EXHIBIT 10.5
FORBEARANCE AGREEMENT
This Forbearance Agreement ("Agreement") is entered into as of March 13,
2002, by and among LaSalle Business Credit, Inc. ("Lender"), Xxxxx Xxxxx
("Guarantor"), Shiny Entertainment, Inc. ("Shiny"), Interplay Entertainment
Corp. ("Interplay"), Interplay OEM, Inc. ("OEM") and Xxxxxxxxxxx.xxx, Inc.
("Games") (Interplay, OEM and Games each referred to as "Co-Borrower" and being
jointly referred to herein as "Co-Borrowers"). Lender, Guarantor, Shiny,
Interplay, OEM and Games may also be referred to herein individually as a
"Party" or collectively as "Parties."
RECITALS
1. Lender and Co-Borrowers are the parties to a Loan and Security Agreement
dated as of April 11, 2001 (as amended, modified, restated and/or modified from
time to time, the "Loan Agreement"), pursuant to which Lender provided certain
financial accommodations to Co-Borrowers.
2. Pursuant to the terms of the Loan Agreement, Co-Borrowers granted a
security interest in substantially all of their assets in favor of Lender.
3. To induce Lender to enter into the Loan Agreement, Guarantor executed a
Limited Individual Guaranty dated as of April 11, 2001 in favor of Lender, under
which Guarantor guaranteed payment of up to two million dollars ($2,000,000.00)
of the outstanding indebtedness owing to Lender by the Co-Borrowers (the "Fargo
Guaranty"). As security for the Fargo Guaranty, Guarantor deposited One Million
Dollars ($1,000,000.00) into an account with Lender for that purpose (the "Fargo
Collateral").
4. To induce Lender to enter into the Loan Agreement and (a) to secure its
obligations under the Loan Agreement, Interplay executed a Stock Pledge
Agreement dated as of April 11, 2001 (the "Stock Pledge Agreement") pursuant to
which Interplay pledged to Lender Interplay's interest in the capital stock of
Shiny, (b) Shiny executed a Guaranty dated as of April 11, 2001 ("Shiny
Guaranty") in favor of Lender, pursuant to which Shiny guaranteed all of the
outstanding indebtedness owing to Lender by Co-Borrowers and (c) to secure its
obligations under the Guaranty and Co-Borrowers' obligations under the Loan
Agreement, Shiny executed a Security Agreement dated as of April 11, 2002 (the
"Shiny Security Agreement") pursuant to which Shiny granted a security interest
in substantially all of its assets to Lender.
5. In order to satisfy, in part, certain of the obligations that
Co-Borrowers owed to Lender, Lender applied the Fargo Collateral, plus all
accrued interest on the Fargo Collateral to the outstanding obligations of
Co-Borrowers under the Loan Agreement (the "Fargo Deposit").
6. Lender claims Co-Borrowers still owe Lender an unpaid sum in excess of
Five Hundred Ninety Thousand Dollars ($590,000) under the terms of the Loan
Agreement, which Lender contends includes principal, interest, contractual fees
(including the success fee and any termination fee), costs, expenses and
attorneys' fees and costs.
7. The Loan Agreement provides that (a) each Co-Borrower direct all of its
account debtors to make all payments on such Co-Borrower's accounts receivable
directly to a post office box (the "Lock Box") maintained at LaSalle National
Bank (the "Bank"), (b) (i) all payments received in the Lock Box and (ii) all
payments and/or proceeds of the disposition of any Collateral received by any
Co-Borrower or any affiliate or subsidiary of any Co-Borrower, or any
shareholder, officer, director, employee or agent of any of the foregoing
Persons or any other Person acting in concert with any Co-Borrower, shall be
immediately deposited in an account
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maintained at the Bank (the "Lock Box Account"), which is under the sole and
exclusive control of Lender, all as is more fully set forth in paragraph 10 of
the Loan Agreement (such funds, the "Cash Collateral").
8. On or about February 1, 2002, Lender filed an action in the Superior
Court of the State of California for the County of Orange (the "Orange County
Court"), Xxxx Xx. 00 XXX0000 against Co-Borrowers, Shiny and Guarantor, styled
as LASALLE BUSINESS CREDIT, INC., A DELAWARE CORPORATION, V. INTERPLAY
ENTERTAINMENT CORP., A DELAWARE CORPORATION, ET AL, in which Lender alleged
INTER ALIA that Co-Borrowers were diverting funds from the Lock Box Account to
other accounts owned by Co-Borrowers and not under the control of Lender (the
"Action"). On or about February 13, 2002, Guarantor filed a cross-action against
Co-Borrowers (the "Cross-Action"). On February 26, 2002, Lender obtained a
preliminary injunction in the Action (the "Preliminary Injunction") that, among
other things, provided that, effective upon Lender's filing of a bond in the sum
of $20,000, all of the Cash Collateral must be deposited directly into the Lock
Box Account and enjoined Co-Borrowers from diverting or depositing the Cash
Collateral to any account other than the Lock Box Account. The Preliminary
Injunction has been duly served on all defendants and is in full force and
effect.
