Document:

ex10_1.htm

Exhibit 10.1

 

SETTLEMENT AGREEMENT AND GENERAL RELEASE

 

This Settlement Agreement and General Release (this “Agreement”) is made and entered into on October 29, 2012 by and between Samuel R. Newborn (“Employee”) and 4Kids Entertainment Licensing, Inc. (the “Employer”) and 4Kids Entertainment, Inc. (the “Company”), in their capacities as debtors and debtors in possession in the chapter 11 cases set forth below.  (Employee, Employer and the Company are sometimes collectively referred to as “the Parties”).

RECITALS

WHEREAS, the Company, Employer and certain affiliates are debtors and debtors in possession (collectively, the “Debtors”) in jointly administered chapter 11 cases pending in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) sub nom. In re: 4Kids  Entertainment, Inc., et al., 11-11607 (SCC) (collectively, the “Chapter 11 Case”);

WHEREAS, the Company, Employer and Employee are parties to that certain 4Kids Entertainment, Inc. Severance Agreement dated October 14, 2009 (as amended, the “Severance Agreement”), under the terms of which Employee asserts that he is currently entitled to receive certain benefits, including without limitation a payment in the sum of $1,000,000;

WHEREAS, the Parties have agreed that the Company and Employer shall terminate Employee’s employment without cause as of October 31, 2012, and that Employee shall render certain post-termination services to the Company and Employer on the terms and conditions below;

WHEREAS, the Debtors are the proponents of a proposed plan of reorganization and a proposed disclosure statement filed in the Chapter 11 Case on October 5, 2012 (as may be amended, modified or supplemented from time to time, the “Plan” and the “Disclosure Statement”); and

WHEREAS, the Parties wish to enter into this Agreement to resolve certain claims related to Employee’s termination and provide for certain post-termination services set forth below.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by the Parties, the Parties hereby agree as follows:

1.             Employment Status.

(a)           The Company hereby notifies Employee that Employee’s employment by the Employer is being terminated without cause.  Employee’s last day of employment with the Employer is October 31, 2012 (the “Termination Date”). On the Termination Date, Employer shall pay Employee the Employee’s salary through the Termination Date, together with six (6) days accrued vacation pay.  Employee agrees that as of the Termination Date, he shall resign from all positions he holds as an employee, officer or director of the Company and any of its affiliates.

 

  

  

  

 

(b)         The Company shall continue to provide Employee with health insurance coverage for Employee (including health insurance coverage for such Employee’s spouse and dependents if such spouse and dependents were covered by the Company's health insurance coverage as of the date of hereof) for the Medical Coverage Period (as defined below), with Employee being deemed to be a continuing employee of Company during such Medical Coverage Period for purposes of qualification for coverage under the Company’s health insurance coverage. Upon expiration of said Medical Coverage Period, Employee shall be eligible to continue Employee's health insurance coverage pursuant to COBRA. For purposes of this Agreement, the Medical Coverage Period shall be defined as eighteen (18) months.  In the event that the Company cannot continue to provide Employee with health insurance coverage due to the terms of the Company’s health insurance plan, the Company shall reimburse Employee for the cost of health insurance coverage (whether such coverage is provided pursuant to COBRA or otherwise) for the Medical Coverage Period. The Company shall pay the same percentage of the premiums for such health insurance coverage for Employee (including health insurance coverage for Employee’s spouse and dependents if such spouse and dependents were covered by the Company' s health insurance coverage as of the date of the Triggering Event (as defined in the Severance Agreement)) as the Company is paying for its other employees during the applicable policy period during which health insurance coverage is continuing to be provided to Employee (and spouse and dependents, if applicable).

2.             Separation Claim.

 

(a)           Separation Claim. The Company agrees that, upon the occurrence of the Effective Date (as defined in the Plan) (the “Plan Effective Date”), subject to approval of the Bankruptcy Court as set forth in paragraph 2(b) below, Employee shall have an Allowed Class 3 - General Unsecured Claim in the amount of Nine Hundred Twenty-Five Thousand Dollars ($925,000) (the “Separation Claim”). The Separation Claim shall be payable by the Reorganized Debtors (as defined in the Plan), as follows:  (i) $600,000 (the “Initial Payment”), shall be payable on the Plan Effective Date, and (ii) $325,000 (the “Additional Payment” and, together with the Initial Payment, the “Separation Payments”) shall be payable upon the earlier of completion of the Ongoing Projects (defined below) and March 1, 2013.

