EXHIBIT 99.12
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of April
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14, 2000 by and between INTERPLAY ENTERTAINMENT CORP., a Delaware corporation
(the "Company"), ▇▇▇▇▇ INTERACTIVE SA, a French corporation ("▇▇▇▇▇" or the
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"Investor"). Capitalized terms not otherwise defined herein shall have the
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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 seven hundred nineteen thousand four hundred twenty-four
(719,424) shares (the "Shares") of its Series A Preferred Stock, par value $.001
per share ("Series A Preferred Stock"). The Series A Preferred Stock has the
rights preferences, privileges and restrictions set forth in the Certificate of
Designation attached hereto as Exhibit A (the "Certificate of Designation").
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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 Shares at a price in
the aggregate of Twenty Million Dollars ($20,000,000) (the "Purchase Payment").
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3. Closing. The closing of the sale to and purchase by Investor of the
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Shares (the "Closing") shall occur at the offices of Paul, Hastings, ▇▇▇▇▇▇▇▇ &
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▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, at the hour of 10:00 A.M., Pacific time, on April 12, 2000 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 Shares 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 $10,000,000 and surrender of those certain promissory notes of
the Company in favor of Investor in the aggregate amount of $10,000,000.
4. Register of Shares; Restrictions on Transfer of Securities; Removal of
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Restrictions on Transfer of Investor Stock.
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4.1 Register of Investor Stock. The Company or its duly appointed
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agent shall maintain a register for the Series A Preferred Stock (and the shares
of Common Stock issuable upon conversion thereof), in which it shall register
the issue and sale of all such shares. All transfers of the Series A Preferred
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 Shares
as the actual holder of the Shares so registered until the Company or its agent
is required to record a transfer of such Shares 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 Series A Preferred 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 neither the Shares, nor
the shares of the Company's Common Stock issuable upon the conversion thereof
(collectively, the "Investor Stock") have 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 hereby agrees with the Company as follows:
(i) Subject to Section 4.3 hereof, the certificates
evidencing the Investor Stock, and each certificate issued in transfer thereof,
will bear the following legend:
"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 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.
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 Shares, 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
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consists of 50,000,000 shares of Common Stock, and 5,000,000 shares of Preferred
Stock, of which
719,424 shares have been designated as Series A 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; 30,022,538 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 31, 2000, the Company has (A) reserved a total of 149,856 shares of Common
Stock for issuance to employees, officers and directors under a 1991 stock
option plan, under which options to purchase a total of 149,856 shares have been
granted, but neither exercised nor forfeited by the holder thereof, (B) reserved
a total of 337,950 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 337,950 shares have been granted, but neither exercised nor forfeited
by the holder thereof, and (C) reserved a total of 2,369,025 shares of Common
Stock for issuance to employees, officers and directors under a 1997 stock
incentive plan, under which options to purchase 2,126,100 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 128,327 shares have been
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 option 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 option
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 Shares have been duly authorized and validly
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issued, and upon payment to the Company of the Purchase Payment at the Closing,
will be fully paid and nonassessable. The shares of Common Stock issuable upon
conversion of the Shares have been reserved for issuance upon such conversion,
and when issued in accordance with the Certificate of Designation will be
validly issued, fully paid and nonassessable. The Investor Stock, when issued in
accordance with the terms of this Agreement and the Certificate of Designation
will be 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) the Stockholder Agreement, (iii) applicable state securities laws,
and (iv) the Securities Act.
5.5 Indebtedness for Borrowed Money. The Company has no Indebtedness
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for Borrowed Money except as disclosed on the Balance Sheet.
5.6 Shareholder List. Schedule 5.6 hereto contains a true and complete
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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
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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
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date of grant, the number of shares subject 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
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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
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or any other security of the Company or any other Person (other than the
Investor) 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
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5.6, there is no voting trust, agreement or arrangement among any of the
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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
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required for the valid 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
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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 (including any agreement evidencing
Indebtedness for Borrowed Money), 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 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
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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
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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
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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 are (a) the
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Company's unaudited balance sheet (the "Balance Sheet") as of December 31, 1999
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(the "Balance Sheet Date"), and the unaudited statement of operations for the
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twelve-month
period then ended, and (b) the Company's unaudited balance sheet as
of October 31, 1999. Included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 (the "1998 Form 10-K") are the Company's
audited balance sheets as of April 30, 1996 and 1997, and December 31, 1997 and
1998, 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent certified public accountants. The
foregoing financial statements (i) are in accordance with the books and records
of the Company, (ii) present fairly in all material respects, taken as a whole,
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 ("GAAP"). Specifically, but not by way of limitation,
the Balance Sheet discloses all of the material 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 GAAP.