9. Guarantor has alleged that Lender may not have had the authority to
apply the Fargo Deposit to the obligations of Co-Borrowers under the Loan
Agreement, may assert other potential defenses and claims with respect to
Lender's application of the Fargo Deposit and has alleged that upon the
indefeasible payment in full in cash of all obligations due and owing by
Co-Borrowers to Lender, Guarantor will be subrogated to the rights of Lender
against Co-Borrowers and Shiny with respect to the payment made to Lender by
application of the Fargo Deposit. Guarantor also claims to have present rights
of reimbursement and contribution with
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respect to the application of the Fargo Deposit and additional present rights
with regard to his alleged subrogation and/or prospective subrogation claims.
10. Interplay is currently in negotiations to sell substantially all of the
stock or assets of Shiny to a third party (the "Shiny Transaction"), and
anticipates that such sale will close on or before June 30, 2002.
11. Concurrently herewith, Interplay and Guarantor are entering into an
Agreement with respect to certain claims that each has against the other (the
"Interplay/Fargo Agreement"), including but not limited to Guarantor's alleged
claim for subrogation against Interplay.
12. In addition to the above-described disputes, Lender and Co-Borrowers,
Lender and Shiny, and Lender and Guarantor each acknowledge and agree that each
may have further claims against the other.
13. In an effort to resolve all disputes between Lender and Co-Borrowers
and between Lender and Shiny, and all disputes (other than with respect to the
Settlement Amount (as increased by the Other Amounts) or any amounts that may be
owing under the Documents (as defined herein))between Lender and Guarantor, the
Parties have agreed to enter into this Agreement.
14. There are various Events of Default now existing under the Loan
Agreement as listed on EXHIBIT A annexed hereto ("Designated Defaults") by
reason of which Lender has no obligation to make any additional Loans and Lender
has the full legal right to exercise all of its rights and remedies under the
Loan Agreement and the other Documents. Co-Borrowers, Shiny and Guarantor have
requested that Lender forbear for a period of time from exercising its rights
and remedies under the Loan Agreement, Fargo Guaranty, Shiny Guaranty and the
Preliminary
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Injunction. Lender is prepared to establish a period of forbearance to
Co-Borrowers, Guarantor and Shiny on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. RECITALS.
The recitals contained in this Agreement are a true and correct summary of
the facts pertinent to this Agreement and are incorporated herein by this
reference.
3. EFFECTIVE DATE.
The effective date of this Agreement shall be the date hereof ("Effective
Date").
4. ACKNOWLEDGEMENT.
Each Co-Borrower, Guarantor and Shiny acknowledge that the Designated
Defaults have occurred and exist as of the date hereof, that any and all cure
periods set forth in the Loan Agreement have expired, and that such Co-Borrower
and Shiny are, jointly and severally, unconditionally obligated to pay all of
their liabilities to Lender including all Liabilities, all without defense,
setoff or counterclaim of any kind or nature whatsoever.
5. OUTSTANDING LIABILITIES.
Each Co-Borrower and Shiny hereby affirms and acknowledges that (i) as of
the Effective Date, there is presently outstanding loans and advances in the
aggregate principal
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amount of $590,000 (which amount includes the success fee and any termination
fee), together with accrued interest thereon and costs and expenses including
attorneys' fees, costs and expenses (collectively, the "Amount") and (ii) the
Amount is a valid obligation of Co-Borrowers and is due and owing without
defense, claim, setoff or counterclaim of any kind or nature whatsoever.
6. PAYMENT
6.1 Lender agrees to accept, and Co-Borrowers agree to pay to Lender, Five
Hundred Thousand Dollars ($500,000.00) (the "Settlement Amount") in full and
complete payment of the Amount, as such amount may be increased pursuant to the
terms of this Agreement. The Settlement Amount (as increased by the Other
Amounts (as hereinafter defined)) shall be paid to Lender by Co-Borrowers as
follows:
6.1.1 Contemporaneously with the execution of this Agreement,
Co-Borrowers shall pay Lender the sum of One Hundred Thousand Dollars
($100,000.00) (the "First Payment Amount") in immediately available funds.
6.1.2 On or before March 28, 2002 (the "Second Payment Date"),
Co-Borrowers shall pay Lender an additional One Hundred Thousand Dollars
($100,000.00) (the "Second Payment Amount") in immediately available funds.
6.1.3 On the earlier to occur of (i) May 28, 2002 or (ii) the closing
date of the Shiny Transaction (the "Third Payment Date"), Co-Borrowers shall pay
Lender an additional Two Hundred Fifty Thousand Dollars ($250,000.00) (the
"Third Payment Amount") in immediately available funds.
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6.1.4 On the earlier to occur of (i) June 30, 2002 or (ii) the closing
date of the Shiny Transaction (the "Final Payment Date"), Co-Borrowers shall pay
Lender Fifty Thousand Dollars ($50,000) (the "Final Payment Amount") in
immediately available funds.
