EXHIBIT 99.1
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____________________________________________________________________________
INTERPLAY ENTERTAINMENT CORP.
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STOCK PURCHASE AGREEMENT
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UP TO 5,000,000 SHARES OF COMMON STOCK
Dated as of March 18, 1999
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____________________________________________________________________________
TABLE OF CONTENTS
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Page No.
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1. Authorization of Investor Stock...................................................1
2. Sale and Purchase of Investor Stock...............................................1
3. Closing; Calculation of Shares of Investor Stock; Adjustment of Shares of
Investor Stock....................................................................1
3.1 Closing..................................................................1
3.2 Sale of Shares of Investor Stock at Closing..............................1
3.3 Interim Valuation of Shares of Investor Stock............................1
3.4 Final Valuation of Shares of Investor Stock..............................2
3.5 Limitations on Adjustments...............................................2
3.6 Collar...................................................................4
4. Register of Investor Stock; Restrictions on Transfer of Securities; Removal
of Restrictions on Transfer of Investor Stock.....................................4
4.1 Register of Investor Stock...............................................4
4.2 Restrictions on Transfer.................................................4
4.3 Removal of Transfer Restrictions.........................................6
4.4 Standstill...............................................................6
5. Representations and Warranties by the Company.....................................7
5.1 Organization, Standing, etc..............................................7
5.2 Qualification............................................................7
5.3 Capital Stock............................................................7
5.4 Investor Stock...........................................................8
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5.5 Indebtedness for Borrowed Money..........................................8
5.6 Shareholder List.........................................................8
5.7 Corporate Acts and Proceedings...........................................9
5.8 Compliance with Laws and Other Instruments...............................9
5.9 Binding Obligations.....................................................10
5.10 Securities Laws.........................................................10
5.11 No Brokers or Finders...................................................10
5.12 Financial Statements....................................................10
5.13 Changes.................................................................10
5.14 Material Agreements of the Company......................................11
5.15 Employees...............................................................12
5.16 Tax Returns and Audits..................................................12
5.17 Patents and Other Intangible Assets.....................................12
5.18 Employment Benefit Plans; ERISA.........................................14
5.19 Title to Property and Encumbrances; Leases..............................14
5.20 Condition of Properties.................................................14
5.21 Insurance Coverage......................................................15
5.22 Litigation..............................................................15
5.23 Registration Rights.....................................................15
5.24 Licenses................................................................15
5.25 Interested Party Transactions...........................................15
5.26 Minute Books............................................................16
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Page No.
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5.27 Computer Software.......................................................16
5.28 Interplay Web Site and Systems..........................................16
5.29 Product Returns.........................................................17
5.30 Disclosure..............................................................17
6. Representations and Warranties of Investor.......................................17
6.1 Organization, Standing, etc.............................................17
6.2 Corporate Acts and Proceedings..........................................17
6.3 Compliance with Laws and Other Instruments..............................17
6.4 Binding Obligations.....................................................17
6.5 No Brokers or Finders...................................................18
7. Conditions of Parties' Obligations..............................................18
7.1 Conditions of Investor's Obligations at the Closing.....................18
(a) No Errors, etc...................................................18
(b) Compliance with Agreement........................................18
(c) No Default.......................................................18
(d) Certificate of Company...........................................18
(e) Opinion of the Company's Counsel.................................18
(f) Qualification Under State Securities Laws........................18
(g) Supporting Documents.............................................19
(h) Proceedings and Documents........................................19
(i) Universal Agreement..............................................19
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Page No.
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(j) Fargo Employment Agreement.......................................19
(k) Lender's Consent.................................................19
(l) Due Diligence....................................................20
(m) NASDAQ-NMS Approval..............................................20
(n) Waiver of Existing Rights Agreement..............................20
(o) Government and Other Consents....................................20
(p) Waiver by Fargo..................................................20
(q) Proxies from Fargo and Universal.................................20
(r) Legal Fees.......................................................20
7.2 Conditions of Company's Obligations.....................................20
8. Affirmative Covenants of the Company................................................20
8.1 Maintain Corporate Rights and Facilities................................21
8.2 Maintain Insurance......................................................21
8.3 Pay Taxes and Other Liabilities.........................................21
8.4 Records and Reports.....................................................21
8.5 Notice of Litigation and Disputes.......................................22
8.6 Directors' Meetings; Election to Board..................................22
8.7 Conduct of Business.....................................................23
8.8 Compliance with Legal Requirements......................................23
8.9 Replacement of Certificates.............................................23
8.10 Compliance with Section 7...............................................23
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Page No.
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8.11 Securities Law Filings..................................................23
8.12 Compliance With Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws.........................................24
8.13 Use of Proceeds.........................................................24
8.14 Exclusivity.............................................................24
8.15 Restriction on Transfer of Fargo's Common Stock.........................24
8.16 Permitted Transaction...................................................25
8.17 Break-Up Fee............................................................25
8.18 Key Man Life Insurance..................................................25
8.19 HSR Filing..............................................................25
9. Negative Covenants of the Company...................................................26
9.1 Senior Securities.......................................................26
9.2 Changes in Type of Business.............................................26
9.3 Loans; Guarantees.......................................................26
9.4 Restrictive Agreements..................................................26
10. Affirmative Covenants of Investor...................................................26
10.1 Permitted Transaction...................................................26
10.2 Compliance with Legal Requirements......................................26
10.3 Interplay Option........................................................26
11. Registration of Registrable Stock...................................................27
11.1 Required Registration...................................................27
11.2 Registration Procedures.................................................27
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11.3 Expenses................................................................29
11.4 Indemnification.........................................................29
11.5 Reporting Requirements Under the Exchange Act...........................31
11.6 Investor Information....................................................31
11.7 Transferability of Registration Rights..................................32
12. Enforcement.........................................................................32
12.1 Survival of Representations and Warranties..............................32
12.2 Indemnification.........................................................32
12.3 Injunctive Relief.......................................................35
12.4 No Implied Waiver.......................................................35
13. Rights of First Refusal.............................................................35
13.1 Subsequent Offerings....................................................35
13.2 Exercise of Rights......................................................35
13.3 Issuance of Equity Securities to Other Persons..........................35
13.4 Excluded Securities.....................................................35
14. Definitions.........................................................................36
15. Miscellaneous.......................................................................39
15.1 Waivers and Amendments..................................................39
15.2 Rights of Investor......................................................39
15.3 Notices.................................................................40
15.4 Severability............................................................41
15.5 Assignment; Parties in Interest.........................................41
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Page No.
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15.6 Headings................................................................41
15.7 Choice of Law...........................................................41
15.8 Expenses................................................................41
15.9 Publicity...............................................................42
15.10 Counterparts............................................................42
15.11 Entire Agreement........................................................42
15.12 Attorneys' Fees.........................................................42
15.13 Arbitration.............................................................42
15.14 Partial and Conditional Termination of Shareholders' Agreement..........43
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of March 18,
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1999 among INTERPLAY ENTERTAINMENT CORP., a Delaware corporation (the
"Company"), XXXXX INTERACTIVE SA, a French corporation ("Xxxxx" or the
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"Investor"), and to the extent expressly provided herein, XXXXX XXXXX, an
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individual ("Fargo"). Capitalized terms not otherwise defined herein shall have
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the meanings ascribed thereto in Section 14 hereof.
THE PARTIES hereby agree as follows:
1. Authorization of Investor Stock. The Company has authorized the issue
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and sale of up to Five Million (5,000,000) shares (the "Investor Stock") of its
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Common Stock, par value $.001 per share ("Common Stock").
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2. Sale and Purchase of Investor Stock. Upon the terms and subject to the
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conditions herein contained, the Company agrees to sell to Investor, and
Investor agrees to purchase from the Company, at the Closing (as hereinafter
defined) on the Closing Date (as hereinafter defined) the Investor Stock at a
price in the aggregate of Ten Million Dollars ($10,000,000) (the "Purchase
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Payment").
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3. Closing; Calculation of Shares of Investor Stock; Adjustment of Shares of
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Investor Stock.
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3.1 Closing. The closing of the sale to and purchase by Investor of the
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Investor Stock (the "Closing") shall occur at the offices of Xxxx, Xxxxxxxx,
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Xxxxxxxx & Xxxxxx LLP, 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx-Xxxxx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx, at the hour of 10:00 A.M., Pacific time, on March 18, 1999 or at
such different time or day as the Investor and the Company shall agree (the
"Closing Date"). At the Closing, the Company shall deliver to Investor a
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certificate evidencing the Investor Stock which shall be registered in
Investor's name, against delivery to the Company of payment by check or wire
transfer in an amount equal to the Purchase Payment.
3.2 Sale of Shares of Investor Stock at Closing. The number of shares
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of Investor Stock to be issued to Investor and registered in Investor's name at
Closing shall be equal to Two Million Five Hundred Thousand (2,500,000) (the
"Initial Shares").
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3.3 Interim Valuation of Shares of Investor Stock. On June 30, 1999
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(the "Interim Valuation Date"), additional shares of Investor Stock, if any (the
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"Interim Additional Shares"), shall be issued to Investor and registered in
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Investor's
name in an amount equal to the difference between (a) the quotient of
(i) the Purchase Payment divided by (ii) the price per share of Common Stock as
of the Interim Valuation Date, less (b) the number of Initial Shares. The
"price per share of Common Stock as of the Interim Valuation Date" shall be the
average closing price of the Common Stock on the NASDAQ National Market System,
as reported in The Wall Street Journal or other nationally recognized
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publication or service that reports such data, for the ten (10) consecutive
trading days immediately preceding the Interim Valuation Date.
3.4 Final Valuation of Shares of Investor Stock. On August 20, 1999
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(the "Final Valuation Date"), the final number of shares of Investor Stock, if
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any, in addition to the Initial Shares (the "Final Additional Shares") shall be
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determined. Such number shall be equal to the difference between (a) the
quotient of (i) the Purchase Payment divided by (ii) the price per share of
Common Stock as of the Final Valuation Date, less (b) the number of Initial
Shares. The price per share of Common Stock as of the Final Valuation Date
shall be the average closing price of the Common Stock on the NASDAQ National
Market System, as reported in The Wall Street Journal or other nationally
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recognized publication or service that reports such data, for the ten (10)
consecutive trading days immediately preceding the Final Valuation Date. In the
event that the number of Interim Additional Shares is less than the number of
Final Additional Shares, the Company shall promptly deliver to Investor a
certificate evidencing the number of shares of Investor Stock, equal to the
difference between the Final Additional Shares and the Interim Additional
Shares, which shall be registered in Investor's name, and in the event that the
number of Interim Additional Shares is greater than the number of Final
Additional Shares, the Investor shall promptly return to the Company for
cancellation the certificate or certificates evidencing the Interim Additional
Shares for a certificate evidencing a number of shares equal to the Final
Additional Shares.
3.5 Limitations on Adjustments.
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(a) Notwithstanding Sections 3.3 or 3.4 hereof, in no event shall the
issuance of either the Interim Additional Shares or the Final Additional Shares
result in the Investor purchasing a number of shares hereunder (including the
Initial Shares) which exceeds 3,661,772 shares of Common Stock (the "Issuance
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Limit") (such occurrence, an "Excess Issuance") unless such issuance has been
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approved by vote of the Company's stockholders in accordance with Delaware law
prior to the date of such issuance (the "Required Approval"). Investor agrees
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to vote all shares of Common Stock held by it, and all shares of Common Stock
for which Investor holds proxies with respect to such issuance, in favor of such
issuance.
(b) In the event that the number of Interim Additional Shares
calculated pursuant to Section 3.3 hereof would result in an Excess Issuance and
the Required Approval is not obtained prior to the Interim Valuation Date, then,
in lieu of the actions required by such Section, (a) the Company shall issue to
Investor and register in Investor's name a number of shares of Common Stock
which, when added to the Initial Shares, equals the Issuance Limit, and (b) the
Company shall issue to the Investor an unsecured promissory note (the "Initial
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Note") in a principal amount equal to (x) Ten Million Dollars ($10,000,000),
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less (y) the product of the Issuance Limit and the price per
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share of the Common Stock as of the Interim Valuation Date. The Initial Note
shall bear interest at the rate of ten percent (10%) per annum from the Closing
Date until the date paid, shall be payable on January 1, 2000 (subject to
subsections (d) and (e) below), and otherwise shall be in form reasonably
acceptable to the Investor.
(c) In the event that the number of Final Additional Shares calculated
pursuant to Section 3.4 hereof would result in an Excess Issuance and the
Required Approval is not obtained prior to the Final Valuation Date, then, in
lieu of the actions required by such Section:
(i) If the number of Final Additional Shares calculated pursuant
to Section 3.4 is greater than the number of Interim Additional Shares
calculated pursuant to Section 3.3, the Company shall, if applicable, issue to
Investor and register in Investor's name a number of shares of Common Stock
which, when added to the Initial Shares and the Interim Additional Shares,
equals the Issuance Limit, and (b) the Company shall issue to the Investor an
unsecured promissory note (the "Additional Note") in a principal amount equal to
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(x) Ten Million Dollars ($10,000,000), less (y) the product of the Issuance
Limit and the price per share of the Common Stock as of the Final Valuation
Date, less (z) the principal amount of the Initial Note (if any).