(b)           Court Approval.  The Parties acknowledge and agree that allowance and payment of the Separation Claim is subject to approval of the Bankruptcy Court as follows, and that the Company shall use reasonable best efforts to seek such approval.  The Company shall revise the Plan to add a provision seeking approval of this Agreement pursuant to Fed.R.Bankr.P. 9019 and section 1123(b)(3) of the Bankruptcy Code, and to make such conforming changes as may be required to the Disclosure Statement.

(c)           The Company and Employee acknowledge and agree that the payments made under paragraph 2(a) above are “wages” for purposes of FICA, FUTA and income tax withholding and such taxes shall be withheld from the Separation Payments made hereunder.  After the Termination Date, Employee will not be entitled to any further compensation, monies or benefits of any kind from the Employer, the Company or any of their respective affiliates except with regard to customary expense reimbursements or as otherwise specifically set forth in this Agreement.

(d)           Notwithstanding anything in this Agreement to the contrary, any payment to be  made by Company to Employee pursuant to this Agreement that is subject to the requirements of Section 409A of the Code, as amended (“Section 409A”), may only be made in a manner permitted by Section 409A of the Code.  To the extent that any payment to Employee under this Agreement is deemed to be subject to the requirements of Section 409A, this Agreement will be administered in compliance with the applicable requirements of Section 409A.  Notwithstanding anything herein to the contrary, if Employee is a “specified employee” within the meaning of Section 409A, then during the first six (6) months after Employee incurs a "separation from service", within the meaning of Section 409A, Employee shall be paid only the portion, if any, of the amounts otherwise due hereunder as will not subject Employee to additional taxes under Section 409A, and the amount not paid will accrue and be paid in a lump sum payment on the day that is six (6) months and one (1) day after such separation from service.  The parties intend that Employee will incur a separation from service no later than December 1, 2012.  Accordingly, notwithstanding anything in this Agreement to the contrary, in no event shall the Employee be required to render services after such date to an extent that would cause the Employee to be treated as if a separation from service had not occurred.

 

  

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3.             Post Termination Services.

(a)           During the period from November 1, 2012 through February 28, 2013 ("Post-Termination Period"), Employee agrees to render services (“Post-Termination Services”) to the Debtors and Reorganized Debtors in connection with the following matters (the “Ongoing Projects”):

(i)            Employee agrees to assist the Debtors and Reorganized Debtors, and their respective financial and legal advisors, with (1) achieving approval of the Disclosure Statement; (2) achieving confirmation of the Plan; (3) completion of any ancillary task or documents necessary to achieve the tasks set forth in clauses (1) and (2) of this paragraph; (4) resolving any disputed claims, whether filed prior to or after the date of this Agreement, and any litigation that may be pending or commenced in the future with respect to any claims in the Chapter 11 Case; and (5) prosecution of an objection to and resolution of the final fee claim asserted by BDO Capital Advisors, LLC.

(ii)           Employee also agrees to render services in connection with the tasks and projects as outlined on Exhibit A, which is attached hereto and deemed to be part of this Agreement.

(b)           Employee shall render the Post-Termination Services in a diligent and workmanlike manner.

(c)           As consideration for the Post-Termination Services, the Debtors or Reorganized Debtors, as applicable, shall pay Employee as follows: $25,000 shall be payable on the Agreement Effective Date; $25,000 shall be payable December 1, 2012; $25,000 shall be payable on January 1, 2013; and $25,000 shall be payable on February 1, 2013.

4.             New Business.  In addition to the Ongoing Projects, Employee shall continue to perform such additional legal services as may be agreed to from time to time with the Company or the Reorganized Debtors with respect to the ongoing operation of their business (the “New Business”).  For the avoidance of doubt, the New Business shall not include services related to the Ongoing Projects.  In consideration for Employee’s legal services related to the New Business, the Debtors or Reorganized Debtors shall provide Employee with a retainer in the amount of Ten Thousand Dollars ($10,000), payable beginning on January 1, 2013 for services to be rendered during the calendar year ending December 31, 2013.  Employee agrees to provide the Debtors or Reorganized Debtors with monthly invoices detailing his legal services performed in connection with the New Business hereunder.  Employee shall be compensated on an hourly rate for such additional services and such rate shall be fixed at $500 per hour, with such hourly fees to be charged against the retainer until such time as the retainer has been depleted.  Thereafter, he shall be paid for such services within thirty (30) days of the receipt of the applicable invoice.

 

  

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5.             Release.

