<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
INTERPLAY ENTERTAINMENT CORP.
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
460615107
(CUSIP Number)
Titus Interactive SA
c/o Titus Software Corporation
20432 Corisco Street
Chatsworth, California 91311
Attention: Mr. Herve Caen, President
(818) 709-3692
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 20, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of (S)(S)240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box[_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See (S)240.13d-7(d) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
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but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
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CUSIP NO. 460615107
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NAMES OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Titus Interactive SA
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
WC,BK
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
France
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SOLE VOTING POWER
7
NUMBER OF
16,591,787, subject to adjustment; see Item 5
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0
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EACH SOLE DISPOSITIVE POWER
9
REPORTING
16,591,787, subject to adjustment; see Item 5
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
16,591,787, subject to adjustment; see Item 5
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
57.2%, subject to adjustment; see Item 5
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TYPE OF REPORTING PERSON*
14
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the Common Stock, par value $.001 per share
(the "Common Stock"), of Interplay Entertainment Corp., a Delaware corporation
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(the "Issuer"). The principal executive offices of the Issuer are located at
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16815 Von Karman Avenue, Irvine, California 92606.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed on behalf of Titus Interactive SA, a French
corporation (the "Reporting Person"). The Reporting Person's principal business
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is developing and publishing games for personal computers and video game console
systems. The address of the Reporting Person's principal business and principal
office is Parc de L'Esplanade, 12 rue Enrico Fermi, Saint Thibault des Vignes
77462 France.
The names and business addresses of each director and executive officer of
the Reporting Person is set forth below. The business address of each of the
individuals named below is Parc de L'Esplanade, 12 rue Enrico Fermi, Saint
Thibault des Vignes 77462 France. Each of the individuals named below is a
French citizen.
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
Herve Caen President and Chairman of the Board of Directors
Eric Caen Vice President and Director
Michel Henri Vulpillat Director
Andree Caen Director
Leon Aaron Ben Yaya Director
</TABLE>
The principal occupation or employment of each of the aforementioned
persons, except for Michel Henri Vulpillat, is his or her position of director
and/or executive officer of the Reporting Person, as described above. Michel
Henri Vulpillat's principal occupation or employment is serving as the sole
owner and President of Edge Consulting, a company whose principal business is
general business consulting and whose address is 27846 Palos Verdes Drive East,
Rancho Palos Verdes, California 90275.
During the last five years, neither the Reporting Person nor, to the best
knowledge of the Reporting Person, any of the executive officers or directors of
the Reporting Person has been convicted in a criminal proceeding, nor were any
of the foregoing a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of the consideration for the consummated purchases reported
hereon was the working capital of the Reporting Person, and funds borrowed from
the Reporting Person's lenders. The amount of funds used or to be used by the
Reporting Person is described in Item 4.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Reporting Person has acquired the shares of Common Stock of the Issuer
for investment purposes and for the purposes described below.
On February 24, 1999, the Reporting Person acquired 21,800 shares of Common
Stock through open-market purchases on NASDAQ-NMS. The price per share for such
shares was equal to $2.006.
On March 18, 1999, the Reporting Person consummated the transactions
contemplated by the Stock Purchase Agreement dated March 18, 1999, by and among
the Issuer, the Reporting Person and Brian Fargo
<PAGE>
("Fargo"), an individual, and the Chief Executive Officer and Chairman of the
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Board of the Issuer. Such Stock Purchase Agreement, as amended by the Letter
Agreement (as defined below), shall be referred to herein as the "Initial
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Purchase Agreement." Pursuant to the Initial Purchase Agreement, the Reporting
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Person agreed to purchase up to 5,000,000 shares of Common Stock. A total of
2,500,000 shares of Common Stock were received by the Reporting Person at the
closing under the Purchase Agreement on March 18, 1999. Pursuant to the Initial
Purchase Agreement, on June 30, 1999 an additional 1,161,771 shares of Common
Stock were issued to the Reporting Person. The aggregate purchase price paid to
the Issuer consisted of a cash payment of $10,000,000. Up to an additional
1,338,229 shares of Common Stock may be acquired by the Reporting Person
pursuant to the Initial Purchase Agreement without additional payment, pursuant
to an adjustment mechanism described in Item 5.