(ii) If the number of Final Additional Shares calculated pursuant
to Section 3.4 is less than the number of Interim Additional Shares calculated
pursuant to Section 3.3, Investor shall promptly return the Initial Note to the
Company for cancellation in exchange for an unsecured promissory note (the
"Replacement Note") in a principal amount equal to (x) Ten Million Dollars
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($10,000,000), less (y) the product of the Issuance Limit and the price per
share of the Common Stock as of the Final Valuation Date.
The Additional Note or the Replacement Note, as applicable, shall bear
interest at the rate of ten percent (10%) per annum from the Closing Date until
the date paid, shall be payable on January 1, 2000 (subject to subsection (e)
below), and otherwise shall be in form reasonably acceptable to the Investor.
(d) In the event that the Required Approval is obtained between the
Interim Valuation Date and the Final Valuation Date, then, in lieu of the
actions required by Section 3.3(c), the Investor shall promptly return the
Initial Note to the Company for cancellation (including cancellation of any
accrued interest thereon) in exchange for a certificate representing a number of
shares of Common Stock equal to (i) the sum of the Initial Shares and the Final
Additional Shares, less (ii) the Issuance Limit, which shares shall be
registered in Investor's name.
(e) In the event that the Required Approval is obtained between the
Final Valuation Date and January 1, 2000 then, in lieu of payment of the notes
set forth in this Section and any accrued interest thereon, the Company shall
issue to the Investor a certificate representing a number of shares of Common
Stock equal to (i) the sum of the Initial Shares and the Final Additional
Shares, less (ii) the Issuance Limit, which shares shall be registered in
Investor's name.
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3.6 Collar. Notwithstanding Sections 3.2, 3.3, 3.4 or 3.5 hereof, in
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the event the price per share of Common Stock as so calculated would be less
than $2.00, the price per share in any event shall be deemed to be $2.00; and in
the event the price per share of Common Stock as so calculated would be more
than $4.00, the price per share in any event shall be deemed to be $4.00.
4. Register of Investor Stock; Restrictions on Transfer of Securities;
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Removal of Restrictions on Transfer of Investor Stock.
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4.1 Register of Investor Stock. The Company or its duly appointed agent
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shall maintain a register for the shares of Investor Stock, in which it shall
register the issue and sale of all such shares. All transfers of the Investor
Stock shall be recorded on the register maintained by the Company or its agent,
and the Company shall be entitled to regard the registered holder of the
Investor Stock as the actual holder of the Investor Stock so registered until
the Company or its agent is required to record a transfer of such Investor Stock
on its register. Subject to Section 4.2(c) hereof, the Company or its agent
shall be required to record any such transfer when it receives the shares of
Investor Stock to be transferred duly and properly endorsed by the registered
holder thereof or by its attorney duly authorized in writing.
4.2 Restrictions on Transfer.
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(a) Investor understands and agrees that the shares of Investor Stock
it will be acquiring have not been registered under the Securities Act, and that
accordingly they will not be fully transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act.
Investor acknowledges that it must bear the economic risk of its investment in
the Investor Stock for an indefinite period of time (subject, however, to the
Company's obligation to effect the registration of the Investor Stock under the
Securities Act in accordance with this Agreement) since they have not been
registered under the Securities Act and therefore cannot be sold unless they are
subsequently registered or an exemption from registration is available.
(b) (i) Investor hereby represents and warrants to the Company
that it is acquiring the Investor Stock for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with the
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, and (ii) it is an "accredited investor" within
the meaning of Regulation D of the Commission under the Securities Act.
(c) Investor xxxxxx agrees with the Company as follows:
(i) Subject to Section 4.3 hereof, the certificates
evidencing the Investor Stock it has agreed to purchase, and each certificate
issued in transfer thereof, will bear the following legend:
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"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 and have been taken for investment
purposes only and not with a view to the distribution thereof, and, except
as stated in an agreement between the holder of this certificate, or its
predecessor in interest, and the issuer corporation, such securities may
not be sold or transferred unless there is an effective registration
statement under such Act covering such securities or the issuer corporation
receives an opinion of counsel (which may be counsel for the issuer
corporation) stating that such sale or transfer is exempt from the
registration and prospectus delivery requirements of such Act."
(ii) The certificates representing such Investor Stock, and
each certificate issued in transfer thereof, will also bear any legend required
under any applicable state securities law.
(iii) Absent an effective registration statement under the
Securities Act, covering the disposition of the Investor Stock which Investor
acquires, Investor will not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of any or all of the Investor Stock without first providing
the Company with an opinion of counsel (which may be counsel for the Company) to
the effect that such sale, transfer, assignment, pledge, hypothecation or other
disposition will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws, except that no such
registration or opinion shall be required with respect to (A) a transfer not
involving a change in beneficial ownership, or (B) a sale to be effected in
accordance with Rule 144 of the Commission under the Securities Act (or any
comparable exemption).
(iv) Investor agrees that neither it nor any of its affiliates
will, during the period between the Closing Date and the Final Valuation Date,
(A) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any of the Initial Shares or the Interim Additional Shares or (B)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Initial Shares of
the Interim Additional Shares, whether any such transaction described in clause
(A) or (B) above is to be settled by delivery of the Initial Shares or the
Interim Additional Shares, in cash or otherwise. Investor agrees that the
certificates evidencing the Initial Shares and the Interim Additional Shares it
has agreed to purchase, and each certificate issued in transfer thereof during
the period between the Closing Date and the Final Valuation Date, will bear the
following legend:
"The sale, pledge, hypothecation or transfer of the
securities represented by this certificate is subject
to the terms and conditions (including certain
adjustment provisions) of a certain Stock Purchase
Agreement by
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and between the Corporation and the holder
hereof. Copies of such agreement may be obtained
upon written request to the secretary of the
Corporation."
(v) Investor consents to the Company's making a notation
on its records or giving instructions to any transfer agent of the Investor
Stock in order to implement the restrictions on transfer of the Investor Stock
mentioned in this subsection (c).
4.3 Removal of Transfer Restrictions. Any legend endorsed on a
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certificate evidencing shares of Investor Stock pursuant to Section 4.2(c)(i)
hereof and any stop transfer instructions and record notations with respect to
such Investor Stock shall be removed and the Company shall issue a certificate
without such legend to the holder of such Investor Stock (a) if such Investor
Stock is registered under the Securities Act, or (b) if such Investor Stock may
be sold under Rule 144(k) of the Commission under the Securities Act or (c) if
such holder provides the Company with an opinion of counsel (which may be
counsel for the Company) reasonably acceptable to the Company to the effect that
a public sale or transfer of such Investor Stock may be made without
registration under the Securities Act.
4.4 Standstill. Each of the Company and Investor agrees that, except as
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otherwise provided in or contemplated by this Agreement, including without
limitation the transactions contemplated by the Universal Agreement (as defined
below), for a period from and after the date hereof until December 31, 1999,
neither it nor any of its Subsidiaries will, without the prior written consent
of the other party: (i) acquire, offer to acquire, or agree to acquire, directly
or indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the other party or any
Subsidiary thereof, or any material amount of the assets of the other party or
any Subsidiary or division thereof outside the ordinary course of business; (ii)
make, or in any way participate in, directly or indirectly, any "solicitation"
of "proxies" (as such terms are used in the rules of the Commission) to vote, or
seek to advise or influence any Person with respect to the voting of, any voting
securities of the other party for the purpose of changing or influencing the
control of the other party; or (iii) make any public announcement with respect
to, or submit a proposal for, or offer of (with or without conditions) any
merger, business combination, recapitalization, restructuring, liquidation or
other extraordinary transaction involving the other party or its securities or
assets; provided, however, the foregoing restrictions shall not preclude
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Investor from (A) acquiring the shares of Common Stock contemplated by this
Agreement or the Universal Agreement, (B) pursuing and consummating a Permitted
Transaction, (C) filing a Schedule 13D in connection with the transactions
contemplated by this Agreement, (D) voting its shares of Common Stock within its
discretion on any matter submitted for a vote or consent of the Company's
stockholders, or (E) taking any other action contemplated by this Agreement;
provided, further, that the restrictions on Investor in this Section 4.4 shall
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lapse automatically to the extent any Person other than Investor takes any
action with respect to the matters described in clauses (ii) and (iii) above.
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5. Representations and Warranties by the Company. In order to induce
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Investor to enter into this Agreement and to purchase the Investor Stock, the
Company hereby covenants with, and represents and warrants to, Investor, as of
the date hereof, except as set forth on the Schedule of Exceptions delivered to
Investor concurrently herewith, as follows (unless the context otherwise
requires, the "Company" shall refer to the Company and its Subsidiaries,
collectively):
5.1 Organization, Standing, etc. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to carry on its business, to
own and hold its properties and assets, to enter into this Agreement, to issue
the Investor Stock and to carry out the provisions hereof and thereof. The
copies of the Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws of the Company which have been delivered to Investor prior to
the execution of this Agreement are true and complete and have not been amended
or repealed. Subsidiaries of the Company are set forth on Schedule 5.1.
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5.2 Qualification. The Company is duly qualified, licensed or
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domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned or leased makes
such qualification, licensing or domestication necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company.
5.3 Capital Stock. The authorized capital stock of the Company consists
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of 50,000,000 shares of Common Stock, and 5,000,000 shares of Preferred Stock,
and the Company has no authority to issue any other capital stock. No shares of
Preferred Stock have been issued prior to the Closing; 18,308,861 shares of
Common Stock are issued and outstanding, and such shares are duly authorized,
validly issued, fully paid and nonassessable. Except where the failure to do so
would not result in a Material Adverse Effect on the Company, the offer,
issuance and sale of the shares of Common Stock were (a) registered or qualified
under (or were exempt from the registration and prospectus delivery requirements
of) the Securities Act, (b) registered or qualified (or were exempt from
registration or qualification) under the registration or qualification
requirements of all applicable state securities laws, and (c) accomplished in
conformity with all other federal and applicable state securities laws, rules
and regulations. As of March 1, 1999, the Company has (A) reserved a total of
893,925 shares of Common Stock for issuance to employees, officers and directors
under a 1991 stock purchase plan, under which options to purchase a total of
270,384 shares have been granted, but neither exercised nor forfeited by the
holder thereof, (B) reserved a total of 603,750 shares of Common Stock for
issuance to employees, officers and directors under a 1994 stock option plan,
under which options to purchase a total of 602,550 shares have been granted, but
neither exercised nor forfeited by the holder thereof, and (C) reserved a total
of 2,259,425 shares of Common Stock for issuance to employees, officers and
directors under a 1997 stock incentive plan, under which options to purchase
622,300 shares have been granted, but neither exercised nor forfeited by the
holder thereof, (D) reserved a total of 200,000 shares of Common Stock for
issuance to employees and officers under an Employee Stock Purchase Plan, of
which 56,102 shares have been
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granted, but neither exercised nor forfeited by the holder thereof, and (E)
reserved a total of 861,156 shares of Common Stock for issuance upon the
exercise of options granted outside the Company's option plans, of which 572,874
shares have been granted, but neither exercised nor forfeited by the holder
thereof. The Company has reserved a total of 400,000 shares for issuance upon
exercise of outstanding warrants issued by the Company. Under the terms thereof,
to the extent that any outstanding award under the 1991 stock purchase plan or
1994 stock option plan expires or terminates prior to exercise of such award in
full, or if shares issued upon exercise are repurchased by the Company, the
unexercised portion or repurchased shares shall be added to the pool of shares
under the 1997 stock incentive plan and shall thereafter be available for grant
under the terms of such 1997 stock incentive plan. Each of the 1991 stock
purchase plan and 1994 stock option plan has been terminated with respect to
future grants of shares of Common Stock. Except as expressly provided in this
Agreement, the Company has no outstanding subscription, option, warrant, call,
contract, demand, commitment, convertible security or other instrument,
agreement or arrangement of any character or nature whatsoever under which the
Company is or may be obligated to issue Common Stock, Preferred Stock or other
Equity Security (as hereinafter defined) of any kind. Neither the offer nor the
issuance or sale of the Investor Stock constitutes or will constitute an event,
under any Equity Security or any anti-dilution or similar provision of any
agreement or instrument to which the Company is a party or by which it is bound
or affected, which shall either increase the number of shares or units of Equity
Securities issuable upon conversion of any securities (whether stock or
Indebtedness for Borrowed Money (as hereinafter defined)) or upon exercise of
any warrant or right to subscribe to or purchase any stock or similar security
(including Indebtedness for Borrowed Money), or decrease the consideration per
share or unit of Equity Security to be received by the Company upon such
conversion or exercise.