 

(a)           As a material inducement for the Employer and the Company to enter into this Agreement, Employee, for Employee, Employee’s heirs, executors, administrators, trustees, legal representatives, successors and assigns hereby forever fully releases and discharges the Employer, the Company, the Debtors, the Reorganized Debtors and all of their respective estates, shareholders, officers, directors, employees, agents, representatives, attorneys, professionals, parents, affiliates, divisions and subsidiaries (hereinafter collectively referred to as the “Releasees”), from any and all claims, charges, demands, sums of money, actions, rights, causes of action, obligations and liabilities of any kind or nature whatsoever, at law or in equity, which Employee may have had, or now has, which are based upon any facts, acts, conduct, representations, contracts, claims, or matters of any kind or character existing at any time on or before the Agreement Effective Date (as hereinafter defined) and arising under or relating to Employee’s employment and the Chapter 11 Case, including, but not limited to:  (i) any claims or actions under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as amended, the Employee Retirement Income Security Act, as amended, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Family and Medical Leave Act; (ii) any other claims of discrimination or retaliation in employment based on any federal, state or local law, including and without limitation the New York Human Rights Law and the New York City Administrative Code; (iii) any claim arising out of the terms and conditions of Employee’s employment with the Employer and/or the Company or the termination of such employment; (iv) any proofs of claim or scheduled claims filed or asserted on behalf of the Employee in the Chapter 11 Case; and (v) any other statutory claim, tort claim, employment or other contract or implied contract claim, including, without limitation, any claims under the Severance Agreement and claims under that certain Employment Agreement dated January 1, 2002 between Employee and the Employer, including any amendments thereto (the “Employment Agreement”); provided, however, that the foregoing shall not release (i) any claim that may arise for indemnification and/or contribution for Employee’s service as a director, officer or employee of the Debtors, whether under Employee’s Indemnification Agreement dated as of November 9, 2005 (as amended) or similar agreement or otherwise available under the Debtors’ corporate documents or applicable law, (ii) any claim against the Debtors’ D&O insurance policies (including any “Side A” or runoff coverage), or (iii) any obligations of the Debtors or Reorganized Debtors under the terms of this Agreement, including without limitation the payments contemplated by paragraph 2(a) above. For the avoidance of doubt, in the event that the Bankruptcy Court does not approve this Agreement as contemplated in paragraph 2(b) above or the Plan Effective Date does not occur, Employee shall be entitled to file and pursue a proof of claim against the Debtors’ estates, including for the full amount alleged due under the Severance Agreement, and the Debtors reserve all rights to contest any such proof of claim.

(c)           Employee specifically waives any right to become and/or remain and promises not to become and/or remain, a member of any class in a case in which any claim or claims are asserted against any of the Releasees involving any events occurring as of or prior to the Agreement Effective Date and arising under or relating to Employee’s employment or the Chapter 11 Case.  Further, Employee agrees, to the fullest extent permitted by law, not to participate in any investigation, proceeding, charge, complaint or claim (on Employee’s own behalf and/or on behalf of any other person or entity and/or on behalf of or as a member of any alleged class of persons) against the Releasees, based in whole or in part upon, or in any way connected with any action, omission, transaction or occurrence prior to and including the Agreement Effective Date.

(d)  Notwithstanding anything herein to the contrary, the Employee releases set forth in this paragraph 5 shall be effective upon the occurrence of the Plan Effective Date and subject to obtaining the approval of the Bankruptcy Court as set forth in paragraph 2(b) above.

6.             No Suit.  Employee represents that Employee has not filed or permitted to be filed against the Employer, the Company, or any of the Releasees, individually or collectively, any lawsuits, and Employee covenants and agrees that Employee will not do so at any time hereafter.  Employee will not voluntarily participate in any judicial proceeding of any nature or description against the Employer, the Company, or any of the Releasees, that in any way involves the allegations and facts that Employee could have raised against the Employer, the Company, or any of the Releasees, in any forum as of the date hereof.

 

  

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7.             Other Agreements.

 

(a)           Employee agrees to maintain confidentiality with respect to proprietary, confidential or secret information that Employee received or developed in the course of Employee’s employment with the Employer and/or the Company. The foregoing shall not prohibit disclosure (i) as may be ordered by any regulatory agency or court or as required by other lawful process, or (ii) as may be necessary for the prosecution of claims relating to the performance or enforcement of this Agreement. In the event Employee is requested to provide any of the information identified in this paragraph or otherwise relating to the Employer, the Company or Releasees to any court or government agency or to comply with a subpoena, court order, legal process or request for information, Employee shall promptly after Employee’s actual receipt of such court order or legal process, transmit a copy thereof to the Company, attention Chief Executive Officer, 4Kids Entertainment, Inc., 53 West 23rd Street, 11th Floor, New York, NY 10010, in order to provide the Company with the timely opportunity to assert its rights, if any, to non-disclosure prior to any response to the court order or legal process

(b)           Employee agrees that Employee will not make, or cause to be made, any statement, observation or opinion, or communicate any information (whether oral or written) that denigrates, disparages, damages, defames or otherwise adversely affects the reputation or business of the Employer, the Company, or any of the Releasees.