5.13 Changes. Since the Balance Sheet Date, except as disclosed on
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Schedule 5.13 hereto, the Company has not (a) incurred any material debts,
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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 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
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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 or could reasonably be expected to be
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
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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
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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
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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 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. ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ (collectively,
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"Designated Key Employees") are in the full-time employ of the Company and/or
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one or more of its Subsidiaries. To the best of the Company's knowledge, no
Designated Key Employee has any plans to terminate his employment with the
Company or a Subsidiary, as the case may be, 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
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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
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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
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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.
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(a) Except as disclosed on Schedule 5.17 hereto, the Company (i)
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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 ▇▇▇▇, 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
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property") required for or incident to the conduct of the Company's business, as
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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
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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
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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,
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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.
(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 ▇▇▇▇, 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 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, any of the
Designated Key Employees 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 and other agreements entered into with the Investor, 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 of any such Person or the Company (other than Investor) 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 made available to
------------
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel for the Investor, contain
all resolutions adopted by directors and stockholders 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 "▇▇▇▇▇▇▇▇▇.▇▇▇" and in connection
therewith to use the registered service ▇▇▇▇ and trade name "Interplay" and in
so doing is not acting in conflict with any patent, trademark, service ▇▇▇▇,
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
▇▇▇▇, 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.
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, 1999.
5.30 Disclosure. To the Company's knowledge, the information
----------
contained in this Agreement, in the Balance Sheet and the 1998 Form 10-K, 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 Balance
Sheet and the 1998 Form 10-K, 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.
5.31 Secured Creditors. As of the Closing Date, the Company does not
-----------------
have any other creditors holding any security interest in any of the property or
assets of the Company, other than Greyrock.
6. Representations and Warranties of Investor. In order to induce the
------------------------------------------
Company to enter into this Agreement and to issue the Shares, 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
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 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, a professional corporation,
counsel for the Company, a favorable opinion dated the Closing Date
substantially in the form of Exhibit B 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.
(g) Supporting Documents. Investor shall have received the
--------------------
following:
(i) 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 the Delaware General Corporation Law with respect to this Agreement
and the transactions contemplated hereby and thereby;
(ii) 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,
Amended and Restated Bylaws of the Company and Certificate of Designation
delivered to the Investors at the time of the execution of this Agreement have
been validly adopted, filed and have not been amended or modified; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as Investor or
its special counsel, Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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) Lender's Consent. The Company's lenders with respect to any
----------------
Indebtedness for Borrowed Money 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 lenders' current credit facility to the Company (or the Company
shall have provided such assurances to Investor with respect to a substitute
credit facility).
(j) 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).
(k) 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.
(l) 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.
(m) 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended.
(n) Warrants. The Company shall have executed and delivered to the
--------
Investor (a) a Warrant to purchase 350,000 shares of the Company's Common Stock,
in the form attached hereto as Exhibit C-1 and (b) a conditional Warrant to
-----------
purchase 50,000 shares of the Company's Common Stock, in the form attached
hereto as Exhibit C-2 (together with the Warrant referenced in Section 10.2, the
-----------
"Warrants").
(o) Certificate of Designation. The Certificate of Designation, in
--------------------------
the form attached hereto as Exhibit A, shall have been filed with the Delaware
---------
Secretary of State.
(p) Extension of Greyrock Line. Greyrock shall have entered into an
--------------------------
amendment (i) extending the term of the Company's credit facility through April
30, 2001 on substantially the same terms as the current facility or on terms
reasonably acceptable to the Company and Investor, (ii) agreeing to release the
$2,500,000 of cash collateral currently held by Greyrock upon receipt of the
financial statements referenced in Section 7.2(d) below, (iii) agreeing to
release the $1,000,000 guaranty of Herve Caen and the $4,000,000 guaranty of
Investor in exchange for the Guaranty, and (iv) consenting to the security
interest
referenced in Section 8.17 below upon Investor's execution of an intercreditor
agreement reasonably acceptable to Greyrock.
(q) Accountants' Opinion. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Company's
--------------------
accountants, shall have issued an unqualified opinion (without any "going
concern" qualification) on the Company's financial statements for the year ended
December 31, 1999.
(r) Fargo Proxy. Fargo shall have granted to Investor an
-----------
irrevocable proxy (the "Fargo Proxy") to vote Fargo's shares of the Company's
stock in favor of the transactions contemplated by this Agreement at any meeting
of the Company's stockholders.
(s) Security Agreement. The Company shall have executed and
------------------
delivered to Investor a Security Agreement, on commercially reasonable terms
(the "Security Agreement"), pursuant to which the Company grants to Investor a
second priority security interest in its assets.
(t) Waiver. The Company, Investor and Fargo shall have executed
------
a waiver of compliance with the terms of Sections 2.6, 3.5 and 3.6 and Article
IV of the Stockholder Agreement dated November 2, 1999 among the Company,
Investor and Fargo.