As a condition to the closing of the transactions contemplated by the
Initial Purchase Agreement, the Reporting Person entered into an agreement with
Universal Studios, Inc. ("Universal") and the Issuer, dated March 18, 1999,
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giving the Reporting Person the option (the "Option") to purchase all (but not
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less than all) shares of Common Stock held by Universal at a price per share
equal to the higher of (i) the average of the closing price of the Common Stock
as reported on the NASDAQ-NMS for the ten (10) trading days preceding the date
of the first public announcement of the closing of the purchase of the Common
Stock by the Reporting Person pursuant to the Purchase Agreement (equal to $2.43
per share) or (ii) if during the term of the Option, the Reporting Person or an
affiliate of the Reporting Person initiates a tender offer for the Common Stock
or otherwise executes an agreement for the merger, consolidation or acquisition
of all or substantially all of the issued and outstanding shares of Common
Stock, or all or substantially all of the assets of the Issuer ("Merger
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Agreement"), the price paid to the Issuer's public shareholders pursuant to such
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tender offer or Merger Agreement. On March 18, 1999, in consideration of
Universal's grant of the Option, the Reporting Person paid Universal $500,000
cash, which would be applied to the exercise price in the event the Reporting
Person exercised the Option. The Option shall be exercisable at any time
between the closing and the date which is 180 days thereafter. At the closing,
Universal holds 4,658,216 shares of Common Stock.
Pursuant to Section 4.4 of the Initial Purchase Agreement, each of the
Issuer and the Reporting Person have agreed that, except as otherwise provided
in the or contemplated by the Initial Purchase Agreement, including the exercise
of the Option as described above, between March 18, 1999 and December 31, 1999,
neither party, nor any of its majority-owned subsidiaries will, without the
prior written consent of the other party: (i) acquire, offer to acquire, or
agree to acquire, directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any voting securities of the
other party or any subsidiary thereof, or of any successor to or person or
entity in control of the other party, or any assets of the other party or any
subsidiary or division thereof or of any such successor or controlling person or
entity; (ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in the rules of the
Commission) to vote, or seek to advise or influence any person or entity with
respect to the voting of, any voting securities of the other party; or (iii)
make any public announcement with respect to, or submit a proposal for, or offer
of (with or without conditions) any merger, business combination,
recapitalization, restructuring, liquidation or other extraordinary transaction
involving the other party or its securities or assets; provided, however, the
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foregoing restrictions shall not preclude the Reporting Person from (A)
acquiring the shares of Common Stock contemplated by the Initial Purchase
Agreement or the Option, (B) pursuing and consummating a Permitted Transaction
(as defined below), (C) filing a Schedule 13D in connection with the
transactions contemplated by the Initial Purchase Agreement, (D) voting its
shares of Common Stock within its discretion on any matter submitted for a vote
or consent of the Issuer's stockholders, or (E) taking any other action
contemplated by the Initial Purchase Agreement; provided, further, that the
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restrictions on the Reporting Person in Section 4.4 shall lapse automatically to
the extent any person other than the Reporting Person takes any action with
respect to the matters described in clauses (ii) and (iii) above.
Pursuant to Section 8.17 of the Initial Purchase Agreement, if a Permitted
Transaction is not consummated prior to the earlier to occur of (i) August 31,
1999, and (ii) the consummation of a Permitted Transaction or a definitive
agreement with respect to a Permitted Transaction (the "Restricted Period"), and
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the Issuer enters into a transaction for the acquisition of the Issuer by merger
or otherwise on or prior to September 30, 1999, then the Issuer shall pay to the
Reporting Person, upon consummation of such transaction, in immediately
available funds a breakup fee in an amount equal to three percent (3%) of the
Enterprise Value of all such transactions. "Enterprise Value" for any
transaction shall mean the sum of (i) all consideration received or deemed
received by the Issuer or the selling shareholder or shareholders of the Issuer
in connection with such transaction, including without limitation all
consideration for covenants not to compete, employment agreements, and
consulting agreements, plus (ii) the principal amount of all indebtedness for
borrowed money outstanding as of the closing of such transaction.