(c)            Employee agrees that Employee will not disclose to anyone any confidential information or trade secret of the Employer or the Company, or any client of the Employer or the Company.

(d)           Employee will cooperate with the Debtors and Reorganized Debtors and their counsel in connection with any investigation, administrative proceeding or litigation relating to any matter in which Employee was involved or of which Employee has knowledge as a result of Employee’s employment with the Employer and/or the Company, including, without limitation, any matters related to the Ongoing Projects; provided, however that after February 28, 2013, Employee shall be entitled to charge the Debtors or Reorganized Debtors for his time and his expenses in connection with such activities at the rate set forth in paragraph 4 above.

8.             Remedies.  If Employee breaches any of the provisions of this Agreement (and in addition to any other legal or equitable remedy it may have) and fails to cure such breach within ten (10) days after receipt by the Employee of a written notice of breach from the Debtors or Reorganized Debtors , the Debtors or Reorganized Debtors shall be entitled to cease making any payments under paragraphs 2(a)(ii) or 3(c) of this Agreement. Nothing herein shall affect any of Employee’s obligations under this Agreement, including, without limitation, Employee’s release of claims under paragraph 3.

9.             Acknowledgments.  Employee warrants and acknowledges that: (a) Employee is not releasing any claims that may arise after the Agreement Effective Date; (b) Employee has had the opportunity to consider the terms and provisions of this Agreement; (c) Employee has been advised to consult with an attorney of Employee’s own choosing prior to executing this Agreement; (d) Employee has carefully read this Agreement in its entirety and fully understands the significance of all of its terms and provisions; (e) Employee is signing this Agreement voluntarily and of Employee’s own free will and assents to all the terms and conditions contained herein; (f) Employee has not relied upon any representations, promises or agreements of any kind made to Employee in connection with Employee’s decision to accept this Agreement, except for those set forth in this Agreement; and (g) Employee has up to twenty-one (21) days from the date when Employee receives this Agreement to consider it, and Employee is electing to sign this Agreement on the date set forth above after what Employee considers to be a sufficient time to consider Employee’s options.

 

  

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10.           Intellectual Property.  Employee agrees that all intellectual property rights (including copyright, trademark and patent rights) to any materials created by Employee in the course of Employee’s employment by the Employer and/or the Company and any ideas, proposals and plans invented or developed by Employee during the term of Employee’s  employment which relate directly or indirectly to the business of the Employer or the Company or any of its clients (collectively “Materials”) and the results and proceeds of Employee’s services for the Employer and the Company are considered  “works made for hire” as defined by the U.S. Copyright Law and as such, the Employer and the Company owns irrevocably throughout the universe in perpetuity all right, title and interest (including without limitation, all copyrights and other rights therein) in and to such Materials and to all of the results and proceeds of Employee’s services. To the extent that any of the Materials and/or the results and proceeds of Employee’s services are not deemed to be a “work made for hire” as defined by the U.S. Copyright Law, Employee hereby assigns to the Company all of Employee’s right, title and interest (including all copyrights) to such Materials and to the results and proceeds of Employee’s services.

11.           No Admission.  Nothing herein shall be deemed to constitute an admission of wrongdoing by the Employer or the Company.  Neither this Agreement nor any of its terms shall be used as an admission or introduced as evidence as to any issue of law or fact in any proceeding, suit or action, other than an action to enforce this Agreement.

12.           Return of Property.  Employee agrees to return to the Company, on or prior to the Termination Date, all of the Employer’s and the Company’s property, including without limitation, mailing lists, reports, files, memoranda, records, computer hardware, software, credit cards, door and file keys, computer access codes or disks and instructional manuals, and other physical or personal property which Employee received or prepared or helped prepare in connection with Employee’s employment with the Employer and the Company.

13.           Successors and Assigns

(a)           Company shall cause any successor to Company to expressly assume the obligations of Company under this Agreement and to perform the obligations under this Agreement in the same manner and to the same extent that Company would be required to perform such obligations if no such succession had taken place.

(b)           This Agreement shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the parties, including Employee. If Employee shall die after the date hereof, the Separation Payments payable in accordance with the terms of this Agreement shall be paid to the executor, personal representative or administrators of the Employee’s estate.