5.4 Investor Stock. The Investor Stock has been duly authorized and
--------------
validly issued, and upon payment to the Company of the Purchase Payment at the
Closing, will be fully paid and nonassessable Common Stock, free and clear of
all Liens and restrictions, other than Liens that might have been created by
Investor and restrictions imposed by (i) Section 4.2 hereof, (ii) applicable
state securities laws and (iii) the Securities Act.
5.5 Indebtedness for Borrowed Money. The Company has no Indebtedness
-------------------------------
for Borrowed Money except as disclosed on the Balance Sheet.
5.6 Shareholder List. Schedule 5.6 hereto contains a true and complete
---------------- ------------
list of the names and addresses of all persons or entities known to the Company,
based on Schedules 13D and/or 13G filed by such persons or entities or otherwise
based on the Company's actual knowledge, to be the beneficial holders of more
than five percent (5%) of the outstanding Common Stock and of the holders of all
outstanding options, warrants or other rights to purchase from the Company more
than five percent (5%) of Common Stock. With respect to holders of more than 5%
of Common Stock, Schedule 5.6 contains, to the Company's knowledge, a true and
------------
complete description of the number of shares held by each such holder. With
respect to each option set forth on such Schedule, Schedule 5.6 sets forth the
------------
date of grant, the number of shares subject
8
thereto, the exercise price, vesting schedule and expiration date. With respect
to the warrants set forth on such Schedule, Schedule 5.6 sets forth the date of
------------
issue of each warrant, the number of shares of Common Stock subject to the
warrant, the exercise price and expiration date. Except as provided on Schedule
--------
5.6, no holder of Common Stock or any other security of the Company or any other
---
Person is entitled to any preemptive right, right of first refusal or similar
right from the Company or, to the Company's knowledge, any Person as a result of
the issuance of the Investor Stock or otherwise. Except as provided on Schedule
--------
5.6, there is no voting trust, agreement or arrangement among any of the
---
beneficial holders of Common Stock of the Company affecting the exercise of the
voting rights of such stock.
5.7 Corporate Acts and Proceedings. All corporate acts and proceedings
------------------------------
required for the authorization, execution and delivery of this Agreement, the
offer, issuance and delivery of the Investor Stock and the performance of this
Agreement have been lawfully and validly taken or will have been so taken prior
to the Closing.
5.8 Compliance with Laws and Other Instruments. The business and
------------------------------------------
operations of the Company have been and are being conducted in accordance with
all applicable federal, state and local laws, rules and regulations, except to
the extent that noncompliance with laws, rules and regulations would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The execution, delivery and performance by the Company of this Agreement (a)
will not require from the Board or stockholders of the Company any consent or
approval that has not been validly and lawfully obtained, (b) will not require
any authorization, consent, approval, license, exemption of or filing or
registration with any domestic or, to best of the Company's knowledge, foreign,
court or governmental department, commission, board, bureau, agency or
instrumentality of government, except such as shall have been lawfully and
validly obtained prior to the Closing, (c) will not cause the Company to violate
or contravene (i) any provision of law, (ii) any rule or regulation of any
agency or government, domestic or foreign, (iii) any order, writ, judgment,
injunction, decree, determination or award, or (iv) any provision of the Amended
and Restated Certificate of Incorporation or Amended and Restated Bylaws of the
Company, (d) will not violate or be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under,
any indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement or other agreement, lease or instrument, commitment
or arrangement to which the Company is a party or by which the Company or any of
its properties, assets or rights is bound or affected, which in any such case
would have a Material Adverse Effect on the Company, and (e) will not result in
the creation or imposition of any Lien, other than Liens in favor of the
Investor. The Company is not in violation of, or (with or without notice or
lapse of time or both) in default under, any term or provision of its Amended
and Restated Certificate of Incorporation or Amended and Restated Bylaws or of
any indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement or other material agreement, lease or other
instrument, commitment or arrangement to which the Company is a party or by
which any of the Company's properties, assets or rights is bound or affected,
which in any such case would have a Material Adverse Effect on the Company. The
Company is not subject to any restriction of any kind or character which
prohibits the
9
Company from entering into this Agreement or would prevent its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby or thereby.
5.9 Binding Obligations. This Agreement constitutes the legal,
-------------------
valid and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally.
5.10 Securities Laws. Based in part upon the representations of
---------------
Investor in Section 4.2, the offer, issue and sale of the Investor Stock are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
5.11 No Brokers or Finders. No Person has, or as a result of the
---------------------
transactions contemplated herein will have, any right or valid claim against the
Company or the Investor for any commission, fee or other compensation as a
finder or broker, or in any similar capacity based upon obligations incurred by
the Company.
5.12 Financial Statements. Attached hereto as Schedule 5.12 is the
-------------------- -------------
Company's unaudited balance sheet (the "Balance Sheet") as of December 31, 1998
-------------
(the "Balance Sheet Date"), and the unaudited statement of operations for the
------------------
twelve-month period then ended. Included in the Company's Registration
Statement on Form S-1 effective June 19, 1998 (the "Form S-1") are the Company's
--------
audited balance sheets as of April 30, 1996 and 1997, and December 31, 1997, and
the audited statements of operations, cash flow and shareholders' equity for
each of the periods then ended, together with the related opinion thereon of
Xxxxxx Xxxxxxxx LLP, independent certified public accountants. Included in the
Company's Report on 10-Q for the quarterly period ended September 30, 1998 (the
"Form 10-Q") are the Company's unaudited balance sheet as of September 30, 1998
---------
and the unaudited statement of operations for the nine-month period then ended.
The foregoing financial statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company at the Balance Sheet Date and other dates therein specified and the
results of its operations and cash flow for the periods therein specified, and
(iii) have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods.
Specifically, but not by way of limitation, the Balance Sheet discloses all of
the debts, liabilities and obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due) of the Company at the
Balance Sheet Date which must be disclosed on a balance sheet in accordance with
generally accepted accounting principles.
5.13 Changes. Since the Balance Sheet Date, except as disclosed on
-------
Schedule 5.13 hereto, the Company has not (a) incurred any debts, obligations or
-------------
liabilities, absolute, accrued, contingent or otherwise, whether due or to
become due in excess of $250,000, except current liabilities incurred in the
usual and ordinary course of
10
business, none of which (individually or in the aggregate) materially and
adversely affects the business, finances, properties or prospects of the
Company, (b) discharged or satisfied any Liens other than those securing, or
paid any obligation or liability other than, current liabilities shown on the
Balance Sheet and current liabilities incurred since the Balance Sheet Date, in
each case in the usual and ordinary course of business, (c) mortgaged, pledged
or subjected to Lien any of its assets, tangible or intangible, (d) sold,
transferred or leased any of its assets of value exceeding $250,000 except in
the usual and ordinary course of business, (e) canceled or compromised any debt
or claim, or waived or released any right, of value exceeding $250,000, (f)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties, business or
prospects of the Company, (g) encountered any labor difficulties or labor union
organizing activities, (h) made or granted any wage or salary increase to any
executive officer other than in the ordinary course of business or entered into
any employment agreement, (i) issued or sold any shares of capital stock or
other securities or granted any options with respect thereto, (j) modified any
Equity Security, except to the extent disclosed on Schedule 5.6 hereto, (k)
------------
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding Equity Securities, (l)
suffered or experienced any change in, or condition affecting, the condition
(financial or otherwise) of the Company as a whole other than changes, events or
conditions in the usual and ordinary course of its business, none of which
(either by itself or in conjunction with all such other changes, events and
conditions) has been materially adverse, (m) made any change in the accounting
principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted, or (n) entered into any agreement, or
otherwise obligated itself, to do any of the foregoing.
5.14 Material Agreements of the Company. Except as expressly set
----------------------------------
forth in this Agreement, the Balance Sheet, as disclosed in the Index (compiled
pursuant to Item 601 of Regulation S-K of the Commission) to the Company's
filings under the Securities Act and the Exchange Act or as disclosed on
Schedule 5.14 hereto, the Company is not a party to any written or oral
-------------
agreement, instrument or arrangement not made in the ordinary course of business
that is material to the Company and is either (a) an agreement with any labor
---
union, (b) an agreement for the purchase of fixed assets or for the purchase of
materials, supplies or equipment over $250,000, (c) an agreement for the
employment of any officer on other than an at-will basis, (d) an indenture, loan
or credit agreement, note agreement, deed of trust, mortgage, security
agreement, promissory note or other agreement or instrument relating to or
evidencing Indebtedness for Borrowed Money in excess of $250,000 or subjecting
any asset or property of the Company to any Lien, (e) a guaranty of any
Indebtedness, (f) a lease or agreement under which the Company is lessee of or
holds or operates any property, real or personal, owned by any other Person
under which payments to such Person exceed $250,000 per annum, (g) a lease or
agreement under which the Company is lessor or permits any Person to hold or
operate any property, real or personal, owned or controlled by the Company
having a value over $250,000 other than in the ordinary course of business, (h)
an agreement granting any preemptive right, right of first refusal or similar
right to any Person, (i) a covenant not to compete or other restriction on its
ability to conduct a business or engage in any other activity, or (j) an
agreement to register securities under
11
the Securities Act. To the Company's knowledge, all parties having material
contractual arrangements with the Company are in substantial compliance
therewith, and none is in default in any material respect thereunder, except for
noncompliance or defaults which will not have a Material Adverse Effect on the
Company.
5.15 Employees. The following individuals (collectively,
---------
"Designated Key Employees") are in the full-time employ of the Company and/or
-------------------------
one or more of its Subsidiaries: Xxxxx, Xxxxxxx X.X. Xxxxxxxx and Xxxxx Xxxxx.
To the best of the Company's knowledge, no Designated Key Employee of the
Company has any plans to terminate his employment with the Company, and the
Company has no intention of terminating the employment of any Designated Key
Employee. To the best of the Company's knowledge, no Designated Key Employee or
any other employee of the Company is a party to or is otherwise bound by any
agreement or arrangement (including, without limitation, any license, covenant,
or commitment of any nature), or subject to any judgment, decree, or order of
any court or administrative agency, (a) that would conflict with such employee's
obligation diligently to promote and further the interests of the Company or (b)
that would conflict with the Company's business as now conducted or as proposed
to be conducted. The Company has complied in all material respects with all
laws relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, collective bargaining and payment of Social
Security and other taxes, and the Company has encountered no material labor
difficulties.
5.16 Tax Returns and Audits. All required federal, state and local
----------------------
tax returns of the Company have been accurately prepared and duly and timely
filed, and all federal, state and local taxes required to be paid with respect
to the periods covered by such returns have been paid. The Company is not
delinquent in the payment of any material tax, assessment or governmental
charge. Except as set forth on Schedule 5.16 hereto, there is not currently
-------------
pending against the Company any tax deficiency proposed or assessed against it
and the Company has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge for any tax period
for which the statute of limitations has not expired. Except as set forth on
Schedule 5.16 hereto, none of the Company's federal income tax returns nor any
-------------
state or foreign income or franchise tax returns has ever been audited by
governmental authorities in any of the last five (5) tax years. The reserves
for taxes, assessments and governmental charges reflected in the Balance Sheet
are and will be sufficient for the payment of all unpaid taxes, assessments and
governmental charges payable by the Company with respect to the period ended on
the Balance Sheet Date.
5.17 Patents and Other Intangible Assets.
-----------------------------------
(a) Except as disclosed on Schedule 5.17 hereto, the Company (i) owns
-------------
or has the right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, used in or
necessary for the conduct of its business as now conducted and proposed to be
conducted, (ii) to the Company's knowledge, is not infringing upon or otherwise
acting adversely to the right or claimed right of any Person under or with
respect to any patent, trademark, service
12
xxxx, trade name, copyright or license with respect thereto, where such
infringement would have a Material Adverse Effect on the Company.
(b) The Company owns or has the right to use all product rights,
manufacturing rights, trade secrets, including know-how, negative know-how,
formulas, patterns, compilations, programs, devices, methods, techniques,
processes, inventions, designs, technical data, computer software (in both
source code and object code forms and all documentation therefor), including
without limitation the Operational Software (as hereinafter defined) (all of the
foregoing of which are collectively referred to herein as "intellectual
------------
property") required for or incident to the conduct of the Company's business, as
it is presently conducted, in each case free and clear of any right, Lien or
claim of others, including without limitation former employers of its employees,
except for rights reserved by the licensors of such intellectual property and
rights granted by the Company pursuant to license, publishing and distribution
agreements, and except where such right, lien or claim would not have a Material
Adverse Effect on the Company.
