or may ever have against 4Kids arising from or in any way whatsoever pertaining or relating to the Term Sheet or which could have been asserted, in this Action, including without limitation the Fox Claims.

B.        Fox understands and acknowledges the significance and consequence of releasing all such Fox Claims and has been fully advised of its legal rights by counsel.  Fox hereby assumes full risk and responsibility for any and all injuries, losses, damages, assessments, penalties, charges, expenses, costs, and/or liabilities that he or she may hereafter incur or discover which in any way arise out of or relate to such Fox Claims.  

C.        Fox hereby acknowledges that it may hereafter discover facts different from, or in addition to, those which it now claims or believes to be true with respect to the Fox Claims released herein, and agrees that this Release shall be and remain effective in all respects notwithstanding the discovery of such different or additional facts.  Fox acknowledges that it is 

 

	
             
 	
            - 8 -
 

 

 

familiar with the provisions of Section 1542 of the California Civil Code and the principles of law set forth therein, which provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.  

To the extent that anyone might argue that these principles of law are applicable – notwithstanding that the Parties have chosen the law of the State of New York to govern this Release – and for purposes of implementing a full and complete Release in accordance with the terms set forth herein, Fox expressly acknowledges that this Release is intended to include in its scope all claims against 4Kids which Fox does not know or suspect to exist in his or her favor at the time of execution of this Release, and that this Release contemplates the extinguishment of any such claim or claims.  In furtherance of this Release, Fox agrees that the provisions of all such principles of law or similar federal or state laws, rights, rules or legal principles, to the extent they are found to be applicable herein, are hereby knowingly and voluntarily
waived, relinquished and released to the full extent that he or she may lawfully waive all such rights and benefits pertaining to the subject matter hereof, and that the consequence of such waiver has been explained to it by counsel and/or his or her advisors.  Fox expressly waives any right to assert hereafter that any claims were excluded from this Release through ignorance, oversight, error or otherwise.

D.        Effective immediately upon the execution of this Settlement Agreement and delivery of the executed Installment Note to Fox, 4Kids fully, finally and completely releases, holds harmless and discharges Fox and its parent and affiliated companies and each of their respective present and former officers, directors, employees, shareholders, successors, partners, employees, agents, representatives, insurers, assigns, servants, attorneys, assignees, heirs, and executors from and for any and all manner of claims, liabilities, actions, causes of action, suits, debts, sums of money, petitions, accounts, obligations, reckonings, contracts, agreements, executions, promises, damages, liens, judgments and demands whatsoever, both at law and in equity, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, past,
present or future, mature or unmatured, including without limitation, any tort claim or claim for emotional distress, bad faith, extra-contractual, exemplary, damage multipliers, and/or punitive 

 

	
             
 	
            - 9 -
 

 

 

damages, whether based on federal, state or local law, statute, ordinance, regulation, contract, common law, or any other source in any court action, tribunal, arbitration, mediation, before any administrative body, state agency or regulatory entity or organization, that 4Kids in any capacity ever had, could have had, now has, may have, or hereafter can, shall or may ever have against Fox and its parent and affiliated companies and each of their respective present and former officers, directors, employees, shareholders, successors, partners, employees, agents, representatives, insurers, assigns, servants, attorneys, assignees, heirs, and executors, arising from or in any way whatsoever pertaining or relating to the Term Sheet, including without limitation, the airing of 4Kids’ programming, the promotion of Fox’s programming and any claims asserted, or which could have been
asserted, in this Action, including without limitation the 4Kids Claims.

E.        4Kids understands and acknowledges the significance and consequence of releasing all such 4Kids Claims and has been fully advised of its legal rights by counsel.  4Kids hereby assumes full risk and responsibility for any and all injuries, losses, damages, assessments, penalties, charges, expenses, costs, and/or liabilities that he or she may hereafter incur or discover which in any way arise out of or relate to such 4Kids Claims. 

F.        4Kids hereby acknowledges that it may hereafter discover facts different from, or in addition to, those which it now claims or believes to be true with respect to the 4Kids Claims released herein, and agrees that this Release shall be and remain effective in all respects notwithstanding the discovery of such different or additional facts.  4Kids acknowledges that it is familiar with the provisions of Section 1542 of the California Civil Code and the principles of law set forth therein, which provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.  