 

  

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14.           Legal Expenses.

 

(a)           The Company agrees that Employee shall have an allowed administrative claim for purposes of section 503 of the Bankruptcy Code in the amount of the legal fees incurred by Employee in connection with the negotiation of this Agreement up to a maximum of $10,000, subject to receipt by the Debtors or Reorganized Debtors of a reasonably-detailed invoice.

(b)           In the event that any dispute arises under this Agreement with respect to the Separation Payments, Company will pay or reimburse Employee all legal fees and expenses incurred by Employee in seeking to obtain or enforce said Severance Payments.  Company shall be required to pay or provide such reimbursement to Employee pursuant to this paragraph 14 within thirty (30) days following the submission by Employee of invoices for such legal fees and expenses.

15.           Notices.  Any notices or other communications required or permitted hereunder shall be in writing and shall be deemed effective when delivered in person, sent by overnight courier (e.g. Federal Express), telefaxed or emailed with a follow up copy by regular mail or sent by registered or certified mail, return receipt requested, in which case the notice shall be deemed effective on the date of deposit in the mails, postage prepaid, addressed to Employee at Employee's then current home address and, in the case of Company, addressed to Company at its offices located at the address set forth above.  Either party may change the address to which notices are to be addressed by notice in writing given to the other in accordance with the terms hereof.

16.           Revocation.  This Agreement may be revoked by Employee within the period of seven (7) days after its execution, and this Agreement will not become effective or enforceable until such seven day period has expired without it having been revoked (such date to be referred to herein as the “Agreement Effective Date”).

 

17.           Miscellaneous.

(a)           This Agreement sets forth the entire agreement between the Parties and fully supersedes any and all prior negotiations, discussions, agreements or understandings between the Parties, including, without limitation, the Severance Agreement and the Employment Agreement.

(b)           This Agreement may not be changed, amended or modified, except by a writing signed by the party affected by such change, amendment or modification.

(c)           The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

(d)           This Agreement will be governed by and construed in accordance with the laws of the State of New York without application of conflict of law provisions.

(e)           The Parties agree the Bankruptcy Court shall retain exclusive jurisdiction to consider any disputes that may arise concerning the interpretation or enforcement of this Agreement and the Parties submit to the core jurisdiction of the Bankruptcy Court for such purposes.

 

[Signature Page Immediately Follows]

 

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

	4Kids Entertainment, Inc.	  	4Kids Entertainment Licensing, Inc.
	Debtor in Possession	  	Debtor in Possession
	 	
  

 

	  	 	  
	By:	
/s/ Bruce Foster

	  	By: 	
/s/ Bruce Foster

	Its:	Interim Chief Executive Officer and Chief Financial Officer	 	Its:	Interim Chief Executive Officer and Chief Financial Officer

 

 

	
Accepted and Agreed:

	  
	
By: 

	/s/ Samuel R. Newborn
	 	Samuel R. Newborn

 

  

  

  

 

EXHIBIT A

 

ONGOING PROJECTS

Document production request in Upper Deck lawsuit served 10/18/12

Trademark items - Expiring 10/31/12:

European Community TM & SM Registration No. 002898245; ARTLIST COLLECTION: THE DOG; Artlist International, Inc.; Our Ref: LEIS1390EC

European Community TM & SM Registration No. 002898252; ARTLIST COLLECTION: THE CAT; Artlist International, Inc.; Our Ref: LEIS1400EC

Clients:

	
  

	
v

	
Artlist:

	
  

	
o

	
Dog/Detexpol (bedding, towels, housewares licensee in Poland) – original amendments dated 3/15 were not signed by Artlist.  They were for renewals.  I have since spoken with Detexpol and Artlist.  Detexpol will increase their guarantee by 5K Euro for The Dog.  The Cat stays as is.  Artlist has approved to move forward by email today and will bring in signed paperwork.

	
  

	
o

	
Dog/ TCC (deal) – amendment pending with UK as of 4/24/12, as we had some questions TCC has not gotten back to us yet. Amendment is revising products, adding premiums, add additional MG ($5,000)

	
  

	
o

	
Max Licensing (subagent) – need an amendment as they want to add the bedding category to their current agreement – rec’d 5/30/12

	
  

	
o

	
Gifi (France retailer) – this is a direct deal to manufacture.  As of Oct 2012 they would like to add Pet products to their contract.  Need an amendment adding on12 new categories.

	
  

	
o

	
Sega (amusement plush) – Sega needed a longer lead time to sell in their plush – as of Oct 2012 they would like a 1year extension on their contract. Need an amendment to add on 1 year.