6.1.5 Co-Borrowers shall be entitled to prepay the Settlement Amount
(as increased by the Other Amounts) at any time.
6.1.6 The parties hereby acknowledge that during the period commencing
on March 1, 2002 and ending on the Effective Date, Lender received $148,000 of
Lock Box Funds (the "Pre-Agreement Lock Box Funds"). On the Effective Date, (a)
$100,000 of the Pre-Agreement Lock Box Funds shall be applied by Lender to the
First Payment Amount and (b) $48,000 of the Pre-Agreement Lock Box Funds shall
be applied by Lender to the Second Payment Amount.
6.2 During the period commencing on the Effective Date and ending on the
earlier to occur of (i) June 30, 2002, (ii) the closing date of the Shiny
Transaction and (iii) the date of any Forbearance Default (as hereinafter
defined) (the "Forbearance Period"), (a) the Lockbox Account shall remain in
place, and Co-Borrowers agree to comply with all of the terms of the Loan
Agreement relating thereto including, without limitation, the provisions of
paragraph 10 of the Loan Agreement and (b) Lender shall remit to Interplay (by
wire transfer to an account designated by Interplay to Lender in writing) within
one (1) Business Day of receipt of good funds in the Lock Box Account (any such
funds, the "Lock Box Funds") seventy-five percent (75%) of such Lock Box Funds
and (c) Lender shall apply twenty-five percent (25%) of such Lock Box Funds to
the payment of the Settlement Amount (as increased by the Other Amounts) (each
such payment to the Settlement Amount, a "Lock Box Settlement Payment"). Each
Lock
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Box Settlement Payment shall be applied by Lender to the next scheduled payment
of the Settlement Amount (as increased by the Other Amounts).
The parties hereby acknowledge that since Lender is applying $48,000 to the
Second Payment Amount on the Effective Date in accordance with Section 6.1.6
hereof, subject to a Forbearance Default and Section 6.3 hereof, Interplay shall
be entitled to receive the first $144,000 of the Lock Box Funds received by
Lender following the Effective Date (it being understood that the $48,000 plus
$144,000 which equals $192,000 is being distributed in accordance with this
Section 6.2). Following the receipt of the first $144,000 of Lock Box Funds
after the Effective Date, subject to a Forbearance Default and Section 6.3
hereof, Lender shall continue to distribute and apply the Lock Box Funds in
accordance with this Section 6.2.
6.3 In the event that Co-Borrowers fail to pay Lender the Second Payment
Amount on or before the Second Payment Date, Co-Borrowers shall incur and pay to
Lender a one-time late fee equal to Ten Thousand Dollars ($10,000.00) (the
"Second Payment Late Fee"). In the event that Co-Borrowers fail to pay Lender
the Second Payment Amount plus the Second Payment Late Fee within five (5)
Business Days after the Second Payment Date, then, anything contained in Section
6.2 hereof notwithstanding, Lender shall be entitled to apply all of the Lock
Box Funds to the payment of the Second Payment Amount plus the Second Payment
Late Fee until such time as the Second Payment Amount plus the Second Payment
Late Fee shall have been paid in full in cash whether by application of the Lock
Box Funds or the payment by any Co-Borrower with other funds which are not
required to be remitted to the Lock Box under the terms of the Loan Agreement
and/or the Preliminary Injunction (the "Satisfaction of the Second Payment").
Upon the Satisfaction of the Second Payment, subject to a Forbearance Default,
the
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Lender shall continue to distribute and apply the Lock Box Funds in accordance
with Section 6.2 hereof.
6.4 Within five (5) Business Days after Lender's receipt of the
indefeasible payment in full in cash of the Settlement Amount plus, if
applicable, the Other Amounts, as set forth herein and receipt of fully executed
releases (it being understood by Co-Borrowers and Shiny that such release shall
not adversely affect or release any rights of subrogation Guarantor will have
after Full Satisfaction with respect to the Documents or the liabilities against
any of the Co-Borrowers and/or Shiny) from all Co-Borrowers, Guarantor and Shiny
(and such releases to be in the form of the release set forth in Section 7.1
hereof and shall be dated the date the full satisfaction occurs) (all such
amounts and receipt by Lender of all such executed releases, collectively, the
"Full Satisfaction"), Lender and Guarantor shall jointly file a request for
dismissal without prejudice of the Action and Lender shall file a stipulation
with the Court to dismiss the Preliminary Injunction without prejudice. The
Cross Action shall be dismissed by Guarantor with prejudice when the Subrogation
Claims (as defined herein) are paid in full.
6.5 During all times during the Forbearance Period and at all times
following the Forbearance Period prior to the Full Satisfaction, the parties
hereto agree that the Preliminary Injunction, the Documents and the terms of
this Agreement shall remain in full force and effect.