To the extent that anyone might argue that these principles of law are applicable – notwithstanding that the Parties have chosen the law of the State of New York to govern this Release – and for purposes of implementing a full and complete Release in accordance with the terms set forth herein, Fox expressly acknowledges that this Release is intended to include in its scope all claims against Fox which 4Kids does not know or suspect to exist in his or her favor at 

 

	
             
 	
            - 10 -
 

 

 

the time of execution of this Release, and that this Release contemplates the extinguishment of any such claim or claims.  In furtherance of this Release, 4Kids agrees that the provisions of all such principles of law or similar federal or state laws, rights, rules or legal principles, to the extent they are found to be applicable herein, are hereby knowingly and voluntarily waived, relinquished and released to the full extent that he or she may lawfully waive all such rights and benefits pertaining to the subject matter hereof, and that the consequence of such waiver has been explained to it by counsel and/or his or her advisors.  4Kids expressly waives any right to assert hereafter that any claims were excluded from this Release through ignorance, oversight, error or otherwise.

	
            VI.
 	
            CONFIDENTIALITY & AGREED-UPON PRESS RELEASE
 

A.        The Parties shall mutually agree on a press release announcing the dismissal of the Action, the settlement of the claims between them, the termination of Fox’s broadcast obligations to 4Kids on December 28, 2008, and the termination of the Term Sheet effective December 31, 2008.  Except as provided in Sections IV. and VI.B., the Parties shall not make any other public announcement regarding the dismissal of the Action, the settlement of the dispute between them, the termination of Fox’s broadcast obligations to 4Kids on December 28, 2008, and the termination of the Term Sheet effective December 31, 2008. 

B.        Except as provided in Section VI.A. above, the Parties acknowledge and agree to keep confidential this Settlement Agreement and any or all of its terms and conditions, the amount of the settlement, the facts and circumstances giving rise to the Action, and/or the negotiations.  The Parties and/or their counsel may, however, make disclosure of the individual settlement amounts paid by 4Kids and received by Fox to their respective accountants and/or financial advisors who shall, however, upon such disclosure, be instructed to maintain and honor the confidentiality of such information; provided however, that nothing in this Settlement Agreement shall prevent either of the Parties from disclosing this Settlement Agreement or the
content thereof to the extent required by law or legal process served on such Party.  In the event that either party to this Settlement Agreement or its lawyers are required, pursuant to judicial or any other governmental process, to disclose this Settlement Agreement or any part thereof, that Party shall give the other party to this Settlement Agreement notice within five (5) business days of their receipt of such legal process in accordance with Section VII.G. below. Notwithstanding 

 

	
             
 	
            - 11 -
 

 

 

the foregoing, if inquiry is made by any third person concerning the status of the Action, either Party and/or its respective counsel shall respond only that the Action has been resolved.

	
            VII.
 	
            GENERAL PROVISIONS
 

A.        This Settlement Agreement is in full satisfaction for the compromise of disputed claims, causes of action, denials, and defenses made or to be made by either of the Parties hereto and is being entered into for the sole purpose of bringing to an end between the Parties hereto the real or potential Claims as alleged in the Action referred to herein.  This Settlement Agreement embodies a compromise of Claims and will not be used or construed as an admission of liability or fault for any purpose.

B.        This Settlement Agreement contains the entire understanding of the Parties regarding the subject matter hereof and shall be binding and inure to the benefit of, as may be applicable, the successors, beneficiaries, assigns, agents, representatives, guardians, duly-appointed trustees, executors, administrators or personal representatives (or equivalent thereto), of each.  This Settlement Agreement supersedes all other agreements, written or oral, or implied, relating to the same subject as this Settlement Agreement.  This Settlement Agreement shall not be amended, supplemented or abrogated other than by a written instrument signed by the authorized representatives of each Party to this Settlement Agreement.

C.        This Settlement Agreement shall be governed by and construed in accordance with the laws of New York as applied to contracts made in the State of New York, without regard to its choice of law principles.

D.        Any dispute arising under this Settlement Agreement or relating to the subject matter thereof, shall be filed only in the State and Federal Courts located in the County and State of New York, and each Party hereby submits itself to the personal jurisdiction of those courts.  

E.        Each Party declares and represents that this Settlement Agreement is being made without reliance upon any statement or representation not contained herein of any other Party, or of any agent or attorney of any other Party.  Each Party represents that it has reviewed each term of this Settlement Agreement with its counsel and that it shall never dispute the validity of this Settlement Agreement on the ground that it did not have advice of counsel.  This Settlement 

 

	
             
 	
            - 12 -
 

 

 

Agreement shall be construed and enforced according to its fair meaning as if prepared by all Parties after extensive negotiation; no part of this Settlement Agreement shall be construed against any Party on the ground that the attorney for that Party drafted it.  As used in this Settlement Agreement the term “or” shall be deemed to include the term “and/or” and the singular or plural number shall be deemed to include the other whenever the context so indicates or requires.