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 following conditions:
(a) No Errors, etc. The representations and warranties of the
--------------
Investor in Section 4.2 and Section 6 of 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) Certain Conditions. All of the conditions precedent specified
------------------
in paragraphs (f), (i), (k), (l) and (m) of Section 7.1 hereof shall have been
satisfied.
(c) Guaranty. The Investor shall have executed and delivered to
--------
the Company a Guaranty, in the form attached hereto as Exhibit D (the
---------
"Guaranty"), pursuant to which the Investor guarantees $20,000,000 of the
Company's obligations to Greyrock Business Credit.
(d) Provision of Financial Statements. By April 30, 2000, or as
---------------------------------
soon thereafter as practicable, Investor shall deliver to the Company any
documents reasonably required by Greyrock to release to the Company $2.5 million
in cash collateral, including, without limitation, the unaudited financial
statements of ▇▇▇▇▇ Interactive SA as of and for the six-month period ended
December 31, 1999.
(e) Waiver. The Company, Investor and Fargo shall have executed
------
a waiver of compliance with the terms of Sections 2.6, 3.5 and 3.6 and Article
IV of the Stockholder Agreement dated November 2, 1999 among the Company,
Investor and Fargo.
(f)
8. Affirmative Covenants of the Company. The Company agrees that unless
------------------------------------
Investor otherwise agrees in writing, from the date hereof through the later of
(i) the effective date of registration statement with respect to the Investor
Shares or (ii) April 30, 2001 (the "Covenant Period"), unless another period is
---------------
expressly provided for in this Section 8, the Company (and each of its
Subsidiaries unless the context otherwise requires) 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, 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;
(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) 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, 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 Intentionally Omitted.
---------------------
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 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.
8.14 HSR Filing. 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 ▇▇▇▇-▇▇▇▇▇- ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, or the rules and regulations promulgated thereunder (collectively, the
"HSR Act"), the Company shall cooperate fully with Investor to enable Investor
-------
to promptly make such filing and to respond to any requests for additional
information in connection therewith. The filing fee associated with any required
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing shall be borne equally by the Company and the Investor.
8.15 Development of Operating Plan. The Company shall cooperate with
-----------------------------
Investor, and Investor's officers, employees and representatives in the
development of an extended operating plan for the Company for the Company's
fiscal year ending December 31, 2001 (the "Operating Plan").
8.16 Right of First Refusal. If, during the period (the "Guaranty
----------------------
Period") beginning on the date hereof and ending on the earlier to occur of (I)
if Investor is not required to pay under the Guaranty, the date upon which the
Guaranty is extinguished and (ii) if Investor is required to pay any amounts
under the Guaranty, the date upon which such amounts are reimbursed to Investor
in full and the Guaranty is extinguished, (a) the Company shall commence any
material communication concerning the acquisition of properties or assets of the
Company (including without limitation publishing rights, distribution rights or
subsidiaries) having a fair market value in excess of $100,000, the Company
shall give written notice of such communications to Investor and (b) upon
receipt of a bona fide offer from a third party (the "Offer") to acquire any
assets of the Company (including without limitation publishing rights,
distribution rights or subsidiaries) having a fair market value in excess of
$100,000, the Company will provide written notice of such offer (the "Notice")
to Investor. The Notice shall contain the identity of the proposed purchaser and
a summary of all material terms of the Offer. Investor shall have the option,
exercisable, if at all, by written notice to the Company within twenty (20)
business days following receipt of the Notice, to elect to purchase such assets
on all of the economic terms of the Offer, and otherwise on commercially
reasonable terms. Investor may offset against the purchase price for such assets
any amounts then owing to Investor by the Company under the Credit Facility or
due to payments made by Investor under the Guaranty. In the event that the
purchase price contained in the Offer is other than in cash, Investor may elect
to pay, in lieu thereof, an amount of cash equal to the fair market value
thereof as mutually determined by the Company and Investor, or, if the parties
are unable to agree, by a third party selected by mutual agreement of the
Company and Investor.
8.17 Further Assurances. The Company agrees from time to time, at its
------------------
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action that may be necessary or reasonably
desirable or that Investor may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted under the
Security Agreement or to enable Investor to exercise and enforce its rights and
remedies under the Security Agreement.
8.18 Stockholder Meeting. The Company will use its best efforts to
-------------------
call a meeting of its stockholders by July 31, 2000 and will use commercially
reasonable efforts to cause the stockholders to approve the transactions
contemplated by this Agreement.
9. Negative Covenants of the Company. The Company agrees that unless
---------------------------------
Investor otherwise agrees in writing, during the Covenant Period (with respect
to Sections 9.5 and 9.6, during the Guaranty 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, or on parity with, 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.
9.5 Sale of Assets. Enter into any agreement for the sale of any
--------------
assets or properties of the Company (including without limitation publishing
rights, distribution rights or subsidiaries) having a fair market value in
excess of $100,000.