6.6 Subject to the provisions of Section 6.1 hereof, the Settlement Amount
(as increased by the Other Amounts) shall be jointly and severally due and
payable in full in cash by Co-Borrowers prior to the termination of this
Agreement.
6.7 Each of the following shall constitute a Forbearance Default:
6.7.1 the existence of any Event of Default (other than a Designated
Default) under paragraphs 16(b) (to the extent such Event of Default arises out
of the breach of a
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covenant related to (i) insurance of the Collateral, (ii) disposition of the
Collateral and/or (iii) paragraphs 7, 8, 10(a), 10(e) or 14(c) of the Loan
Agreement), 16(d), 16(e), 16(f), 16(g) (provided, that such breach shall only
constitute a Forbearance Default to the extent a judgment or order referred to
therein remains unsatisfied or undischarged for more than sixty (60) days)and
16(h) (provided, that, an event of default under the Documents referred to
herein shall only constitute a Forbearance Default if such event of default is
the same type or kind of default as a Material Default provided, further, that
it is understood that a revocation or termination of any such Document shall, in
any event, constitute a Forbearance Default) of the Loan Agreement
(collectively, the "Material Defaults") (the Loan Agreement together with all
Other Agreements, as amended, modified, restated or supplemented from time to
time, collectively, the "Documents") provided, that, if any Co-Borrower sells
any Inventory or Equipment in or outside of the ordinary course of business on
an arms length basis for fair consideration and the proceeds of any such sale
are remitted directly to the Lock Box, any such sale shall not constitute a
Material Default; and
6.7.2 Subject to Section 6.10 hereof, any Co-Borrower, Guarantor
and/or Shiny shall fail to keep or perform any of the terms, obligations,
covenants or agreements contained herein including, without limitation, the
payment of any installment (other than the Second Payment Amount) of the
Settlement Amount (as increased by the Other Amounts) on the date such
installment becomes due and payable; and
6.7.3 Any representation or warranty of any Co-Borrower, Guarantor
and/or Shiny herein shall be false, misleading or incorrect in any material
respect; and
6.7.4 Any Co-Borrower, Guarantor and/or Shiny shall fail to comply
with the terms of the Preliminary Injunction.
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6.8 Upon the occurrence of a Forbearance Default, Co-Borrowers shall be
immediately obligated to pay Lender in full in cash an amount equal to (a) the
Settlement Amount outstanding on the date of such Forbearance Default, plus (b)
interest on the Settlement Amount for the period commencing on the date of such
Forbearance Default and ending on the date of the Full Satisfaction (such
period, the "Final Payment Period") at the rate of interest applicable to
Revolving Loans which are Prime Rate Loans upon and after an Event of Default
(such rate, the "Default Rate") plus (c) all fees scheduled to be paid during
the Final Payment Period pursuant to the terms of the Loan Agreement (it being
understood that the success fee and any termination fee are included in the
Settlement Amount) plus (d) all other amounts payable pursuant to paragraph 18
of the Loan Agreement which have been incurred at any time (including, without
limitation, the Lender's costs and expenses and disbursements and reasonable
fees of counsel for Lender incurred in connection with the preparation,
negotiation, implementation, administration and/or enforcement of this Agreement
and/or in any manner relating to or arising out of this Agreement, the Loan
Agreement or any Other Agreement (all of the amounts set forth in clauses (b),
(c) and (d) above are collectively referred to as, the "Other Amounts"). The
Other Amounts shall automatically be added to and included in the Settlement
Amount and the Settlement Amount shall be increased by the Other Amounts. The
Settlement Amount (as increased by the Other Amounts) shall be deemed to be a
Liability under the Loan Agreement and therefore shall be secured by the
Collateral pursuant to the terms of the Loan Agreement. In addition, the terms
of the Preliminary Injunction as they exist immediately prior to the Effective
Date shall apply and Lender shall no longer remit any of the Lock Box Funds to
Interplay and Lender shall be immediately entitled to enforce all of its rights
and remedies under
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the Documents. All Lock Box Funds shall be applied to the payment of the
Settlement Amount (as increased by the Other Amounts).
6.9 The parties hereby agree that the following transactions (the "Payment
Transactions") (which have already occurred) shall not be deemed to have been
violations of the Preliminary Injunction (it being understood that for purposes
of this agreement the Parties are stipulating that the Payment Transactions did
not violate the Preliminary Injunction and if any transaction of the same type
as the Payment Transactions were or are made at anytime after February 28, 2002,
such transactions would violate the Preliminary Injunction):
(a) The payment of Interplay's payroll on February 28, 2002 in an
amount not exceeding $800,000 in the aggregate from funds
received from Tech Pacific, Xxxxx Interactive, S.A., Creative
Labs, Sega Corporation and KBK Co. Ltd.; and
(b) The payment of checks drawn on or before February 28, 2002 in an
amount not exceeding $200,000 in the aggregate from funds
received from Tech Pacific.