	
  

	
o

	
DeckDaq (online Facebook game) – DeckDaq is a new company working on collectible online Facebook games.  Artlist would like to move forward with this agreement to promote The Dog online.

	
  

	
o

	
RPM Asia (manufacturing company based in HONG KONG) – This was discussed but needed to be processed from UK team.  RPM Asia proposes to manufacture a few select items for/with Artlist with business model of selling to licensee’s around the world.

 

  

  

  

 

	
  

	
v

	
Dinosaur King

Canal J and Gulli TV) broadcast agreement (France, Andorra, Monaco, DOM-Tom, Belgium, Switzerland, Luxembourg, Mauritius) - term runs from October 2009- Sept 30, 2013.  Fee of 195K Euro collected.  Sega needs a deal memo and long form agreement.

Zen Media – broadcast agreement for Hungary.  Term runs May 2012-July 31, 2015.  Fee of $5,850 collected.  Long form agreement needed.

 

 

2NOTE PURCHASE
AND SECURITY AGREEMENT

 

This Note Purchase
and Security Agreement is entered as of October 26, 2012, between GBS Enterprises Incorporated, a Nevada corporation (the “Company”)
and Stephen D. Baksa, an individual having a principal residence at 2 Woods Lane, Chatham, New Jersey 07928 (the “Lender”).

 

RECITALS

 

WHEREAS, the Company
desires to borrow an aggregate of one million U.S. Dollars and zero cents ($1,000,000.00) (the “Principal Amount”)
from the Lender at an annual rate of twenty percent (20%) (the “Interest Rate”), the Lender is willing to lend
the Company the Principal Amount at the Interest Rate, the Principal Amount will be evidenced by a duly executed promissory note
substantially in the form of Exhibit A attached hereto (the “Note”) and the Company is negotiating with
certain other lenders for additional loans up to an aggregate principal amount of an additional one million U.S. Dollars and zero
cents ($1,000,000.00) (such lenders, the “Co-Lenders”); and

 

WHEREAS, the Company’s
obligations to the Lender under this Agreement and the Note will be secured by a first priority security interest as described
in Section 4 of this Agreement.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.           Amount
and Terms of the Note and Warrant.

 

1.1          Note
Purchase. Subject to the terms and conditions of this Agreement, at the Closing, the Company agrees to sell to the Lender,
and the Lender agrees to purchase from the Company, the Note substantially in the form of Exhibit A attached to this Agreement.

 

1.2          Warrant
Purchase. Subject to the terms and conditions of this Agreement, in consideration for the Lender purchasing the Note at the
Closing, the Company agrees to sell and issue to the Lender, and the Lender agrees to purchase from the Company, a duly executed
warrant to purchase shares of the Company’s common stock (“Common Stock”), substantially in the form
attached hereto as Exhibit B (the “Warrant”) exercisable for 500,000 shares of Common Stock (the “Warrant
Stock”) at an exercise price per share as set forth in the Warrant.

 

2.           Closing.
Subject to the satisfaction or waiver of the conditions set forth herein, the purchase and sale of the Note and the Warrant will
take place at 10:00 a.m. on October 26, 2012 at the offices of Baker Botts L.L.P., 30 Rockefeller Plaza, New York, NY 10112-4498,
or at such other time and place as the Company and the Lender mutually agree upon (which time and place are referred to as the
“Closing”). At the Closing, the Lender will deliver to the Company, as payment in full for the Note, (a) a
check payable to the Company’s order, (b) wire transfer of funds to the Company, or (c) any combination of the foregoing.
At the Closing, the Company will deliver to the Lender the Note and the Warrant.

 

    	 

    	 

    

 

3.           Conditions
to Closing.

 

3.1          Conditions
to Lender’s Obligations. The obligations of the Lender under this Agreement are subject to the fulfillment or waiver,
on or before the Closing, of each of the following conditions, which waiver may be given by written, oral or telephone communication
to the Company or its counsel:

 

(a)          each
of the representations and warranties of the Company contained in this Agreement shall be true and complete in all material respects
on and as of the Closing;

 

(b)          the
Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the sale described herein; and

 

(c)          the
Company shall have executed and delivered to the Lender the Note and the Warrant.

 

3.2          Conditions
to Company’s Obligations. The obligations of the Company to the Lender under this Agreement are subject to the fulfillment
or waiver on or before the Closing of the following conditions by the Lender:

 

(a)          Each
of the representations and warranties of the Lender contained in this Agreement shall be true and complete on and as of the Closing;
and

 

(b)          The
Lender shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required
to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase described herein.

