EXHIBIT 99.5
May 12, 1999
Xx. Xxxxx Xxxx
Chairman and Chief Executive Officer
Xxxxx Interactive SA
c/x Xxxxx Software Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Mr. Xxxxx Xxxxx
00000 Xxx Xxxxxx Xxx.
Xxxxxx, XX 00000
Gentlemen:
The purpose of this letter (the "Letter of Intent") is to express the
intentions and, in certain respects, agreement of Interplay Entertainment Corp.,
a Delaware corporation ("Interplay"), Xxxxx Interactive SA, a French corporation
("Xxxxx"), and Xxxxx Xxxxx, an individual, with respect to the transactions
described herein.
The transactions include the following key elements:
1. Sale of Stock. Interplay and Xxxxx would enter into an agreement
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whereby Interplay would issue 6,250,000 shares of Common Stock to Xxxxx at a
price of $4.00 per share, for aggregate consideration of $25,000,000 (the
"Additional Purchase"). Such agreement would be on substantially the same terms
and conditions as the Initial Stock Purchase Agreement (as defined below).
2. Amendment of Stock Purchase Agreement. The Stock Purchase Agreement
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dated March 18, 1999 and entered into by and among Interplay, Xxxxx and Xxxxx
Xxxxx (the "Initial Stock Purchase Agreement") is hereby amended or will be
amended as follows:
a. Effective upon the Additional Closing (as defined below), Section
10.3 of the Initial Stock Purchase Agreement is deleted in its entirety, and
Interplay would have no further rights with respect to the shares referred to
therein.
b. Effective upon the execution of this Letter of Intent, Section
8.14 of the Initial Stock Purchase Agreement is hereby amended by replacing "(i)
ninety (90) days from the Closing Date hereof" with "(i) August 31, 1999."
c. Effective upon the execution of this Letter of Intent, Section
8.15 of the Initial Stock Purchase Agreement is hereby amended by replacing
"During the Restricted Period" with "On or before August 31, 1999."
d. Effective upon the execution of this Letter of Intent, Section
11.1 of the Initial Stock Purchase Agreement is hereby amended by including the
Conversion Stock (as defined below) in the definition of the term "Registrable
Stock." For all purposes of the Initial Stock Purchase Agreement, the term
"Registrable Stock" shall include the Conversion Stock.
3. Exchange of Shares with Xxxxx Xxxxx. Xxxxx and Xxxxx Xxxxx would
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enter into an agreement whereby Mr. Fargo will exchange 2,000,000 shares of
Interplay Common Stock owned by him for shares of Xxxxx Common Stock (the
"Exchanged Shares") at an exchange rate determined by dividing Ten Million
Dollars ($10,000,000) (based upon a per share price for Fargo's shares of
Interplay Common Stock of $5.00) by the average of the closing price per share
of Xxxxx Common Stock for the ten (10) trading days ended the date before the
date hereof.
Under the terms of such Agreement, (a) Mr. Fargo would agree not to
sell, transfer or otherwise dispose of, or pledge, collateralize or hypothecate
any of the Exchanged Shares, or enter into any contract, option, or other
arrangement with respect to any of the foregoing (each, a "Transfer") for a
period of two hundred seventy (270) days following the closing date of the
transaction (the "Lock-Up Period"), (b) following the expiration of the Lock-Up
Period, Mr. Fargo would have the right, from time to time, to elect, by written
notice to Xxxxx, to require Xxxxx to arrange for the sale of all or any portion
of such Exchanged Shares on Mr. Fargo's behalf (which sale could be to Xxxxx, or
to Herve Caen or Xxxx Xxxx if Xxxxx so elects). After the expiration of the
Lock-Up Period, each of Xxxxx, Xxxxx Caen and Xxxx Xxxx would have a right of
first refusal to purchase the Exchanged Shares in the event that Mr. Fargo
desires to Transfer any or all of such Exchanged Shares. If Xxxxx is unable to
arrange a sale of such Exchanged Shares within sixty (60) days following receipt
of such notice, then Xxxxx shall, at Fargo's option, either (x) repurchase such
Exchanged Shares for cash at a purchase price equal to the average closing
trading price per share of Xxxxx Common Stock for the ten (10) trading days
immediately preceding the date of such notice or (y) exchange such Exchanged
Shares for shares of Interplay Common Stock at an exchange rate based upon the
average closing trading price per share of Interplay Common Stock and Xxxxx
Common Stock for the ten (10) trading days immediately preceding the date of
such notice.
4. Management of Interplay. Unless otherwise mutually agreed by
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Interplay, Mr. Fargo and Xxxxx, Xx. Xxxxx would be the Chief Executive Officer
of Interplay, and Herve Caen would be the President of Interplay. Prior to the
Additional Closing (as defined below), the parties would agree on the relative
roles and duties of Messrs. Fargo and Caen, it being understood and agreed that
certain significant operating decisions would require the joint approval of
Fargo and Caen. In addition, immediately after the closing of the transactions
contemplated by this Letter of Intent (the "Additional Closing"), the parties
would agree on an operating plan (the "Plan") for Interplay for the twelve (12)
months following the Additional Closing, and Messrs. Fargo and Caen would
operate Interplay in accordance with the Plan, except as may otherwise be
approved by Interplay's Board of Directors.