6.10 Notwithstanding the foregoing paragraphs 4 and 5, and notwithstanding
the provisions of Section 6.8 or any other provision of this Agreement, nothing
in this Agreement shall be deemed to be an acknowledgment or agreement by
Guarantor as to the amount of the alleged outstanding balance under the Loan
Agreement, Guaranty, or any other related loan documents; Guarantor reserves all
of his alleged rights, claims, defenses, and arguments, if any, solely with
respect to the amount of debt set forth herein, or otherwise alleged at any time
by Lender or any other party to be owing under the Loan Agreement, Guaranty, or
any other related loan documents.
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7. RELEASES.
7.1 Upon the execution of this Agreement, each of Shiny and each
Co-Borrower hereby releases, remises, acquits and forever discharges Lender and
Lender's employees, agents, representatives, consultants, attorneys,
fiduciaries, officers, directors, partners, predecessors, successors and
assigns, subsidiary corporations, parent corporations and related corporate
divisions (all of the foregoing hereinafter called the "Released Parties"), from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at laws or in equity, of
whatsoever kind or nature, for or because of any matter or things done, omitted
or suffered to be done by any of the Released Parties prior to and including the
date of execution hereof, and in any way directly or indirectly arising out of
or in any way connected to this Agreement or the Documents including, without
limitation, the Action or any claim arising out of the application of the Fargo
Deposit by Lender to the obligations of Co-Borrowers (all of the foregoing
hereinafter called the "Released Matters"). The foregoing releases shall survive
the termination of this Agreement and the Full Satisfaction. Each of Shiny and
each Co-Borrower acknowledges that the agreements in this Section are intended
to be in full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters.
7.2 Upon the execution of this Agreement Guarantor hereby releases,
remises, acquits and forever discharges the Released Parties from any and all
actions and causes of action, judgments, executions, suits, debts, claims,
demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at laws or in equity, of
whatsoever kind or nature, for or because of any matter or things done, omitted
or
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suffered to be done by any of the Released Parties prior to and including the
date of execution hereof, in any way directly or indirectly arising out of or in
any way connected to the application of the Fargo Deposit by Lender to the
obligations of Co-Borrowers (all of the foregoing hereinafter called the "Fargo
Released Matters"). The foregoing releases shall survive the termination of this
Agreement and the Full Satisfaction. Guarantor acknowledges that the agreements
in this Section are intended to be in full satisfaction of all or any alleged
injuries or damages arising in connection with the Fargo Released Matters.
7.3 Immediately following the date of the Full Satisfaction and the
delivery to Lender of a joint written direction for Lender to give a release
(which includes a full indemnity of Lender (which is reasonably acceptable to
Lender)), executed by each Co-Borrower, Guarantor and Shiny, Lender shall
deliver to each Co-Borrower, Guarantor and Shiny a release dated the date of the
Full Satisfaction in substantially the form as the release set forth in Section
7.1 hereof. Guarantor will not deliver and will not be expected to deliver the
joint written direction referred to in this section unless and until the full
amount of the Subrogation Claims are paid (the "Fargo Satisfaction").
7.4 The releases in this Agreement shall be effective as a bar to all
actions, causes of action, suits, claims, liens, or demands of any kind. The
Parties hereto acknowledge and agree that they have been advised by legal
counsel, are familiar with, and hereby waive the protections of California Civil
Code Section 1542 (or any similar provision of any other jurisdiction), which
provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing
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the release, which if known by him must have materially
affected his settlement with the debtor.
7.5 During the Forbearance Period, Lender hereby agrees to forbear from
exercising any rights and remedies Lender has pursuant to the Documents provided
that (i) such postponement or forbearance shall be without prejudice to any of
Lender's rights and remedies under the Loan Agreement or any such other
documents; (ii) Lender does not hereby waive any of its remedies, and does not
grant to Co-Borrowers, Guarantor and/or Shiny any additional rights to receive
notice or to have an opportunity to cure other than as set forth in the
Documents; and (iii) Lender does not hereby agree to amend or modify the
Documents.
7.6 Shiny affirms all of the Liabilities of Co-Borrowers to Lender
including, without limitation the Settlement Amount (as increased by the Other
Amounts) and each of Guarantor and Shiny affirms the validity of the Documents,
acknowledges and agrees to the continuing authenticity, enforceability and
validity of the Fargo Guaranty and the Shiny Guaranty, as the case may be, and
to the extent executed by such Person, reaffirms, ratifies and confirms such
guaranty in its entirety and agrees that such guaranty shall remain in full
force and effect until the date of the Full Satisfaction.