 

4.           Security;
Covenants.

 

4.1          Security
Interest. As security for the full and prompt payment, in cash, and performance of the Company’s obligations under this
Agreement and the Note, the Company hereby grants to the Lender a security interest in all of the Company’s right, title
and interest in and to the Collateral. As used herein, “Collateral” means all the shares of IDC Global, Inc.
owned by the Company

 

4.2          Permitted
Liens. The Company shall keep the Collateral free and clear of all liens, except Permitted Liens. “Permitted Liens”
means (a) first security interests granted to the Co-Lenders, pari passu with the first priority security interest granted
to the Lender in Section 4.1; (b) liens arising by operation of law for taxes, assessments or governmental charges not yet due;
(c) statutory liens of mechanics, materialmen, shippers, warehousemen, carriers, and other similar persons for services or materials
arising in the ordinary course of business for which payment is not past due; (d) nonconsensual liens incurred or deposits made
in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social
security; (e) liens for taxes or statutory liens of mechanics, materialmen, shippers, warehousemen, carriers and other similar
persons for services or materials that are due but are being contested in good faith; (f) liens granted with the consent of the
Lender; and (g) liens of a depository institution arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of setoff, or similar rights and remedies as to deposit accounts or other funds maintained with such
institution.

 

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4.3          Termination.
The term of the security interest set forth in Section 4.1 above and the other obligations and restrictions set forth in this
Agreement, including under this Section 4, will extend until the aggregate obligations to the Lender under the Note have been
paid or satisfied in full, at which time the Company and any of its duly appointed officers are hereby authorized to file any
termination statement under the Uniform Commercial Code in effect in any jurisdiction to terminate the financing statements that
evidence the security interest in the Collateral created by this Agreement and the Note. Upon payment in full of such obligations,
the Lender will execute and deliver to the Company all deeds, assignments and other instruments, and will take such other actions,
as may be necessary or proper to re-vest in the Company full title to the Collateral, subject to any disposition which may have
been made by the Lender pursuant to this Agreement.

 

5.           Representations
and Warranties of the Company. The Company hereby represents and warrants to the Lender that the statements in the
following paragraphs of this Section 5 are all true and complete as of immediately prior to the Closing, except as otherwise
indicated:

 

5.1          Organization.
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has
all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.

 

5.2          Authorization.
All corporate action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the
performance of the Company’s obligations hereunder, and the authorization, issuance and delivery of the Note and the Warrant
has been taken. This Agreement, the Note and the Warrant, when executed and delivered by the Company, shall constitute valid and
legally binding obligations of the Company enforceable in accordance with their terms, except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’
rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

 

5.3          Valid
Issuance. The Note and the Warrant, when issued, sold, and delivered in accordance with this Agreement, and based in part
upon the representations of the Lender in this Agreement, will be issued in compliance with all applicable federal and state securities
laws. The Warrant Stock, when issued and delivered in accordance with the Warrant, will be duly and validly issued, fully paid
and non-assessable and, based in part upon the representations of the Lender in this Agreement, will be issued in compliance with
all applicable federal and state securities laws, assuming that the Lender has complied with its obligations and covenants under
this Agreement and the Warrant.

 

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5.4          Noncontravention.
The execution, delivery and performance of the Agreement, the consummation of the transactions contemplated hereby and the authorization,
issuance and delivery of the Note, the Warrant and the Warrant Stock (collectively, the “Securities”) will
not result in any violation of or be in conflict with or constitute, with or without the passage of time and giving of notice,
a default under any judgment, order, writ, decree or agreement to which the Company is bound as of the date hereof.

 

6.           Representations
and Warranties and Covenants of the Lender.

 

6.1          Representations
and Warranties. The Lender hereby represents and warrants to the Company that the statements in the following paragraphs of
this Section 6.1 are all true and complete as of immediately prior to the Closing, except as otherwise indicated:

 

(a)          Authorization.
This Agreement constitutes the Lender’s valid and legally binding obligation enforceable in accordance with its terms.

 

(b)          Non-contravention.
The execution, delivery and performance of the Agreement, the consummation of the transactions contemplated hereby and the authorization,
issuance and delivery of the Securities will not result in any violation or be in conflict with or constitute, with or without
the passage of time and giving of notice, a default under any judgment, order, writ, decree or agreement to which the Lender is
bound as of the date hereof.

 

(c)          Purchase
Entirely for Own Account. The Lender acknowledges that this Agreement is made with the Lender in reliance upon the Lender’s
representation to the Company that the Securities will be acquired for investment for the Lender’s own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Lender has no present intention
of selling, granting any participation in, or otherwise distributing any Securities. By executing this Agreement, the Lender further
represents that he does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person with respect to any Securities.