(c) Since its organization, the Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all intellectual
property and all Inventions (as defined below). Without limiting the generality
of the foregoing, except as set forth on Schedule 5.17, each of the Company's
-------------
present employees has signed an agreement with the Company in the form provided
to Investor, and each of the Company's past employees has signed an agreement
with the Company substantially in the form provided to Investor, except, in
either such case, where the failure to do so would not have a Material Adverse
Effect on the Company. As used herein, "Inventions" means all inventions,
----------
developments and discoveries which during the period of an employee's or other
Person's service to the Company he or she makes or conceives of, either solely
or jointly with others, that relate to any subject matter with which his or her
work for the Company may be concerned, or relate to or are connected with the
business, products, services or projects of the Company, or relate to the actual
or demonstrably anticipated research or development of the Company or involve
the use of the Company's time, material, facilities or trade secret information.
(d) Except for license, publishing and distribution agreements with
third parties entered into in the ordinary course of business, and except as
disclosed on Schedule 5.17 hereto, the Company has not sold, transferred,
-------------
assigned, licensed or subjected to any Lien, any intellectual property, trade
secret, know-how, invention, design, process, computer software or technical
data, or any interest therein, necessary for the development, manufacture, use,
operation or sale of any product listed on Schedules 5.27(a) and 5.27(b)
hereto.
(e) No director, officer, employee, agent or shareholder of the
Company owns or has any right in the intellectual property of the Company, or
any patents, trademarks, service marks, trade names, copyrights, licenses or
rights with respect to the foregoing, or any inventions, developments or
discoveries used in or necessary for the conduct of the Company's business as
now conducted and as proposed to be conducted, which could reasonably be
expected to have a Material Adverse Effect on the Company.
13
(f) The Company has not received any communication alleging or stating
that the Company or any of its employees or other agents has violated or
infringed, or by conducting business as proposed, would violate or infringe, any
patent, trademark, service mark, trade name, copyright, trade secret,
proprietary right, process or other intellectual property of any other Person,
which could reasonably be expected to have a Material Adverse Effect on the
Company.
5.18 Employment Benefit Plans; ERISA. Except for the Interplay
-------------------------------
Productions 401(k) Profit Sharing Plan (the "Plan"), as described in Schedule
---- --------
5.18, the Company does not maintain or make contributions to any pension, profit
----
sharing or other employee retirement benefit plan. The Plan has been maintained
in compliance with all applicable laws, ordinances, rules, regulations, permits,
orders, writs, judgments, injunctions, decrees, determinations and awards of any
agency, government, or arbitrator. The Company has no material liability with
respect to the Plan or any other such plan (including, without limitation, any
unfunded liability or any accumulated funding deficiency) or any material
liability to the Pension Benefit Guaranty Corporation or under Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
-----
respect to the Plan or any multi-employer pension benefit plan, nor would the
Company have any such liability if the Plan or any multi-employer plan were
terminated or if the Company withdrew, in whole or in part, from the Plan or any
multi-employer plan. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will
constitute a termination of employment or other event entitling any person to
any additional or other benefits, or that would otherwise modify benefits or the
vesting of benefits, provided under the Plan.
5.19 Title to Property and Encumbrances; Leases. The Company has
------------------------------------------
good and marketable title to all of its properties and assets, including without
limitation the properties and assets reflected in the Balance Sheet and the
properties and assets used in the conduct of its business, except for properties
disposed of in the ordinary course of business since the Balance Sheet Date and
except for properties held under valid and subsisting leases which are in full
force and effect and which are not in default, subject to no Lien, except those
which are shown and described on the Balance Sheet and except for Permitted
Liens (as hereinafter defined). All material leases under which the Company is
lessee of any real or personal property are valid, enforceable and effective in
accordance with their terms; there is not under any such lease any existing or
claimed default by the Company or event or condition which with notice or lapse
of time or both would constitute a default by the Company. Except as disclosed
on Schedule 5.19 hereto, no material lease under which the Company is lessee of
-------------
any real property contains any provision which either (i) treats a sale or
transfer of any or all of the outstanding stock of the Company or a merger of
the Company with another Person as an assignment of the Company's leasehold
interest, or (ii) otherwise requires the consent of the lessor in the event of
any such sale, transfer or merger.
5.20 Condition of Properties. All facilities, machinery,
-----------------------
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company with fair
14
market value in excess of $250,000 are in good operating condition and repair,
subject to ordinary wear and tear, and are adequate and sufficient for the
Company's business.
5.21 Insurance Coverage. There is in full force and effect one or
------------------
more policies of insurance issued by insurers of recognized responsibility,
insuring the Company and its properties and business against such losses and
risks, and in such amounts, as are customary in the case of corporations engaged
in the same or similar business and similarly situated. The Company has not
been refused any insurance coverage sought or applied for, and the Company has
no knowledge of any facts that cause it to believe that the Company will be
unable to renew its existing insurance coverage as and when the same shall
expire upon terms at least as favorable as those presently in effect, other than
possible increases in premiums that do not result from any act or omission of
the Company.
5.22 Litigation. Except as disclosed on Schedule 5.22 hereto,
---------- -------------
there is no legal action, suit, arbitration or other legal, administrative or
other governmental investigation, inquiry or proceeding (whether federal, state,
local or foreign) pending or, to the Company's knowledge, threatened against or
affecting (i) the Company or its properties, assets or business (existing or
contemplated), or (ii) any Designated Key Employee, before any court or
governmental department, commission, board, bureau, agency or instrumentality or
any arbitrator, which if adversely determined would have a Material Adverse
Effect on the Company. Except as disclosed on Schedule 5.22 hereto, the Company
-------------
is not aware of any fact which might result in or form the basis for any such
action, suit, arbitration, investigation, inquiry or other proceeding, which if
adversely determined would have a Material Adverse Effect on the Company.
Neither the Company nor, to the best of the Company's knowledge, neither Fargo
nor Xxxxx is in default with respect to any order, writ, judgment, injunction,
decree, determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign).
5.23 Registration Rights. Except as set forth on Schedule 5.23,
------------------- -------------
other than under this Agreement, the Company has not agreed to register under
the Securities Act any of its authorized or outstanding securities.
5.24 Licenses. The Company possesses from the appropriate agency,
--------
commission, board and governmental body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
which are necessary for the Company to engage in the business currently
conducted by it and proposed to be conducted (except where the failure to so
hold would not have a Material Adverse Effect on the Company), including without
limitation the development, manufacture, use, sale and marketing of its existing
and proposed products and services; and all such certificates, licenses,
permits, authorizations and rights have been lawfully and validly issued and are
in full force and effect.
5.25 Interested Party Transactions. Except as disclosed on
-----------------------------
Schedule 5.25 hereto, no officer, director or 5% shareholder of the Company or
-------------
any Affiliate or "associate" (as this term is defined in Rule 405 of the
Commission under the Securities
15
Act) of any such Person or the Company has, either directly or indirectly, (a) a
material interest in any Person which (i) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (ii) purchases from or sells or furnishes to the Company any
goods or services, or (b) a beneficial interest in any transaction, contract or
agreement to which the Company is a party or by which it is bound or affected.
5.26 Minute Books. The minute books of the Company provided to
------------
Paul, Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP, special counsel for the Investor, contain
all resolutions adopted by directors and shareholders since the incorporation of
the Company and fairly and accurately reflect, in all material respects, all
matters and transactions referred to in such minutes.
5.27 Computer Software.
-----------------
(a) Each of the computer software programs developed by the Company
that are listed on Schedule 5.27(a) hereto (the "Operational Software") is
---------------- --------------------
functional, complete and operational in all material respects in accordance with
its specifications, has been documented in accordance with the Company's
standard practices, and the Company possesses both the source code and object
code versions thereof.
(b) Attached as Schedule 5.27(b) hereto is a true and complete list of
----------------
all computer software games currently in active development by or on behalf of
the Company (the "Developing Software"). Schedule 5.27(b) also sets forth
------------------- ----------------
whether each such game is being internally or externally developed and, if
externally developed, the name of the third party developer.
5.28 Interplay Web Site and Systems.
------------------------------
(a) The Company owns and has the right to communicate and publish its
"Interplay" Internet product offering (the "Web Site") and conduct business on
--------
the World Wide Web at the Internet address "xxxxxxxxx.xxx" and in connection
therewith to use the registered service mark and trade name "Interplay" and in
so doing is not acting in conflict with any patent, trademark, service mark,
trade name, copyright, trade secret, license or other proprietary right with
respect thereto, except where such conflict would not have a Material Adverse
Effect on the Company.
(b) The Company has not received any communication from any Person
that the Web Site or the conduct of the Company's business is in violation of
any law, rule or regulation or in conflict with any patent, trademark, service
mark, trade name, copyright, trade secret, license or other proprietary right
with respect thereto, except where such violation or conflict would not have a
Material Adverse Effect on the Company.
16
5.29 Product Returns. Schedule 5.29 hereto sets forth the
--------------- -------------
Company's experience with respect to the return of any of its products sold or
leased for the three (3) year period ended on December 31, 1998.
5.30 Disclosure. To the Company's knowledge, the information
----------
contained in this Agreement, in the Form 10-Q, the Balance Sheet and the Form S-
1, and in any writing furnished pursuant hereto or in connection herewith, taken
as a whole, is true, complete and correct (except that with respect to the Form
10-Q, the Balance Sheet and the Form S-1, the information contained therein
shall be true, complete and correct as of the date thereof), and does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or herein or necessary to make the statements
therein or herein, in light of the circumstances under which they were made, not
misleading.
6. Representations and Warranties of Investor. In order to induce the
------------------------------------------
Company to enter into this Agreement and to issue the Investor Stock, Investor
hereby covenants with, and represents and warrants to, the Company as follows:
6.1 Organization, Standing, etc Investor is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of France, and
has all requisite corporate power and authority to enter into this Agreement,
and to carry out the provisions hereof and thereof.
6.2 Corporate Acts and Proceedings. All corporate acts and proceedings
------------------------------
required for the authorization, execution and delivery of this Agreement by
Investor, and the performance of this Agreement by Investor, have been lawfully
and validly taken or will have been so taken prior to the Closing.
6.3 Compliance with Laws and Other Instruments. The execution, delivery
------------------------------------------
and performance by Investor of this Agreement (a) will not require from the
board of directors or stockholders of Investor any consent or approval that has
not been validly and lawfully obtained, (b) will not require any authorization,
consent, approval, license, exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality of government, except such as shall have lawfully and validly
obtained prior to the Closing, (c) will not cause Investor to violate or
contravene (i) any provision of law, (ii) any rule or regulation of any agency
or government, domestic of foreign, (iii) any order, writ, judgment, injunction,
decree, determination or award binding upon Investor, or (iv) any provision of
the charter documents of Investor, (d) will not violate or be in conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under, any indenture, loan or credit agreement, note agreement,
deed of trust, mortgage, security agreement or other material agreement, lease
or instrument, commitment or arrangement to which Investor is a party or by
which Investor or any of its properties, assets or rights is bound or affected,
which in any case would have a Material Adverse Effect on Investor.
6.4 Binding Obligations. This Agreement constitutes the legal, valid
-------------------
and binding obligations of Investor and is enforceable against Investor in
17
accordance with its terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally.
6.5 No Brokers or Finders. No Person has, or as a result of the
---------------------
transactions contemplated herein will have, any right or valid claim against the
Company or Investor for any commission, fee or other compensation as a finder or
broker, or in any similar capacity, except for Concordia Capital Technology
Group, Inc., whose fees will be the responsibility of the Investor.
7. Conditions of Parties' Obligations.
----------------------------------
7.1 Conditions of Investor's Obligations at the Closing. The
---------------------------------------------------
obligation of Investor to purchase and pay for the Investor Stock is subject to
the fulfillment prior to or on the Closing Date of the following conditions, any
of which may be waived in whole or in part by Investor:
(a) No Errors, etc. The representations and warranties of the
--------------
Company under this Agreement shall be deemed to have been made again on the
Closing Date and shall then be true and correct in all material respects (except
to the extent already qualified as to materiality, in which case such
representations and warranties shall then be true and correct in all respects).
(b) Compliance with Agreement. The Company shall have performed
-------------------------
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
(c) No Default. There shall not exist on the Closing Date any
----------
Default (as hereinafter defined) or Event of Default (as hereinafter defined) or
any event or condition which, with the giving of notice or lapse of time or
both, would constitute a Default or Event of Default.
(d) Certificate of Company. The Company shall have delivered to
----------------------
Investor a certificate dated the Closing Date, executed by the Chief Executive
Officer and Chief Financial Officer of the Company, certifying the satisfaction
of the conditions specified in subsections (a), (b) and (c) of this Section 7.1.
(e) Opinion of the Company's Counsel. The Investor shall have
--------------------------------
received from Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, a professional corporation,
counsel for the Company, a favorable opinion dated the Closing Date
substantially in the form of Exhibit A hereto.
---------
(f) Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws shall have been obtained for the lawful execution, delivery and performance
of this Agreement, including without limitation the offer, sale, issue and
delivery of the Investor Stock.