7.7 Notwithstanding anything contained in the foregoing release provisions,
or any other provision contained in this Agreement, nothing in this Agreement
shall be deemed to affect, impair, delay, impede or otherwise have any adverse
effect upon Guarantor's subrogation rights which will arise upon the Full
Satisfaction, any rights Guarantor may have as a prospective subrogee, rights of
reimbursement, or contribution, or any other similar rights or claims
(collectively, "Subrogation Claims") arising against any Person against whom any
Subrogation Claims arise by virtue of the Fargo Deposit being utilized to
satisfy the obligations of the Co-
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Borrowers to Lender, or Subrogation Claims arising by virtue of any other facts,
circumstances, events, documents, or other matters (it being understood that
unless Lender expressly consents in writing (the granting of such consent shall
be at the sole and absolute discretion of Lender), Guarantor shall not exercise
any Subrogation Claims until the Full Satisfaction occurs and that the
Subrogation Claims may be subject to various limitations or conditions under
applicable law or the Documents). Notwithstanding anything to the contrary in
this Section 7.7 or any other provision of this Agreement, Lender shall not be
liable to Guarantor whatsoever for his failure to fully enforce and/or realize
on the Subrogation Claims.
8. REPRESENTATIONS AND WARRANTIES.
Each of Guarantor, Shiny and each Co-Borrower hereby represents and
warrants as follows:
8.1 This Agreement, the Loan Agreement and all other Documents to which
such Person is a party to are and shall continue to be legal, valid and binding
obligations of such Person and are enforceable against such Person in accordance
with their respective terms.
8.2 To the extent applicable, such Person has the corporate power, and has
been duly authorized by all requisite corporate action, to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly executed and delivered by such Person.
8.3 Such Person's execution, delivery and performance of this Agreement
does not and will not (i) violate any law, rule, regulation or court order to
which such Person is subject, (ii) to the extent applicable, conflict with or
result in a breach of such Person's Articles/Certificate of Incorporation or
by-laws or any agreement or instrument to which such
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Person is a party or by which it or its properties are bound or (iii) result in
the creation or imposition of any lien, security interest or encumbrance on any
property of such Person, whether not owned or hereafter acquired, other than
liens in favor of Lender.
8.4 Such Person has no defense, counterclaim or setoff with respect to the
Documents.
8.5 Other than the Designated Defaults, no Material Defaults exist under
the Loan Agreement as of the date hereof and no other Material Defaults would
exist after giving effect to this Agreement.
8.6 Lender has and will continue to have a validly perfected, unavoidable
first priority lien and security interest in all Collateral, and such Person
expressly reaffirms all security interests and liens granted to Lender pursuant
to the Documents.
9. WAIVER.
Each of Guarantor, Shiny and each Co-Borrower waives and affirmatively
agrees not to allege or otherwise pursue any or all defenses, affirmative
defenses, counterclaims, claims, causes of action, setoffs or other rights that
it may have to contest (a) any Designated Defaults which could be declared by
Lender; (b) any provision of the Documents or this Agreement; (c) the security
interest of Lender in any property, whether real or personal, tangible or
intangible, or any right or other interest, now or hereafter arising in
connection with the Collateral; or (d) the conduct of Lender in administering
the financing arrangements between Co-Borrower and Lender.
10. EFFECT AND CONSTRUCTION OF AGREEMENT.
Except as expressly provided herein, the Documents shall remain in full
force and effect in accordance with their respective terms, and this Agreement
shall not be construed to:
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10.1.1 impair the validity, perfection or priority of any lien or
security interest securing the Liabilities;
10.1.2 waive or impair any rights, powers or remedies of Lender under,
or constitute a waiver of, any provision of the Documents upon termination of
the Forbearance Period; or
10.1.3 constitute an agreement by Lender or require Lender to extend
the Forbearance Period, grant additional forbearance periods, or extend the term
of the Loan Agreement or the time for payment of any of the Liabilities.
11. CONFLICTS.
In the event of any express conflict between the terms of this Agreement
and any of the Documents, this Agreement shall govern.
12. PRESUMPTIONS.
Each party hereto acknowledges that it has consulted with and been advised
by its counsel and such other experts and advisors as it has deemed necessary in
connection with the negotiation, execution and delivery of this Agreement and
has participated in the drafting hereof. Therefore, this Agreement shall be
construed without regard to any presumption or rule requiring that it be
construed against any one party causing this Agreement or any part hereof to be
drafted. In this regard, the Parties hereby waive California Civil Code Section
1654.
13. CONDITIONS OF EFFECTIVENESS.
This Agreement shall become effective upon satisfaction of the following
conditions precedent: Lender shall have received (i) a payment in cash of the
$100,000 due on the Effective Date from Co-Borrowers and(ii) four (4) copies of
this Agreement executed by Co-Borrowers, Guarantor and Shiny.
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14. EXPENSES.
Each party hereto shall be responsible for its own costs and expenses
including legal fees, in connection with the negotiation, preparation and
administration of this Agreement provided, that, as provided herein, if a
Forbearance Default occurs on or after the Effective Date, Co-Borrowers shall,
jointly and severally, pay all costs, fees and expenses of Lender (including the
costs, fees and expenses of Lender's counsel) incurred by Lender in connection
with the negotiation, preparation, administration and/or enforcement of this
Agreement and/or the Documents.
15. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement among the parties hereto
with respect to the subject matter hereof. Guarantor, Shiny and each Co-Borrower
has not relied on any agreements, representations, or warranties of Lender,
except as specifically set forth herein. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each party hereto. Guarantor,
Shiny and each Co-Borrower acknowledges that it is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
16. FURTHER ASSURANCE.
Guarantor, Shiny and each Co-Borrower shall execute such other and further
documents and instruments as Lender may reasonably request to implement the
provisions of this Agreement.
17. BENEFIT OF AGREEMENT.
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective permitted successors and
assigns as set forth in the
Page 19
Loan Agreement. No other person or entity shall be entitled to claim any right
or benefit hereunder, including, without limitation, any third-party beneficiary
of this Agreement. Lender's agreement to forbear from enforcing certain of its
remedies does not in any manner limit Co-Borrower's obligations to comply with,
and Lender's right to insist upon compliance with, each and every one of the
terms of the Loan Agreement except as specifically modified herein.
18. SEVERABILITY.
The provisions of this Agreement are intended to be severable. If any
provisions of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or enforceability without in any
manner affecting the validity or enforceability of such provision in any other
jurisdiction or the remaining provisions of this Agreement in any jurisdiction.
19. GOVERNING LAW, JURISDICTION, VENUE.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois applied to contracts to be performed wholly within
the State of Illinois. Any judicial proceeding brought by or against any
Co-Borrower, Guarantor and/or Shiny with respect to this Agreement or any
related agreement may be brought in any court of competent jurisdiction in the
State of California, County of Orange, United States of America, and, by
execution and delivery of this Agreement, each of Guarantor, Shiny and each
Co-Borrower accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Nothing herein shall affect the right to serve process in
any manner permitted by law or shall limit the right of Lender to bring
proceedings against any Co-Borrower, Shiny and/or Guarantor in the courts of any
other
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jurisdiction. Each of Guarantor, Shiny and each Co-Borrower waives any objection
to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon FORUM
NON CONVENIENS. Any judicial proceeding by any Co-Borrower, Guarantor and/or
Shiny against Lender involving, directly or indirectly, any matter or claim in
any way arising out of, related to or connected with this Agreement or any
related agreement, shall be brought only in a federal or state court located in
the County of Orange, State of California.
20. WAIVER OF JURY TRIAL.
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT, THE DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO THIS AGREEMENT, THE DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS
Page 21
OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. IN
ADDITION, EACH PARTY WAIVES THE RIGHT TO CLAIM OR RECOVER IN ANY SUCH SUIT,
ACTION OR PROCEEDING ANY DAMAGES OTHER THAN OR IN ADDITION TO ACTUAL DAMAGES.
21. SURVIVAL.
All indemnities and releases of Guarantor, Shiny, LaSalle and/or
Co-Borrowers contained herein and/or provided for herein shall survive the
termination of this Agreement and the Full Satisfaction. All other
representations, warranties, covenants, agreements, undertakings and waivers
(including, without limitation the obligation to pay the Settlement Amount (as
increased by the Other Amounts) of Guarantor, Shiny and/or Co-Borrowers
contained herein shall survive the termination of the Forbearance Period but
shall terminate immediately after the Full Satisfaction and the Fargo
Satisfaction.
22. AMENDMENT.
No amendment, modification, rescission, waiver or release of any provision
of this Agreement shall be effective unless the same shall be in writing and
signed by all of the parties hereto.
23. HEADINGS.
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
24. FURTHER COOPERATION, ASSURANCES, AND DOCUMENTS.
(a) All of the Parties pledge to each other their future cooperation
to implement this Agreement. Each of the Parties hereto agrees that it or
he (as the case may be) will execute and deliver all documents and
instruments and take
Page 22
such action as may be necessary and appropriate to effectuate the terms
hereof. In connection therewith, after the date of the Full Satisfaction
and upon the joint written direction of Co-Borrowers, Guarantor and Shiny
which direction shall provide a full indemnity of Lender, reasonably
satisfactory to Lender, for Lender taking any and all actions in connection
herewith, Lender shall execute such documents as shall be reasonably
necessary to terminate Lender's security interest under the Loan Agreement
and other documents executed in connection therewith including, without
limitation, a Trademark Security Agreement between Interplay and Lender
dated April 11, 2001, a Trademark Security Agreement between OEM and Lender
dated April 11, 2001, a Security Agreement in Copyrighted Works between
Interplay and Lender dated April 11, 2001, a Security Agreement in
Copyrighted Works between OEM and Lender dated April 11, 2001, the Shiny
Security Agreement and the Stock Pledge Agreement, and shall terminate
those other agreements that were entered into as a condition of Lender's
execution of the Loan Agreement, including without limitation a
Subordination Agreement between Lender and Guarantor dated April 11, 2001,
an Intercreditor Agreement among Lender, Guarantor and Interplay dated
April 11, 2001, a Subordination Agreement between Lender and Microsoft
Corporation ("Microsoft") dated April 11, 2001, an Intercreditor Agreement
among Lender, Microsoft and Interplay dated April 11, 2001, the Fargo
Guaranty, a Revolving Note ($15,000,000) executed by Interplay in favor of
Lender, a Cross Corporate Guaranty between Interplay and Lender dated April
11, 2001, a Cross Corporate Guaranty between OEM and Lender dated April 11,
2001, a Cross Corporate Guaranty between
Page 23
Games and Lender dated April 11, 2001, and a Corporate Guaranty between
Shiny and Lender dated April 11, 2001 provided that all such documents
shall be provided to Lender by Interplay at Interplay's sole cost and
expense.