F.        The Parties expressly acknowledge and agree that this Settlement Agreement along with all related drafts, conversations, negotiations and discussions constitute an offer of compromise and a compromise within the meaning of Federal Rule of Evidence 408 and any equivalent state rule.  In no event shall this Settlement Agreement or any exhibit hereto, any of its provisions or any negotiations, statements or court proceedings relating to this Settlement Agreement or any of its provisions be construed as, offered as, received as, used as or deemed to be evidence, except in an action to enforce the terms of this Settlement Agreement and/or its exhibits.

G.        All notices relating to this Settlement Agreement shall be sent by e-mail and by overnight delivery service as follows:  

	
             
 	
            All notices relating to this Settlement Agreement for 4Kids shall be sent to:
 

 

 

	
             
 	
            Samuel Newborn, Esq.
 

	
             
 	
            4Kids Entertainment, Inc.
 

	
             
 	
            1414 Avenue of the Americas
 

	
             
 	
            New York, NY 10019
 

	
             
 	
            snewborn@4kidsent.com
 

 

	
             
 	
            With a Copy to:
 	
            Frederic W. Yerman, Esq.
 

	
             
 	
            Kaye Scholer LLP
 

	
             
 	
            425 Park Avenue
 

	
             
 	
            New York, NY 10022
 

fyerman@kayescholer.com

 

 

	
             
 	
            All notices relating to this Settlement Agreement for Fox shall be sent to:
 

 

 

	
             
 	
            Randy Kender, Esq.
 

	
             
 	
            Fox Broadcasting Company
 

	
             
 	
            10201 West Pico Boulevard
 

	
             
 	
            Los Angeles, CA 90053
 

 

	
             
 	
            - 13 -
 

 

 

	
             
 	
            randy.kender@fox.com
 

 

	
             
 	
            With a Copy to:
 	
            John P. Hooper, Esq.
 

	
             
 	
            Reed Smith LLP
 

	
             
 	
            599 Lexington Avenue
 

	
             
 	
            New York, NY 10022
 

	
             
 	
            jhooper@reedsmith.com
 

 

H.        This Settlement Agreement may be pleaded as a full and complete defense and may be used as the basis for an injunction against any action, suit or proceeding which may be prosecuted, instituted or attempted by any Party in breach thereof.

I.         The parties agree that all covenants and warranties contained in this Settlement Agreement are contractual and shall be deemed to have survived the execution of this Settlement Agreement.  If any provision of this Settlement Agreement, or part thereof, is held invalid, void or voidable as against public policy or otherwise, the invalidity will not affect other provisions, or parts thereof, which may be given effect without the invalid provision or part.  To this extent, the provisions, and parts thereof, of this Settlement Agreement are declared to be severable. 

J.         The Parties agree that any and all indemnification provisions of the Term Sheet, including without limitation all indemnification obligations set forth in Sections 4.a and 8.d. of the January 18, 2002 original agreement (annexed hereto as Exhibit C), shall survive the termination of the Term Sheet, and that all indemnity obligations thereunder shall remain in full force and effect notwithstanding the termination of the Term Sheet.

K.        This Settlement Agreement may be executed in one or more counterparts by each Party hereto, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same Settlement Agreement.  A photocopy, scanned copy and faxed copy of the signed Settlement Agreement or counterpart shall be binding and admissible as if it were an original signature.  

IN WITNESS WHEREOF, the undersigned does hereby subscribe his or her signature to this Settlement Agreement on the date indicated.

	
            Dated:    11/9/08
 	
            ON BEHALF OF 4KIDS ENTERTAINMENT
 

	
             
 	
            INC.
 

 

 

	
             
 	
            - 14 -
 

 

 

 

/s/ Samuel R. Newborn

Name: Samuel R. Newborn

Title:  EVP 

 

	
            Dated:
 	
            11/9/08
 	
            ON BEHALF OF FOX BROADCASTING
 

	
             
 	
            COMPANY
 

 

 

	
             
 	
            /s/        
 	
              Rita Tuzon
 

Name: Rita Tuzon

Title:  Executive Vice President and 

	
             
 	
            General Counsel, Fox Networks Group
 

 

 

	
             
 	
            - 15 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}]]