5. Voting Agreement. Interplay, Xxxxx and Xx. Xxxxx would enter into a
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Voting Agreement whereby after the Additional Closing, Xxxxx and Mr. Fargo would
each vote their shares to elect to Interplay's Board of Directors (a) three (3)
individuals nominated by Mr. Fargo,
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(b) three (3) individuals nominated by Xxxxx and (c) two (2) individuals not
affiliated with either Interplay or Xxxxx who are mutually agreed upon by
Interplay and Xxxxx.
6. Additional Financing. Xxxxx would use its commercially reasonable
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efforts to raise additional debt or equity financing in the European capital
markets following the Additional Closing on terms and conditions reasonably
acceptable to Xxxxx (the "Xxxxx Financing"). Thereafter, Xxxxx would provide
Interplay with an unsecured line of credit (the "Line of Credit") for a term of
one year in an aggregate principal amount equal to the lesser of (a) thirty
percent (30%) of the Xxxxx Financing or (b) Fifteen Million Dollars
($15,000,000). The interest rate payable and other material terms with respect
to such Line of Credit would be substantially the same as the Xxxxx Financing;
provided, however, that if the Xxxxx Financing is solely in the form of equity,
the Line of Credit would have an interest rate and other material terms
substantially the same as the terms of any intercompany indebtedness between
Xxxxx and Xxxxx Software Corporation.
7. Distribution Agreement. Interplay and Xxxxx would enter into
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negotiations for an agreement whereby Xxxxx would xxxxx to Interplay (or a newly
formed entity jointly owned by Xxxxx and Interplay) exclusive rights to
distribute all of its products related to console gaming systems in North
America in exchange for a distribution fee to be mutually agreed upon by Xxxxx
and Interplay. The parties anticipate that such an agreement would be reached
on or before the Additional Closing.
8. Representations and Warranties of Interplay. Interplay represents and
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warrants to, and covenants and agrees with, Xxxxx as follows:
a. Interplay has all requisite corporate power and authority to
execute, deliver and perform this Letter of Intent and the Note (as defined
below), and all corporate acts and proceedings required for the authorization,
execution and delivery of this Letter of Intent and the Note and the performance
of this Letter of Intent and the Note have been lawfully and validly taken.
b. To the extent provided in Section 9.e. hereof, this Letter of
Intent and the Note constitute the legal, valid and binding obligations of
Interplay and are enforceable against Interplay in accordance with their
respective terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally.
c. This Letter of Intent and the Note, and the terms hereof and
thereof, have been approved by Greyrock Business Credit, and the execution,
delivery and performance of this Letter of Intent and the Note will not violate
or be in conflict with any other material agreement to which Interplay is a
party.
d. Since the date of the Initial Stock Purchase Agreement, Interplay
has not experienced any event that would have a Material Adverse Effect (as
defined in the Initial Stock Purchase Agreement) on Interplay.
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9. General.
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a. The transactions described in this Letter of Intent will be
accomplished, where applicable, pursuant to the terms of definitive agreements
to be negotiated by the parties thereto. Subject to Section 1 hereof, such
agreements would be in form and content mutually satisfactory to the parties and
will include such terms and conditions as are customary in transactions of that
type.
x. Xxxxx shall pay Interplay the amount of $5,000,000 concurrently
with the execution of this Letter of Intent (the "Deposit"). Simultaneously
therewith, Interplay shall execute the Convertible Promissory Note attached
hereto as Exhibit A (the "Note"). The Deposit shall be used by Interplay only
for the purposes permitted under the Initial Stock Purchase Agreement. In the
event the transactions contemplated by this Letter of Intent are not consummated
on or before August 31, 1999 for any reason, then the Deposit, together with
interest at the rate of six percent (6%) from the date hereof until paid, shall
be refunded by Interplay to Xxxxx in full or, at the election of Xxxxx, may be
converted into shares of Common Stock of Interplay (the "Conversion Stock") at a
price per share calculated in accordance with the terms of the Note. In the
event the transactions contemplated by this Letter of Intent are consummated on
or before August 31, 1999, the Deposit, without interest, shall be credited
against the purchase price paid by Xxxxx for the Additional Purchase.
c. The parties to any agreements proposed to be entered into
pursuant to the transactions described herein will negotiate in good faith and
will use their commercially reasonable efforts to execute such agreements so as
to enable these transactions to close no later than August 31, 1999.
d. Interplay and Xxxxx acknowledge that this Letter of Intent is
covered by the terms of those certain Nondisclosure Agreements dated November
10, 1998, and March 3, 1999, between Interplay and Xxxxx.
e. Except as provided in Sections 2.b., 2.c., 2.d., 8, 9.b., 9.d.,
9.f. and 9.g. hereof, this Letter of Intent is not intended to be a legally
binding obligation of Interplay, Xxxxx and Xx. Xxxxx.
f. Interplay and Xxxxx shall bear their own respective legal,
accounting and other expenses in connection with the proposed transaction.
g. Any public announcement of the transactions contemplated hereby
must be approved in writing as to content and timing in advance by both
Interplay and Xxxxx; provided, however, that any party may make any announcement
required by law, but only after such party makes a good faith effort to contact
the other parties hereto prior to such announcement.
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If the foregoing correctly reflects your understanding of our mutual
intentions (and, as set forth in Section 9.e. hereof, agreements), please so
indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
INTERPLAY ENTERTAINMENT CORP.
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx,
Chief Executive Officer and
Chairman of the Board
ACKNOWLEDGED AND AGREED TO
AS OF THE DATE OF THIS LETTER:
XXXXX INTERACTIVE SA
By:/s/ Herve Caen
--------------------------------
Herve Caen,
Chairman and
Chief Executive Officer
/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, individually
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