18
(g) Supporting Documents. Investor shall have received the
--------------------
following:
(1) Copies of resolutions of the Board, certified by the
Secretary of the Company, authorizing and approving the execution, delivery and
performance of this Agreement, and all other documents and instruments to be
delivered pursuant hereto and thereto, and taking all such other actions as
required by Section 203 of the Delaware General Corporation Law with respect to
this Agreement and the Universal Agreement (as defined below), and the
transactions contemplated hereby and thereby;
(2) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subsection (1) above and
further certifying that the Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws of the Company delivered to the Investors at the
time of the execution of this Agreement have been validly adopted and have not
been amended or modified; and
(3) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as Investor or
its special counsel, Xxxx, Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP ("Investor Counsel"),
----------------
may reasonably request.
(h) Proceedings and Documents. All corporate and other proceedings
-------------------------
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transactions, shall be satisfactory in form and
substance to Investor and to Investor Counsel.
(i) Universal Agreement. Investor shall have entered into an
-------------------
agreement with Universal Studios, Inc. ("Universal") and the Company with
---------
respect to the granting to Investor of an option (the "Universal Option") to
----------------
purchase 4,658,215 shares of Common Stock (the "Option Stock") held by Universal
------------
substantially in the form of Exhibit B hereto (the "Universal Agreement").
--------- -------------------
(j) Fargo Employment Agreement. Fargo, Universal and the Company
--------------------------
shall have entered into a one-year extension of the employment agreement among
Fargo, Universal and the Company dated as of March 28, 1994.
(k) Xxxxxx's Consent. The Company's lender shall have approved this
----------------
Agreement and the transactions contemplated hereby, and shall otherwise provide
such assurances to Investor as Investor may reasonably request with respect to
the use of the proceeds from the sale of the Investor Stock and the continuing
availability and renewal of such lender's current credit facility to the Company
(or the Company shall have provided such assurances to Investor with respect to
a substitute credit facility).
19
(l) Due Diligence. Investor and Investor Counsel shall have
-------------
completed their legal due diligence investigation of the Company and its
business prospects, and Investor shall be satisfied with the results thereof in
its sole discretion (including without limitation investigation of the Company's
D&O insurance policies).
(m) NASDAQ-NMS Approval. The Company shall have obtained any
-------------------
waiver or approval from NASDAQ-NMS required with respect to this Agreement and
the issuance of the Investor Stock.
(n) Waiver of Existing Rights Agreement. If necessary, the
-----------------------------------
requisite percentage of the Holders (as defined therein) party to the Investors'
Rights Agreement dated as of October 10, 1996, by and among the Company and the
Holders (the "Existing Rights Agreement"), shall have waived the application of
-------------------------
the Existing Rights Agreement (including without limitation Section 1.12
thereof) to the issuance of the Investor Stock and the registration rights
granted hereunder with respect to the Investor Stock.
(o) Government and Other Consents. Any approval, consent or waiting
-----------------------------
period required by any governmental agency or authority, or any other Person,
necessary or material to the consummation of the transactions contemplated
hereby shall have been obtained or expired, as the case may be, including
without limitation any approval from NASDAQ and any applicable waiting period
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
(p) Waiver by Xxxxx. Fargo shall have entered into the
---------------
Waiver substantially in the form of Exhibit C hereto.
---------
(q) Proxies from Fargo and Universal. Each of Fargo and Universal
--------------------------------
shall have granted to Investor an irrevocable proxy substantially in the form of
Exhibit D hereto.
---------
(r) Legal Fees. The Company shall have paid or reimbursed Investor
----------
for $50,000 of the reasonable fees and expenses of Investor Counsel incurred in
connection with the preparation of this Agreement, and all other documentation
necessary to consummate the transactions contemplated hereby, and all reasonable
fees and expenses of Investor Counsel incurred in connection with its legal due
diligence investigation of the Company and its business prospects.
7.2 Conditions of Company's Obligations. The Company's obligation to
-----------------------------------
issue and sell the Investor Stock to Investor on the Closing Date is subject to
the fulfillment prior to or at the Closing Date of the conditions precedent
specified in paragraphs (f) and (o) of Section 7.1 hereof, and to the accuracy
in all material respects of the representations of Investor in Section 4.2 and
Section 6 of this Agreement.
8. Affirmative Covenants of the Company. The Company agrees that unless
------------------------------------
Investor otherwise agrees in writing, from the date hereof through the later of
the Final Valuation Date or the effective date of registration statement with
respect to the
20
Investor Shares (the "Adjustment Period"), unless another period is expressly
-----------------
provided for in this Section 8, the Company (and each of its Subsidiaries unless
the context otherwise requires) and, to the extent expressly provided herein,
Fargo, will do the following:
8.1 Maintain Corporate Rights and Facilities. Maintain and preserve
----------------------------------------
its corporate existence and all rights, franchises and other authority adequate
for the conduct of its business; maintain its properties, equipment and
facilities in good order and repair; and conduct its business in an orderly
manner without voluntary interruption.
8.2 Maintain Insurance. Maintain in full force and effect a policy
------------------
or policies of insurance issued by insurers of recognized responsibility,
insuring it and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or a similar business and similarly situated.
8.3 Pay Taxes and Other Liabilities. Pay and discharge, before the
-------------------------------
same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon or against it or any of its
properties, and all its other material liabilities at any time existing, except
to the extent and so long as (i) the same are being contested in good faith and
by appropriate proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of redemption from
any sale thereunder, and (ii) it shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting principles)
deemed by it adequate with respect thereto.
8.4 Records and Reports. Accurately and fairly maintain its books
-------------------
of account in accordance with generally accepted accounting principles, as
approved from time to time by a majority of the Board and its independent
certified public accountants; permit Investor and its representatives to have
access to and to examine its properties, books and records (and to copy and make
extracts therefrom) at such reasonable times and intervals as Investor may
request and to discuss its affairs, finances and accounts with its officers and
auditors, all to such reasonable extent and at such reasonable times and
intervals as Investor may request; and furnish Investor:
(a) As soon as available, and in any event within thirty (30)
days after the close of each monthly accounting period, but only during the
Restricted Period, financial statements prepared on a consolidated basis
(together with consolidating statements in support thereof) consisting of a
balance sheet of the Company as of the end of such monthly accounting period and
statements of income, shareholders' equity and cash flow for such monthly
accounting period, and for the portion of the Company's fiscal year ending with
the last day of such monthly accounting period, all in reasonable detail,
prepared and certified by the chief executive officer or the chief financial
officer of the Company as fairly presenting the financial condition as of the
balance sheet date and results of operations and cash flows for the period then
ended in accordance with generally accepted accounting principles consistently
applied, subject to normal year end adjustments which in the aggregate shall not
be material;
21
(b) Promptly upon, and in any event within three (3) business days
following, the learning of the occurrence of a Default or an Event of Default or
a condition or event which with the giving of notice or the lapse of time, or
both, would constitute a Default or an Event of Default, a certificate signed by
the chief executive officer or chief financial officer of the Company describing
such Default, Event of Default or condition or event and stating what steps are
being taken to remedy or cure the same;
(c) During the Restricted Period, promptly upon the receipt thereof
by the Company or the Board, copies of all reports, all management letters and
other detailed information submitted to the Company or the Board by independent
accountants in connection with each annual or interim audit or review of the
accounts or affairs of the Company made by such accountants;
(d) Concurrently with their delivery to the Commission, all
reports, registration statements, proxy statements, and any other document, form
or report submitted to, or filed with, the Commission; and
(e) With reasonable promptness, during the Restricted Period, such
other information relating to the finances, properties, business and affairs of
the Company and each Subsidiary, as Investor reasonably may request from time to
time.
Notwithstanding the foregoing, the Company's obligation to provide any
such information to the Investor under this Section 8.4 shall be subject to the
Company's right to refuse to provide such information if, in the good faith
judgment of the Company, such information has not been provided, directly or
indirectly, to the general public or to any governmental agency (unless and to
the extent filed on a confidential basis), and is confidential and/or
competitively sensitive in nature, unless Investor executes an agreement, in
form reasonably satisfactory to the Company, pursuant to which Investor agrees
(i) to keep such information strictly confidential and not to use it for any
purpose not reasonably related to its interest as a stockholder of the Company,
and (ii) to comply with all of its obligations under the Securities Act and the
Exchange Act with respect to such information.
8.5 Notice of Litigation and Disputes. Promptly notify Investor of each
---------------------------------
legal action, suit, arbitration or other administrative or governmental
investigation or proceeding (whether federal, state, local or foreign)
instituted or threatened against the Company which could materially and
adversely affect its condition (financial or otherwise), properties, assets,
liabilities, business, operations or prospects, or of any occurrence or dispute
which involves a reasonable likelihood of any such action, suit, arbitration,
investigation or proceeding being instituted.
8.6 Directors' Meetings; Election to Board. From and after the Closing
--------------------------------------
until the expiration of the Restricted Period:
(a) Give Investor at least the notice required by Delaware law
and the Company's bylaws to be given to directors (or such longer notice
actually
22
given to the Company's directors), and permit up to two (2) officers or other
representatives of Investor or any Persons designated by Investor (each a
"Designee" and together the "Designees") to attend as observers, all meetings of
--------- ---------
the Board and all meetings of committees of the Board; furnish Investor and the
Designees with a complete and accurate copy of the minutes and other records of
all meetings and other proceedings of the Board and its committees as well as of
the written consents of members of the Board by which action is taken by the
Board or any committee without a meeting, and minutes and written consents
relating to action taken by the shareholders of the Company; provided, that, if
a meeting of the Board or any committee thereof is required to be held on
shorter notice than required above, waiver of the notice contained in this
Section 8.6 shall not be unreasonably withheld; and also furnish Investor and
the Designees with a complete and accurate copy of the minutes of the meetings
and the written consents with respect to action taken without a meeting of the
board of directors and committees of each Subsidiary and of the stockholders of
each Subsidiary. The Company may exclude the Designees from portions of any
such meeting to the extent necessary (i) for reasons of attorney-client
privilege or (ii) if the subject matter of the meeting involves discussion of
competitively sensitive information.
(b) At any time upon at Investor's notice to the Company, the
Company shall use its best efforts to cause one of the Designees to be elected
to the Board. In such event, Xxxxx shall vote all shares owned by Xxxxx in favor
of the election of such Designee to the Board and the Company shall, upon such
election, execute and deliver to such Designee an indemnification agreement in
form identical to that which it has entered into with its other directors.
8.7 Conduct of Business. Conduct its business in accordance with all
-------------------
applicable provisions of federal, state, local and foreign law.
8.8 Compliance with Legal Requirements. Comply promptly with all
----------------------------------
legal requirements that applicable law may impose upon it with respect to the
transactions contemplated by this Agreement, and cooperate promptly with, and
furnish information to, Investor in connection with any such requirements
imposed upon the Company in connection therewith or herewith.
8.9 Replacement of Certificates. Upon receipt of evidence reasonably
---------------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any certificate representing any of the Investor Stock, issue a new certificate
representing such Investor Stock in lieu of such lost, stolen, destroyed, or
mutilated certificate.
8.10 Compliance with Section 7. Use commercially reasonable
-------------------------
efforts to cause the conditions specified in Section 7.1 hereof to be met by the
Closing Date.
8.11 Securities Law Filings. Make all filings necessary to perfect
----------------------
in a timely fashion exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act and (ii) the registration or qualification
requirements of
23
all applicable securities or blue sky laws of any state or other jurisdiction,
for the issuance of the Investor Stock to Investor.
8.12 Compliance With Amended and Restated Certificate of
---------------------------------------------------
Incorporation and Amended and Restated Bylaws. Perform and observe all
---------------------------------------------
requirements of the Company's Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws.
8.13 Use of Proceeds. Use the proceeds from the sale of the
---------------
Investor Stock hereunder solely for working capital purposes, including product
development; provided, however, that the Company shall not use such proceeds to
-------- -------
pay more than $250,000 in outstanding Indebtedness for Borrowed Money, except to
the extent that the amounts so paid may immediately be re-borrowed.
Notwithstanding anything herein to the contrary, the proceeds from the sale of
the Investor Stock shall not be used to exercise the Interplay Option (defined
below).
8.14 Exclusivity. The Company will not, between the date hereof
-----------
and the earlier to occur of (i) ninety (90) days from the Closing Date hereof
and (ii) the consummation of a Permitted Transaction or a definitive agreement
with respect to a Permitted Transaction (the "Restricted Period"), directly or
-----------------
indirectly, through any officer, director, employee, agent, 5% stockholder,
partner or otherwise, (a) solicit or initiate, or participate in discussions or
negotiations with, or encourage the submission of bids, offers or proposals by
(or commence negotiations with or provide any information to), any Person with
respect to an acquisition of the Company, its business or assets, or any
interest therein, other than Investor, or (b) provide any non-public information
concerning the Company, its business or assets, to any Person, other than
Investor, except for product developers, distributors, publishers and licensees
under agreements with the Company entered into in the ordinary course of
business consistent with past practices, and except for the Company's lender.