 

(d)          Disclosure
of Information. The Lender acknowledges that it has received all the information it considers necessary or appropriate for deciding
whether to acquire any Securities. The Lender further represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the Securities.

 

(e)          Investment
Experience. The Lender acknowledges that he can bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities.

 

(f)          Accredited
Investor. The Lender is an “affiliate” and an “accredited investor” within the meaning of Rule 501 of
Regulation D of the SEC, as presently in effect.

 

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(g)          Restricted
Securities. The Lender understands that the Securities are characterized as “restricted securities” and “control
securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations such a Securities may be resold without registration
under the Securities Act of 1933, as amended (the “Act”), only in certain limited circumstances. The Lender
represents that he is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby
and by the Act.

 

6.2          Covenants.
The Lender hereby covenants that:

 

(a)          Further
Limitations on Disposition. Without in any way limiting the representations set forth above and any other limitations set forth
in the Note and/or Warrant, the Lender further agrees not to make any disposition of all or any portion of the Securities unless
and until the transferee has agreed in writing for the benefit of the Company to make with respect to itself the representations
and warranties in and be bound by the covenants of this Section 6.2 and (a) there is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (b)
the Lender shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement
of the circumstances surrounding the proposed disposition, and if requested by the Company, the Lender shall have furnished the
Company with a written opinion of counsel, which opinion and counsel are acceptable to the Company, to the effect that that such
disposition will not require registration of any Securities under the Act.

 

(b)          Compliance
with Securities Filing Requirements. The Lender acknowledges that he may be required to make certain public filings with the Securities
and Exchange Commission (the “SEC”) or other governmental authorities and agrees to timely file all such forms
or filings.

 

7.           Miscellaneous.

 

7.1          No
Transfers of Notes; Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties hereto (or their respective successors and assigns)
any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

7.2          Governing
Law. This 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 provisions thereof. The parties hereby submit to the exclusive jurisdiction of the federal or state courts
located in the County of New York, State of New York with respect to any dispute arising under this Agreement, the Note, the Warrant
or the transactions contemplated hereby or thereby.

 

7.3          Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile or other electronic
imagining means shall be effective as delivery of a manually executed counterpart of this Agreement.

 

    	5

    	 

    

 

7.4          Notices.
Any notice required or permitted under this Agreement, the Note or the Warrant shall be in writing, and shall be personally delivered,
or shall be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid and addressed to such
party at the address set forth below, or at such other address as such party may designate by written notice to the other party.
Any such notice may be sent by facsimile, but shall in such case be subsequently confirmed by a writing personally delivered or
sent by certified or registered mail or by recognized overnight mail courier as provided above. All notices shall be deemed to
have been given either at the time of the receipt thereof by the person entitled to receive such notice at the address of such
person for purposes of this Section 7.4, or, if mailed by registered or certified mail or with a recognized overnight mail courier,
two days after deposit with the United States Post Office or the day following deposit with such overnight mail courier, if postage
is prepaid and the mailing is properly addressed, as the case may be.

 

If to the Company:

 

GBS Enterprises Incorporated

585 Molly Lane

Woodstock, GA 30189

Attn: Chief Executive Officer

T: (404) 474-7256

 

If to the Lender:

 

To the address written above.

 

7.5          Entire
Agreement. This Agreement, the Note and the Warrant constitute the entire understanding and agreement among the parties with
regard to the subject hereof and thereof.

 

7.6          Amendments
and Waivers. Any term of this Agreement, the Note or the Warrant may be amended or waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of the Company and the Lender. To the extent that
any Co-Lender loans money to the Company on terms materially more favorable to such Co-Lender than the terms provided to the Lender,
taking into account all economic terms of such transaction, including, without limitation, the interest rate, principal amount,
term, security provided, and all other terms, the parties agree that they will amend the terms of the Note or the Warrant so as
to provide substantially similar terms to the Lender as provided to such Co-Lender.

 

7.7          Waiver
of Jury Trial. EACH OF THE COMPANY AND THE LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE NOTE. A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT
TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.

 

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IN WITNESS WHEREOF,
the parties have executed this Note Purchase and Security Agreement as of the date first above written.

 

	 	GBS ENTERPRISES INCORPORATED
	 	 	 	 
	 	By:	 
	 	 	Name:	Gary D. MacDonald
	 	 	Title:	Chief Executive Officer

 

	LENDER	 
	 	 
	 	 
	Name: Stephen D. Baksa

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