9.6 Greyrock Covenants. Enter into or make any new operating or
------------------
financial position covenants to Greyrock pursuant to any agreement covered by
the Guaranty.
9.7 Issuance of Shares. Until the approval of the transactions
------------------
contemplated by this Agreement by the Company's stockholders, the Company shall
not issue a number of voting securities such that the sum of (a) the voting
securities of the Company held by Investor, plus (b) the voting securities of
the Company subject to the Fargo Proxy, would constitute fifty percent (50%) or
less of the total voting securities of the Company.
10. Affirmative Covenants of Investor. Investor agrees that, unless the
---------------------------------
Company otherwise agrees in writing, Investor will:
10.1 Compliance with Laws. 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.
10.2 Credit Facility; Warrant. Provide the Company with a secured
------------------------
revolving credit facility in the amount of $5,000,000 (the "Credit Facility"),
to be evidenced by an agreement in the form attached hereto as Exhibit D-1. The
-----------
outstanding amounts under the Credit Facility shall bear interest at the rate of
12% per annum, or the maximum rate permitted by law, whichever is less, payable
quarterly, and all outstanding principal and
interest will be due on May 1, 2001. As consideration of such Credit Facility,
the Company shall issue to Investor a warrant, in the form attached hereto as
Exhibit D-2, to purchase 100,000 shares of the Company's Common Stock, which
-----------
warrant shall vest from time to time in proportion to the maximum amount
outstanding at any one time under the Credit Facility.
11. Registration of Registrable Stock.
----------------------------------
11.1 Required Registration. On or before April 15, 2001, the Company
---------------------
shall prepare and file a registration statement under the Securities Act, on a
form selected by the Company, covering all of the shares of Common Stock
issuable upon conversion of the Shares and upon exercise of the Warrants
(collectively, 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
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 the Company shall promptly register the
Registrable Stock.
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 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
(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.
(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 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.
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.
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 until the date which is twelve (12) months
after the Closing Date; provided, however, that each of the representations and
warranties contained in Sections 5.4, 5.7 and 5.9 hereof 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 until the
expiration of any applicable statute of limitations with respect to such
representation and warranty.
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 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 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.
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 14.9, 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. 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.
-----
"Certificate of Designation" shall have the meaning set forth in
--------------------------
Section 1 above.
"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.
"Common Stock" shall mean the Company's common stock, $.001 par
------------
value.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Covenant Period" shall have the meaning set forth in Section 8.
---------------
"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.
"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).
"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 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
--------------
4.2.
"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.
"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.
"Registrable Stock" shall have the meaning assigned to it in Section
-----------------
11.1.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Series A Preferred Stock" shall have the meaning assigned to it in
------------------------
Section 1.
"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).
"Web Site" shall have the meaning assigned to it in Section 5.28(a).
--------
14. Miscellaneous.
-------------
14.1 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
14.1. 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.
14.2 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 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.
14.3 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.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇, Chairman and
Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇.▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, a professional corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Investor to:
▇▇▇▇▇ Interactive SA
c/▇ ▇▇▇▇▇ Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇, Chairman and
Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ Interactive SA
Parc de l'esplanade
▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ des ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Telecopier: 011-33-1-60-31-59-60
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Fargo to:
Mr. ▇▇▇▇▇ ▇▇▇▇▇
c/o Interplay Entertainment Corp.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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 or French 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).
14.4 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.
14.5 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.
14.6 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.
14.7 Choice of Law; Jurisdiction and Venue. 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. The parties hereby
consent and agree that the United States District Court for the Central District
of California, or the Superior Court of California for the County of Orange will
have exclusive jurisdiction over any legal action or proceeding arising out of
or relating to this Agreement, and each party consents to the in personam
jurisdiction of such courts for the purpose of any such action or proceeding and
agrees that venue is proper in such courts.
14.8 Satisfaction of Investor Obligations. The Company and Investor
------------------------------------
hereby agree that upon consummation of the transactions contemplated by this
Agreement, Investor shall have satisfied its obligations in full pursuant to
Section 9.2 of that certain Stock Purchase Agreement, dated as of July 20, 1999,
by and between Investor, the Company and ▇▇▇▇▇ ▇▇▇▇▇.
14.9 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. The foregoing restriction shall not limit the
applicability of the Nondisclosure Agreements between the Company and Investor
dated November 10, 1998, and March 3, 1999, which shall continue in full force
and effect in accordance with their respective terms.
14.10 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.
14.11 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.
14.12 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.
14.13 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 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.
[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/ ▇▇▇▇▇ ▇▇▇▇▇
------------------
An Authorized Officer
▇▇▇▇▇ INTERACTIVE SA, a French corporation
By: /s/ Herve Caen
-----------------
An Authorized Officer