Notwithstanding the foregoing, the Company may entertain a written unsolicited
bid or proposal from, and provide non-public information to, any party who
delivers such a written bid or proposal with respect to an acquisition of the
Company, its business or assets, but only if and so long as the Board determines
in good faith by a majority vote (with the written concurring and concurrent
advice from outside legal counsel) that failing to entertain such written bid or
proposal would constitute a breach of the fiduciary duties of the Board under
applicable law. The Company shall notify Investor in writing promptly upon
receipt of any bids, offers or proposals received, written or oral. The Company
further agrees that it will not engage any broker, financial advisor or other
consultant on a basis which might provide such broker, financial advisor or
consultant with an incentive to initiate or encourage proposals or offers from
other parties with respect to the Company, its business or assets, or any
interest therein. The Company shall not commence any proceeding to merge,
consolidate, liquidate or dissolve the Company or obligate itself to do so.
8.15 Restriction on Transfer of Xxxxx's Common Stock. During the
-----------------------------------------------
Restricted Period, Fargo shall not sell, assign, pledge, mortgage or otherwise
dispose of or transfer his Common Stock, or any other securities of the Company,
whether now owned or hereafter acquired, or agree to do any of the foregoing,
except to Investor.
24
8.16 Permitted Transaction. The Company will within one week after
---------------------
the Closing enter into negotiations with Investor concerning, and will use
commercially reasonable efforts thereafter to effect, a transaction approved by
the Board (including Fargo unless he abstains, in which case such abstention
shall be deemed an approval), in which Investor and the Company (or any wholly
owned Subsidiary of the Company) would merge or effect another business
combination involving both Investor and the Company (a "Permitted Transaction").
---------------------
If necessary, Fargo will vote his shares of Common Stock in favor of any
Permitted Transaction, and will waive any rights he has to purchase such shares
of Common Stock in accordance with the Shareholders' Agreement by and among the
Company, Fargo and MCA Inc. dated March 30, 1994.
8.17 Break-Up Fee. In the event that the Permitted Transaction is
------------
not consummated on or prior to the Restricted Period, and the Company enters
into a definitive agreement or letter of intent, or makes a public statement
with respect to, or becomes subject to, any transaction or series of related
transactions (including any tender offer) with any Person other than Investor
and its affiliates which results in, or is intended to result in, a Change of
Control (as defined herein) on or prior to September 30, 1999, then the Company
shall pay to Investor in immediately available funds upon the consummation of
such transaction (whether such transaction is consummated prior to or after
September 30, 1999) a breakup fee in an amount equal to three percent (3%) of
the Enterprise Value of all such transactions. "Enterprise Value" for any
----------------
transaction shall mean the sum of (a) all consideration received or deemed
received by the Company or the selling shareholder or shareholders of the
Company in connection with such transaction, including without limitation all
consideration for covenants not to compete, employment agreements, and
consulting agreements, plus (b) the principal amount of all Indebtedness for
Borrowed Money outstanding as of the closing of such transaction. For purposes
of this Agreement, a "Change in Control" shall mean a sale by the Company of all
-----------------
or substantially all of its assets, or a merger, consolidation, stock sale by
the Company or its stockholders, or any other transaction in which the holders
of the Company's outstanding Common Stock immediately prior to such transaction
or series of related transactions hold less than fifty percent (50%) of the
outstanding Common Stock of the Company (or the common stock of the surviving
entity of parent of such surviving entity) after the consummation of such
transaction or series of related transactions.
8.18 Key Man Life Insurance. The Company shall within thirty (30)
----------------------
days after Closing obtain, at the Company's expense, a $2,000,000 life insurance
policy on the life of Xxxxx, for the benefit of Investor, and thereafter so long
as Investor holds any Investor Stock, the Company shall pay from general
corporate funds all trustee fees and remaining insurance premiums.
8.19 HSR Filing. From the date hereof through the end of the
----------
Option Period (as defined in the Universal Agreement), to the extent that
Investor is required in connection with the transactions contemplated hereby, or
the transactions contemplated by the Universal Agreement, to file a notification
and report form in compliance with the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements
Act of 1976, as amended, or the rules and regulations promulgated thereunder
(collectively, the "HSR Act"), the Company shall agree to fully cooperate with
-------
Investor to enable Investor to
25
promptly make such filing and to respond to any requests for additional
information in connection therewith.
9. Negative Covenants of the Company. The Company agrees that unless
---------------------------------
Investor otherwise agrees in writing, during the Adjustment Period the Company
(and each of its Subsidiaries unless the context otherwise requires) will not do
any of the following:
9.1 Senior Securities. Issue, assume or suffer to exist (a) any
-----------------
security that is senior to the Investor Stock, or (b) any Indebtedness for
Borrowed Money that is an Equity Security or is issued with an Equity Security.
9.2 Changes in Type of Business. Make any substantial change in the
---------------------------
character of its business.
9.3 Loans; Guarantees. Make any loan or advance to any Person,
-----------------
including, without limitation any employee or director of the Company or any
Subsidiary, except advances for travel and entertainment expenses and similar
expenditures in the ordinary course of business or under the terms of an
employee stock option plan or stock purchase agreement approved by the Board,
and except for de minimis loans to employees consistent with past practice; or
-- -------
guarantee, directly or indirectly, any Indebtedness for Borrowed Money except
for trade accounts of the Company or any Subsidiary arising in the ordinary
course of business.
9.4 Restrictive Agreements. Enter into or become a party to any
----------------------
agreement or instrument which by its terms would violate or be in conflict with,
or restrict the Company's performance of, its obligations under this Agreement.
10. Affirmative Covenants of Investor. Investor agrees that, unless the
---------------------------------
Company otherwise agrees in writing, during the Restricted Period Investor will
do the following:
10.1 Permitted Transaction. Investor will within one week after
---------------------
the Closing enter into negotiations with the Company concerning, and will use
commercially reasonable efforts thereafter to effect, a Permitted Transaction.
10.2 Compliance with Legal Requirements. Comply promptly with all
----------------------------------
legal requirements that applicable law may impose upon it with respect to the
transactions contemplated by this Agreement, and cooperate promptly with, and
furnish information to, the Company in connection with any such requirements
imposed upon Investor in connection therewith or herewith.
10.3 Interplay Option. In the event that Investor exercises the
----------------
Universal Option, but Investor and the Company do not consummate a Permitted
Transaction within the 180 days from the date hereof (the "Option Period"), then
-------------
the Company shall have the right and option (the "Company Option") to purchase
--------------
up to fifty percent (50%) of the Option Stock from Investor at a price per
26
share equal to the price per share paid by Investor pursuant to the Universal
Agreement (the "Company Option Price"). The Company Option shall be exercisable
--------------------
by the Company providing written notice to Investor within fifteen (15) days
following the earlier to occur of (i) the end of the Option Period, or (ii) if
Investor shall have then exercised the Universal Option, notice by Investor to
the Company that Investor intends to dispose of the Option Stock. Upon the
exercise of the Company Option, the Company shall become obligated to purchase
from Investor, and Investor shall become obligated to sell to the Company, the
number of shares of the Option Stock set forth in the Company's notice for cash
equal to the Company Option Price. Notwithstanding anything herein to the
contrary, the Company Option is personal to the Company and may not be assigned
or transferred or encumbered by the Company to any other Person. Investor
agrees not to sell more than fifty percent (50%) of the Option Stock without
first complying with this Section and, in furtherance thereof, consents to the
placement of a stop transfer order on the Stock transfer books of the Company
with respect to the Option Stock.
11. Registration of Registrable Stock.
---------------------------------
11.1 Required Registration. On June 21, 1999, the Company shall
---------------------
prepare and file a registration statement under the Securities Act, on a form
selected by the Company, covering all Investor Stock (including the Initial
Shares and the maximum number of Final Additional Shares) and all Option Stock
(together with the Investor Stock, the "Registrable Stock") and shall use its
-----------------
best efforts to cause such registration statement to become effective as
expeditiously as possible and to remain effective until the earlier to occur of
the date (a) the Registrable Stock covered thereby has been sold, or (b) by
which all Registrable Stock covered thereby may be sold under Rule 144(k).
Notwithstanding the foregoing, if (i) prior to June 21, 1999, the Company shall
become ineligible to use Form S-3 or (ii) prior to such date the Company enters
into an agreement to cause a sale or other disposition of all or substantially
all of the assets or outstanding Common Stock of the Company and the Investor
would be materially prejudiced in such transaction by holding unregistered
Common Stock, then in either of such cases the Company shall promptly prepare
and file such registration statement on Form S-1. Without limiting the
generality of clause (ii) in the preceding sentence, the parties agree that
Investor would be materially prejudiced in such transaction in the event that it
is unable to dispose of the shares of Registrable Stock immediately upon the
consummation of such transaction.
11.2 Registration Procedures. When the Company effects the
-----------------------
registration of the Registrable Stock under the Securities Act pursuant to
Section 11.1 hereof, the Company will, at its expense, as expeditiously as
possible:
(a) In accordance with the Securities Act and the rules and
regulations of the Commission, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period described herein, and prepare and file with the Commission such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period and such registration statement and
27
prospectus accurate and complete for such period; the plan of distribution set
forth in such registration statement or in any amendment or supplement shall be
subject to the approval of Investor;
(b) Furnish to Investor such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as Investor may reasonably request in order to facilitate the public
offering of such securities;
(c) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as Investor may reasonably request within twenty (20)
days following the original filing of such registration statement, except that
the Company shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in
any jurisdiction where it is not so qualified;
(d) Notify Investor, promptly after it shall receive notice
thereof, of the date and time when such registration statement and each post-
effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(e) Notify Investor promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(f) Prepare and file with the Commission, promptly upon the
request of Investor, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for Investor, is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Stock by Investor;
(g) Prepare and promptly file with the Commission, and promptly
notify Investor of the filing of, such amendments or supplements to such
registration statement or prospectus as may be necessary (i) to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) to revise or amend the plan of
distribution of the Registrable Stock, as requested by Investor;
(h) In case Investor is required to deliver a prospectus at a
time when the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare promptly
upon request such amendments or supplements to such registration statement and
such prospectus as may be necessary in order for such prospectus to comply with
the requirements of the Securities Act and such rules and regulations; and
28
(i) Advise Investor, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
11.3 Expenses. With respect to any registration effected pursuant
--------
to Section 11.1 hereof, the Company agrees to bear all fees, costs and expenses
of and incidental to such registration and the public offering in connection
therewith; provided, however, that Investor shall bear its pro rata share of any
underwriting discounts or commissions. The fees, costs and expenses of
registration to be borne as provided in this Section 11.3 shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and disbursements
of counsel for the underwriter or underwriters of such securities (if the
Company and/or selling security holders are otherwise required to bear such fees
and disbursements), all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, reasonable fees
and disbursements of one firm of counsel for the Investor (not to exceed
$15,000), and the premiums and other costs of policies of insurance against
liability of directors and officers arising out of such public offering.
11.4 Indemnification.
---------------
(a) The Company will indemnify and hold harmless Investor and
any underwriter (as defined in the Securities Act) for Investor, and any Person
who controls Investor or such underwriter within the meaning of the Securities
Act, and any officer, director, employee, agent, partner or affiliate of
Investor, from and against, and will reimburse Investor and each such
underwriter, controlling person, officer, director, employee, agent, partner and
affiliate with respect to, any and all claims, actions, demands, losses,
damages, liabilities, costs and expenses to which Investor or any such
underwriter or controlling Person or any such officer, director, employee,
agent, partner or affiliate may become subject under the Securities Act or
otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
claim, action, demand, loss, damage, liability, cost or expense is caused by an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity in all material respects with information furnished to the
Company by Investor, such underwriter or such controlling person or such
officer, director, employee, agent, partner or affiliate in writing specifically
for use in the preparation thereof.
29
(b) Investor will indemnify and hold harmless the Company,
and any Person who controls the Company within the meaning of the Securities
Act, from and against, and will reimburse the Company and such controlling
Persons with respect to, any and all losses, damages, liabilities, costs or
expenses to which the Company or such controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or are
caused by the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in conformity in all material respects with written information furnished by
Investor to the Company in writing specifically for use in the preparation
thereof. Notwithstanding the foregoing, the liability of Investor pursuant to
this subsection (b) shall be limited to an amount equal to the per share sale
price (less any brokerage or underwriting discount and commissions) multiplied
by the number of shares of Registrable Stock sold by Investor pursuant to the
registration statement which gives rise to such obligation to indemnify (less
the aggregate amount of any damages which Investor has otherwise been required
to pay in respect of such losses, damages, liabilities, costs or expenses or any
substantially similar losses, damages, liabilities, costs or expenses arising
from the sale of such Registrable Stock).