(b) In addition, after the date of the Full Satisfaction and upon the
joint written direction of Co-Borrowers and Shiny (the "Lock Box
Direction") which direction shall provide for a full indemnity of Lender
(which shall be reasonably satisfactory to Lender), Lender shall direct the
Lock Box Funds to an account set forth in the Lock Box Direction provided,
that, (i) if Lender in its reasonable discretion believes, based on
conflicting demands or claims, it is prohibited from following the Lock Box
Direction under applicable law or by a court order, Lender shall be
permitted to follow such court order and/or to interplead all of the Lock
Box Funds it receives after the Full Satisfaction with the court which
entered such order or with the Orange County Court and (ii) prior to
receipt of a Lock Box Direction, Lender shall be permitted to interplead
the Lock Box Funds it receives after the Full Satisfaction with the Orange
County Court. Notwithstanding anything contained in the foregoing
provisions or this Agreement to the contrary, Lender shall be permitted to
close the Lock Box at any time after sixty (60) days following the date of
the Full Satisfaction. Further, after the date of the Full Satisfaction,
Lender shall acknowledge any notice from any Co-Borrower to any account
debtor of such Co-Borrower (which notice shall be reasonably acceptable to
Lender), which re-directs away from the Lock Box any payments made by such
account debtor to such Co-Borrower. Co-Borrowers, Guarantor and/or Shiny
hereby agree that Lender shall have no liability
Page 24
whatsoever to any Co-Borrower, Guarantor and/or Shiny for complying with
any of the provisions of this Section 24 including, without limitation,
following the direction of Interplay and Shiny as provided in this
paragraph, the interpleading of any Lock Box Funds, the acknowledgement of
Lender to any notice to an account debtor of a Co-Borrower or the closing
of the Lock Box by Lender.
(c) Guarantor will not deliver and will not be expected to deliver any
joint written directions referred to in this Section 24 unless and until
the Fargo Satisfaction.
25. COUNTERPARTS AND FACSIMILE SIGNATURES.
This Agreement, any document or instrument entered into, given, or made
pursuant to this Agreement or authorized hereby, and any amendment or supplement
thereto may be executed in two or more counterparts, and, when so executed, will
have the same force and effect as though all signatures appeared on a single
document. Any of the Parties may deliver its signature to this Agreement by
facsimile and that signature shall be treated as an original for all purposes.
Any signature page of this Agreement or of such an amendment, supplement,
document, or instrument may be detached from any counterpart without impairing
the legal effect of any signatures thereon, and may be attached to another
counterpart identical in form thereto but having attached to it one or more
additional signature pages.
26. GENDER AND NUMBER.
All references herein to the masculine gender shall be deemed to apply
equally to the feminine and neuter genders and vice versa. All references herein
to the singular shall be deemed to apply equally to the plural and vice versa.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 25
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
LASALLE BUSINESS CREDIT, INC.,
a Delaware corporation
By: /S/ ILLEGIBLE
-------------------------------
Its: Senior Vice President
INTERPLAY ENTERTAINMENT CORP.,
a Delaware corporation
By: /S/ HERVE CAEN
-------------------------------
Name: Herve Caen
Its: President
INTERPLAY oeM, INC,
a California corporation
By: /S/ HERVE CAEN
-------------------------------
Name: Herve Caen
Its: Authorized Officer
xxxxxxxxxxx.xxx, inc.,
a Delaware corporation
By: /S/ HERVE CAEN
-------------------------------
Name: Herve Caen
Its: Authorized Officer
SHINY ENTERTAINMENT, inc.,
a Delaware corporation
By: /S/ HERVE CAEN
-------------------------------
Name: Herve Caen
Its: Authorized Officer
/S/ XXXXX XXXXX
-----------------------------------
XXXXX XXXXX
Page 26
EXHIBIT A
DESIGNATED DEFAULTS
1. The Events of Default which have occurred under paragraph 16(b) of the Loan
Agreement as a result of Co-Borrowers failure to:
(a) remit all proceeds of Collateral received to the Blocked Account in
accordance with paragraph 10 of the Loan Agreement; and
(b) deliver any Schedules or Reports to Lender in accordance with
paragraph 11 of the Loan Agreement.
(c) pay to Lender the monies received by Co-Borrowers from VUIPNA with
respect to Inventory transferred by Borrower to VUIPNA.
Page 27