(c) Promptly after receipt by a party indemnified pursuant
to the provisions of paragraph (a) or (b) of this Section 11.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 11.4 and shall not relieve the indemnifying party from liability under
this Section 11.4 except to the extent that such indemnifying party is
materially prejudiced by such omission. In case such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of such paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall be liable to an indemnified party for any settlement of any action or
claim without the consent of the indemnifying party. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified
30
party of a complete and unconditional release from all liability in respect to
such claim or litigation.
(d) If the indemnification provided for in subsection (a)
or (b) of this Section 11.4 is held by a court of competent jurisdiction to be
unavailable to a party to be indemnified with respect to any claims, actions,
demands, losses, damages, liabilities, costs or expenses referred to therein,
then each indemnifying party under any such subsection, in lieu of indemnifying
such indemnified party thereunder, hereby agrees to contribute to the amount
paid or payable by such indemnified party as a result of such claims, actions,
demands, losses, damages, liabilities, costs or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such claims, actions, demands, losses,
damages, liabilities, costs or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Notwithstanding the foregoing, the amount
Investor shall be obligated to contribute pursuant to this subsection (d) shall
be limited to an amount equal to the per share sale price (less any brokerage or
underwriting discount and commissions) multiplied by the number of shares of
Registrable Stock sold by Investor pursuant to the registration statement which
gives rise to such obligation to contribute (less the aggregate amount of any
damages which Investor has otherwise been required to pay in respect of such
claim, action, demand, loss, damage, liability, cost or expense or any
substantially similar claim, action, demand, loss, damage, liability, cost or
expense arising from the sale of such Registrable Stock). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution hereunder from any person who
was not guilty of such fraudulent misrepresentation.
11.5 Reporting Requirements Under the Exchange Act. The Company
---------------------------------------------
shall timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 or 15(d) of the Exchange Act. The Company
acknowledges and agrees that the purposes of the requirements contained in this
Section 11.5 are (a) to enable Investor to comply with the current public
information requirement contained in paragraph (c) of Rule 144 should Investor
ever wish to dispose of any of the Registrable Stock without registration under
the Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision) and (b) to qualify the Company for the use of registration statements
on Form S-3.
11.6 Investor Information. The Company may require Investor to
--------------------
furnish the Company such information with respect to Investor and the
distribution of the Registrable Stock as the Company may from time to time
reasonably request in writing as shall be required by law or by the Commission
in connection therewith.
31
11.7 Transferability of Registration Rights. Notwithstanding
--------------------------------------
anything to the contrary in this Section 11, the rights of the Investor under
this Section 11 shall automatically transfer to any transferee of at least ten
percent (10%) of the Registrable Stock in accordance with Section 15.5 hereof.
It is understood and agreed that the registration of the Option Stock in
accordance with this Section 11 shall not be deemed to inure to the benefit of
Universal.
12. Enforcement.
-----------
12.1 Survival of Representations and Warranties. The
------------------------------------------
representations, warranties, covenants and agreements of the parties hereto
contained in this Agreement or in any writing delivered pursuant to the
provisions of this Agreement or at the Closing shall survive any examination by
or on behalf of any party hereto and shall survive the Closing and the
consummation of the transactions contemplated hereby.
12.2 Indemnification.
---------------
(a) Subject to Section 12.2(e), the Company hereby covenants
and agrees to defend, indemnify and save and hold harmless Investor, together
with its officers, directors, shareholders, employees, attorneys and
representatives and each Person who controls Investor within the meaning of the
Securities Act, from and against any loss, cost, expense, liability, claim or
legal damages (including, without limitation, reasonable fees and disbursements
of counsel and accountants and other costs and expenses incident to any actual
or threatened claim, suit, action or proceeding (each, an "Action") and all
------
costs of investigation) (collectively, the "Damages") arising out of or
-------
resulting from (i) any Default, or any inaccuracy in or breach of, or failure to
perform or observe, any representation, warranty, covenant or agreement made by
the Company or Fargo in this Agreement or in any writing delivered pursuant to
this Agreement or at the Closing, or (ii) any claims of third parties claiming
compensation, commissions or expenses for services as a broker or finder based
upon obligations incurred by the Company.
(b) In the event that any indemnified party is made a
defendant in or party to any action, suit, proceeding or claim, judicial or
administrative, instituted by any third party for Damages or other relief (any
such third party action, suit, proceeding or claim being referred to as a
"Claim"), the indemnified party (referred to in this clause (b) as the
-----
"notifying party") shall give notice thereof (a "Notice of Claim") as soon as
--------------- ---------------
practicable and in any event within thirty (30) days after the notifying party
receives notice thereof. The failure to give such notice shall not affect
whether an indemnifying party is liable for reimbursement unless such failure
has resulted in the loss of substantive rights with respect to the indemnifying
party's ability to defend such Claim, and then only to the extent of such loss.
Notice of the intention so to contest and defend shall be given by the
indemnifying party to the notifying party within twenty (20) business days after
the notifying party's notice of such Claim (but, in all events, at least ten
(10) business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the indemnifying party and approved by the indemnified party (which
approval will not be
32
unreasonably withheld). The indemnifying party shall have the sole right to
control the contest and defense of such Claim. The notifying party shall be
entitled, at its own cost and expense (which expense shall not constitute
Damages unless the notifying party reasonably determines that the indemnifying
party because of a conflict of interest, may not adequately represent, the
interests of the indemnified parties, and has provided the indemnifying party
with notice of such determination, and only to the extent that such expenses are
reasonable), to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. The notifying party will cooperate with
the indemnifying party in the conduct of such defense. Neither the notifying
party nor the indemnifying party may concede, settle or compromise any Claim
without the consent of the other party, which consent will not be unreasonably
withheld or delayed in light of all factors of importance to such party;
provided, however, that if the indemnified party shall fail to consent to the
settlement of any Claim where (i) such settlement includes an unconditional
release of all claims against the indemnified party and requires no payment on
the part of the indemnified party to the claimant or any other party, (ii) such
settlement does not require any action on the part of the indemnified party and
does not impose terms restricting or adversely affecting the indemnified party's
activity, and (iii) the claimant has affirmatively indicated that it will accept
such settlement, then the indemnifying party shall no liability with respect to
any payment to be made in respect of such claim in excess of the proposed
settlement amount.
(c) In the event any indemnified party shall have a claim
against any indemnifying party that does not involve a Claim, the indemnified
party shall deliver a notice of such claim with reasonable promptness to the
indemnifying party. The failure to give such notice shall not affect whether an
indemnifying party is liable for reimbursement unless such failure has resulted
in the loss of substantive rights with respect to the indemnifying party's
ability to defend such claim, and then only to the extent of such loss. If the
indemnifying party notifies the indemnified party that it does not dispute the
claim described in such notice or fails to notify the indemnified party within
thirty (30) days after delivery of such notice by the indemnified party whether
the indemnifying party disputes the claim described in such notice, the Damages
in the amount specified in the indemnified party's notice will be conclusively
deemed a liability of the indemnifying party and the indemnifying party shall
pay the amount of such Damages to the indemnified party on demand.
(d) Any claim for indemnity under this Section 12.2 shall
be delivered in writing to the indemnifying party and set forth with reasonable
specificity as to the amount claimed and the underlying facts supporting such
claim. The indemnifying party shall have thirty (30) days to accept or dispute
such claim by written notice to the indemnified party (a "Contest Notice");
--------------
provided, however, that if, at the time a Notice of Claim is submitted to the
indemnifying party the amount of the Claim in respect thereof has not yet been
determined, such thirty (30) day period shall not commence until a further
written notice (a "Notice of Liability") has been sent or delivered by the
-------------------
indemnified party to the indemnifying party setting forth the amount of the
Claim incurred by the indemnified party that was the subject of the earlier
Notice of Claim. Such Contest Notice shall specify the reasons or bases for the
objection of the Indemnifying Party to the claim, and if the objection relates
to the amount of the Claim
33
asserted, the amount, if any, which the indemnifying party believes is due
the indemnified party. If no such Contest Notice is given with such 30-day
period, the obligation of the indemnifying party to pay to the indemnified party
the amount of the Claim set forth in the Notice of Claim, or subsequent Notice
of Liability, shall be deemed established and accepted by the indemnifying
party. If, on the other hand, the indemnifying party contests a Notice of Claim
or Notice of Liability (as the case may be) within such 30-day period, the
indemnified party and the indemnifying party shall thereafter attempt in good
faith to resolve their dispute by agreement. If the parties are unable to so
resolve their dispute within the immediately succeeding thirty (30) days, such
dispute shall be resolved by binding arbitration in Los Angeles, California, as
provided in Section 15.13 below. The award of the arbitrator shall be final and
binding on the parties and may be enforced in any court of competent
jurisdiction. Upon final determination of the amount of the Claim that is the
subject of an indemnification claim (whether such determination is the result of
the indemnifying party's acceptance of, or failure to contest, a Notice of Claim
or Notice of Liability, or of a resolution of any dispute with respect thereto
by agreement of the parties or binding arbitration), such amount shall be
payable, in cash by the indemnifying party to the indemnified parties who have
been determined to be entitled thereto within fifteen (15) days of such final
determination of the amount of the Claim due by the indemnifying party. Any
amount that becomes due hereunder and is not paid when due shall bear interest
at the maximum legal rate per annum from the date due until paid.
(e) Anything to the contrary notwithstanding, (i) the
Investor shall not be indemnified and held harmless in respect of any Damages
unless and until the aggregate amount of such Damages exceeds $100,000, in which
event the Investor shall be indemnified and held harmless in respect of all
Damages without regard to the foregoing $100,000 limit, and (ii) the liability
of the Company to the Investor shall be limited to an amount equal to the
Purchase Payment.
(f) Investor hereby covenants and agrees to defend,
indemnify and save and hold harmless the Company, together with officers,
directors, shareholders, employees, attorneys and representatives and each
Person who controls the Company within the meaning of the Securities Act from
and against any Damages arising out of or resulting from (i) any inaccuracy in
breach of, or failure to perform or observe, any representation, warranty,
covenant or agreement made by Investor in this Agreement or in any writing or
other agreement delivered pursuant hereto, or (ii) any claims of third parties
claiming compensation, commissions or expenses for services as a broker or
finder based upon obligations incurred by Investor.
(g) Except as provided in Section 12.3, the provisions of
this Section 12.2 shall be the exclusive remedy or exclusive means to obtain
relief, as the case may be, of any party in the event of any breach of any
representation, warranty, covenant or agreement contained herein (or in any
certificate or other document delivered pursuant hereto) by another party, or
with respect to any Action or Claim; provided, however, that this subsection (g)
-------- -------
shall not limit any statutory claim, or any claim in tort, which any party may
have against the other party.
34
12.3 Injunctive Relief. (a) Any party may bring a claim seeking
-----------------
specific performance by way of injunctive relief before a court of competent
jurisdiction to enforce the provisions of this Agreement, (b) any party seeking
to enforce a claim for indemnification may bring any claim of indemnification
which is not resolved within the thirty day period provided in Section 12.2(b)
before a court of competent jurisdiction, and (c) in the event of any breach by
either party of Section 15.9, the other party may seek injunctive relief from a
court of competent jurisdiction to restrain any such breach.
12.4 No Implied Waiver. Except as expressly provided in this
-----------------
Agreement, no course of dealing between the Company and Investor and no delay in
exercising any such right, power or remedy conferred hereby or now or hereafter
existing at law in equity, by statute or otherwise, shall operate as a waiver
of, or otherwise prejudice, any such right, power or remedy.
13. Rights of First Refusal.
-----------------------
13.1 Subsequent Offerings. Investor shall have the right of first
--------------------
refusal to purchase all (or any part of all) Equity Securities that the Company
may, from time to time, propose to sell and issue during the Restricted Period,
other than the Equity Securities excluded by Section 13.4 hereof.
13.2 Exercise of Rights. If and each time the Company proposes to
------------------
issue any Equity Securities, it shall give Investor written notice of its
intention, describing the Equity Securities, the price, and the general terms
and conditions upon which the Company proposes to issue the same. Investor
shall have ten (10) days from the giving of such notice to agree to purchase
Equity Securities for the price and upon the terms and conditions specified in
the notice by giving written notice to the Company.
13.3 Issuance of Equity Securities to Other Persons. If Investor
----------------------------------------------
fails to exercise in full the rights of first refusal within such ten (10) day
period by giving the agreement referred to in Section 13.2, the Company shall
have ninety (90) days thereafter to complete the sale of the Equity Securities
in respect of which Investor's rights were not exercised, at a price and upon
general terms and conditions no more favorable to the purchasers thereof than
specified in the Company's notice to the Investors pursuant to Section 13.2
hereof. If the Company has not sold all of such Equity Securities within such
ninety (90) days, the Company shall not thereafter issue or sell any of such
Equity Securities, without first offering such securities to Investor in the
manner provided above.
13.4 Excluded Securities. The rights of first refusal established
-------------------
by this Section 13 shall have no application to (a) any shares of Common Stock
issued in accordance with the stock option plans and warrants currently reserved
for issuance to employees, directors and advisors, as described in Sections 5.3
and 5.6, and Schedule 5.6, (b) shares of Common Stock issued as consideration to
------------
third parties for product development services or publishing or distribution
rights, not to exceed 500,000 shares, (c) shares of Common Stock issued in
connection with any stock split, stock dividend or reverse stock split, and (d)
shares of Common Stock issued in connection with
35
acquisitions of other entities by way of merger, share exchange, sale of assets
or otherwise.
14. Definitions. Unless the context otherwise requires, the terms defined in
-----------
this Section 14 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined. All accounting terms defined in this Section 14 and those
accounting terms used in this Agreement not defined in this Section 14 shall,
except as otherwise provided for herein, be construed in accordance with those
generally accepted accounting principles that the Company is required to employ
by the terms of this Agreement. If and so long as the Company has any
Subsidiary, the accounting terms defined in this Section 14 and those accounting
terms appearing in this Agreement but not defined in this Section 14 shall be
determined on a consolidated basis for the Company and its Subsidiaries, and the
financial statements and other financial information to be furnished by the
Company pursuant to this Agreement shall be consolidated and presented with
consolidating financial statements of the Company and its Subsidiaries.
"Action" shall have the meaning assigned to it in Section 12.2(a).
------
"Affiliate" shall mean any Person which directly or indirectly controls,
---------
is controlled by, or is under common control with, the indicated Person.
"Agreement" shall mean this Agreement.
---------
"Balance Sheet" and "Balance Sheet Date" shall have the meanings assigned
------------- ------------------
to these terms in Section 5.12 hereof.
"Board" shall mean the Board of Directors of the Company.
-----
"Claim" shall have the meaning assigned to it in Section 12.2(b).
-----
"Closing" and "Closing Date" shall have the meanings assigned to these
------- ------------
terms in Section 3.1.
"Common Stock" shall have the meaning assigned to it in Section 1 hereof.
------------
"Commission" shall mean the Securities and Exchange Commission.
----------
"Damages" shall have the meaning assigned to it in Section 12.2(a).
-------
"Default" shall mean a default or failure in the due observance or
-------
performance of any covenant, condition or agreement on the part of the Company
or any of its Subsidiaries to be observed or performed under the terms of this
Agreement, if such default or failure in performance shall remain unremedied for
ten (10) days.
36
"Designated Key Employees" shall have the meaning assigned to it in
------------------------
Section 5.15.
"Designee" shall have the meaning assigned to it in Section 7.6(a).
--------
"Developing Software" shall have the meaning assigned to it in Section
-------------------
5.27(b).
"Equity Security" shall mean any stock or similar security of the Company
---------------
or any security (whether stock or Indebtedness for Borrowed Money) convertible
or exchangeable, with or without consideration, into or for any stock or similar
security, or any security (whether stock or Indebtedness for Borrowed Money)
carrying any warrant or right to subscribe to or purchase any stock or similar
security, or any such warrant or right.
"Event of Default" shall mean (a) the failure of either the Company or
----------------
any Subsidiary to pay any Indebtedness for Borrowed Money, or any interest or
premium thereon, within ten (10) days after the same shall become due, whether
such Indebtedness shall become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise, (b) an event of default
under any agreement or instrument evidencing or securing or relating to any such
Indebtedness, or (c) the failure of either the Company or any Subsidiary to
perform or observe any material term, covenant, agreement or condition on its
part to be performed or observed under any agreement or instrument evidencing or
securing or relating to any such Indebtedness when such term, covenant or
agreement is required to be performed or observed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Existing Rights Agreement" shall have the meaning assigned to it in
-------------------------
Section 7.1(p).
"Form 10-Q" shall have the meaning assigned to it in Section 5.12.
---------
"Form S-1" shall have the meaning assigned to it in Section 5.12.
--------
"Indebtedness" shall mean any obligation of the Company or any Subsidiary
------------
which under generally accepted accounting principles is required to be shown on
the balance sheet of the Company or such Subsidiary as a liability. Any
obligation secured by a Lien on, or payable out of the proceeds of production
from, property of the Company or any Subsidiary shall be deemed to be
Indebtedness even though such obligation is not assumed by the Company or
Subsidiary.
"Indebtedness for Borrowed Money" shall mean (a) all Indebtedness in
-------------------------------
respect of money borrowed including, without limitation, Indebtedness which
represents the unpaid amount of the purchase price of any property and is
incurred in lieu of borrowing money or using available funds to pay such amounts
and not constituting an
37
account payable or expense accrual incurred or assumed in the ordinary course of
business of the Company or any Subsidiary, (b) all Indebtedness evidenced by a
promissory note, bond or similar written obligation to pay money, or (c) all
such Indebtedness guaranteed by the Company or any Subsidiary or for which the
Company or any Subsidiary is otherwise contingently liable.
"Investor Counsel" shall have the meaning assigned to it in Section
----------------
7.1(g)(3).
"Investor Stock" shall have the meaning assigned to it in Section 1.
--------------
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other law.
"Material Adverse Effect" on a Person means a material adverse effect, or
-----------------------
any condition, situation or set of circumstances that could reasonably be
expected to have an adverse effect, on such Person and its Subsidiaries, taken
as a whole.
"Operational Software" shall have the meaning assigned to it in Section
--------------------
5.27(a).
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
---------------
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; and (c) Liens incidental to the conduct of the business
of the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
"Permitted Transaction" shall have the meaning assigned to it in Section
---------------------
8.16.
"Person" shall include any natural person, corporation, trust,
------
association, company, partnership, limited liability company, joint venture and
other entity and any government, governmental agency, instrumentality or
political subdivision.
"Purchase Payment" shall have the meaning assigned to it in Section 2.
----------------
38
"Restricted Period" shall have the meaning assigned to it in Section
-----------------
8.14.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Subsidiary" shall mean any corporation, association or other business
----------
entity at least fifty percent (50%) of the outstanding voting stock of which is
at the time owned or controlled directly or indirectly by the Company or by one
or more of such subsidiary entities or both, where "voting stock" means any
shares of stock having general voting power in electing the board of directors
(irrespective of whether or not at the time stock of any other class or classes
has or might have voting power by reason of any contingency).
"Universal" shall have the meaning assigned to it in Section 7.1(j).
---------
"Universal Agreement" shall have the meaning assigned to it in Section
-------------------
7.1(j).
"Web Site" shall have the meaning assigned to it in Section 5.28(a).
--------
15. Miscellaneous.
-------------
15.1 Waivers and Amendments. With the written consent of Investor,
----------------------
the obligations of the Company and the rights of Investor under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely), and with the same consent the Company, when authorized by
resolution of its Board, may enter into a supplementary agreement for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of any supplemental agreement or
modifying in any manner the rights and obligations hereunder of Investor and the
Company. Neither this Agreement, nor any provision hereof, may be amended,
waived, discharged or terminated orally or by course of dealing, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, as provided in this Section
15.1. Specifically, but without limiting the generality of the foregoing, the
failure of Investor at any time or times to require performance of any provision
hereof by the Company shall in no manner affect the right of Investor at a later
time to enforce the same. No waiver by any party of the breach of any term or
provision contained in this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in the
Agreement.
15.2 Rights of Investor. Investor shall have the absolute right to
------------------
exercise or refrain from exercising any right or rights which Investor may have
by reason of this Agreement or any Investor Stock, including, without
limitation, the right to consent to the waiver of any obligation of the Company
under this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement
39
or any agreement effecting any such modification, and Investor shall not incur
any liability to any other shareholder of the Company with respect to exercising
or refraining from exercising any such right or rights.
15.3 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to the Company to:
Interplay Entertainment Corp.
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Mr. Xxxxx Xxxxx, Chairman and
Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
X.X. Xxxxxx, Esq.
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, a professional corporation
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
if to Investor to:
Xxxxx Interactive SA
c/x Xxxxx Software Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxx, Chairman and
Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Xx., Esq.
Xxxx, Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
40
if to Fargo to:
Mr. Xxxxx Xxxxx
c/o Interplay Entertainment Corp.
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
or to such other address or telecopier number as such party may specify for the
purpose by notice to the other party or parties to this Agreement, as the case
may be. Any notice, request, consent or other communication hereunder shall be
deemed to have been given and received on the day on which it is delivered (by
any means including personal delivery, overnight air courier, United States
mail) or telecopied (or, if such day is not a business day or if the notice,
request, consent or communication is not telecopied during business hours of the
intended recipient, at the place of receipt, on the next following business
day).
15.4 Severability. Should any one or more of the provisions of
------------
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
15.5 Assignment; Parties in Interest. Neither this Agreement nor
-------------------------------
any interest herein may be assigned by either party hereto without the written
consent of the other parties hereto, except that Investor may assign all of its
rights hereunder to any Subsidiary of Investor. Subject to the foregoing, all
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. Subject to the immediately
preceding sentence, this Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement and its
successors and assigns.
15.6 Headings. The headings of the Sections and paragraphs of
--------
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
15.7 Choice of Law. The internal substantive laws, and not the
-------------
laws of conflicts, of the State of California shall govern the enforceability
and validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
15.8 Expenses. The Company agrees, whether or not the
--------
transactions contemplated hereby are consummated, to pay (a) $50,000 of the fees
and expenses of the Investor Counsel arising in connection with the negotiation
and execution
41
of this Agreement and consummation of the transactions contemplated hereby, some
or all of which Investor, in its discretion, may deduct from the Purchase
Payment, (b) the fees and expenses incurred in connection with any requested
waiver of the right of Investor or the consent of Investor to contemplated acts
of the Company not otherwise permissible by the terms of this Agreement, (c)
stamp and other taxes, excluding income taxes, which may be payable with respect
to the execution and delivery of this Agreement or the issuance, delivery or
acquisition of the Investor Stock, and (d) all costs of the Company's
performance of and compliance with this Agreement.
15.9 Publicity. Without the prior consent of the other parties, no
---------
party shall, and each party shall cause its directors, officers, employees,
representatives and agents not to, make any public statement or press release
with respect to the transactions contemplated by this Agreement or otherwise
disclose to any Person the existence, terms, content or effect of this
Agreement; provided, however, that if a disclosure is required by law, the party
--------
required to make such disclosure shall be permitted to make such disclosure but
shall use best efforts to consult with the other parties hereto before making
the required disclosure.
15.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile) and by different parties hereto in
separate counterparts, with the same effect as if all parties had signed the
same document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument.
15.11 Entire Agreement. This Agreement, and the Exhibits,
----------------
Schedules, certificates, and documents referred to herein constitute the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersede all prior understandings with respect to the subject matter hereof,
and no representation or warranty not included herein has been relied upon by
any party hereto.
15.12 Attorneys' Fees. In the event of any dispute, controversy, or
---------------
proceeding between the parties concerning this Agreement or the transactions
contemplated hereby, the prevailing party shall be entitled to receive from the
non-prevailing party its costs and expenses, including attorneys' fees.
15.13 Arbitration. Except for actions to obtain injunctions or
-----------
other equitable remedies, all disputes between the parties hereto shall be
determined solely and exclusively by arbitration under, and in accordance with
the rules then in effect of, the American Arbitration Association, or any
successors thereto ("AAA"), in Los Angeles, California, unless the parties
---
otherwise agree in writing. The parties shall, in connection with such
arbitration, in addition to any discovery permitted under AAA rules, be
permitted to conduct discovery in accordance with Section 1283.05 of the
California Code of Civil Procedure, the provisions of which are incorporated
herein by this reference. The parties shall jointly select an arbitrator. In
the event the parties fail to agree upon an arbitrator within ten (10) days,
then each party shall select an arbitrator and such arbitrators shall then
select a third arbitrator to serve as the sole arbitrator; provided, that if
--------
either party, in such event, fails to select an arbitrator within seven (7)
days, such
42
arbitrator shall be selected by the AAA upon application of either party.
Judgment upon the award of the agreed upon arbitrator or the so chosen third
arbitrator, as the case may be, shall be binding and may be entered in any court
of competent jurisdiction.
15.14 Partial and Conditional Termination of Shareholders'
----------------------------------------------------
Agreement. In the event the Investor exercises the Universal Option, the
---------
Investor, the Company and Fargo agree that the provisions of Article II of the
Shareholders' Agreement shall terminate and be of no further force or effect.
43
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers as of the day and year
first above written.
INTERPLAY ENTERTAINMENT CORP., a Delaware
corporation
By: /s/ Xxxxx Xxxxx
----------------------------
An Authorized Officer
XXXXX INTERACTIVE SA, a French corporation
By: /s/ Herve Caen
-----------------------------
An Authorized Officer
/s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx
44