<PAGE>
Pursuant to Section 8.6 of the Initial Purchase Agreement, during the
Restricted Period, the Reporting Person has the right to cause up to two
officers or other representatives of the Reporting Person (the "Designees") to
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attend as observers all meetings of the Issuer's board of directors and all
meetings of committees of the Issuer's board. The Reporting Person and the
Designees shall also receive during the Restricted Period copies of all minutes
of board and committee meetings and other proceedings, all board and other
committee actions by written consents without a meeting, and all minutes and
written consents relating to action taken by the shareholders of the Issuer. At
any time during the Restricted Period at the Reporting Person's election, the
Issuer shall use its best efforts to cause one of the Designees to be elected to
the Issuer's board. In such event, Fargo has agreed to vote all of shares of
Common Stock owned by him in favor of the election of such Designee to the
Issuer's board.
On May 12, 1999, the Reporting Person, the Issuer and Fargo entered into a
Letter of Intent (the "Letter Agreement"). The Letter Agreement is non-binding,
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except with respect to certain amendments to the Purchase Agreement and the
payment by the Reporting Person of the Deposit in exchange for the Issuer's
issuance of the Note (each as defined below).
Pursuant to Section 1 of the Letter Agreement, the Issuer and the Reporting
Person agreed that the Issuer and the Reporting Person would enter into an
agreement whereby the Issuer would issue 6,250,000 shares of Common Stock to the
Reporting Person at a price of $4.00 per share, for aggregate consideration of
$25,000,000. Such agreement would be on substantially the same terms and
conditions as the Purchase Agreement.
Pursuant to Section 3 of the Letter Agreement, the Reporting Person and
Fargo agreed that Fargo would enter into an agreement whereby Fargo would
exchange 2,000,000 shares of Interplay Common Stock owned by him for shares of
the Reporting Person's common stock at an exchange rate determined by dividing
$10,000,000 (based upon a per share price for Fargo's shares of Common Stock of
$5.00) by the average of the closing price per share of the Reporting Person's
common stock for the ten (10) trading days ended the date before the date
of the Letter Agreement.
Pursuant to Section 4 of the Letter Agreement, unless otherwise mutually
agreed by the Issuer, Fargo and the Reporting Person, Fargo would be the Chief
Executive Officer of the Issuer, and Herve Caen would be the President of the
Issuer. Prior to the closing of the transactions contemplated by the Letter
Agreement, the parties would agree on the relative roles and duties of Fargo and
Herve Caen, it being understood and agreed that certain significant operating
decisions would require the joint approval of Fargo and Herve Caen.
Pursuant to Section 5 of the Letter Agreement, the Issuer, the Reporting
Person and Fargo would enter into a Voting Agreement whereby after the
additional closing, the Reporting Person and Fargo would each vote their shares
to elect to the Issuer's board of directors (a) three (3) individuals nominated
by Fargo, (b) three (3) individuals nominated by the Reporting Person and (c)
two (2) individuals not affiliated with either the Issuer or the Reporting
Person who are mutually agreed upon by the Issuer and the Reporting Person.
On May 12, 1999, pursuant to Section 9 of the Letter Agreement, the Issuer
issued to the Reporting Person a Convertible Promissory Note (the "Note") in the
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principal amount of $5,000,000 (the "Deposit"). Unless earlier accelerated or
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converted in accordance with the terms of the Note, the Deposit, along with
interest of six percent (6%) per annum from the date of issuance, shall be due
and payable in full on the earlier of (a) August 31, 1999 or (b) the date upon
which the Issuer and the Reporting Person mutually agree not to consummate the
transactions contemplated by the Letter Agreement (in any case, the "Maturity
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Date"). The Deposit shall be used by the Issuer only for the purposes permitted
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under the Initial Purchase Agreement. In the event the transactions
contemplated by the Letter Agreement are not consummated on or before August 31,
1999 for any reason, then the Deposit, together with accrued interest, shall be
refunded by the Issuer to the Reporting Person in full or, at the election of
the Reporting Person, on or after the Maturity Date, may be converted into
shares of Common Stock (the "Conversion Stock") at a price per share based upon
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the average of the closing price per share of the Issuer's Common Stock for the
ten (10) trading days immediately preceding the effective date of registration
of the Common Stock in accordance with the terms of the Purchase Agreement. In
the event the transactions contemplated by the Letter Agreement are consummated
on or before August 31, 1999, the Deposit, without interest, shall be credited
against the purchase price paid by the Reporting Person for the Additional
Purchase.
On July 20, 1999, the Reporting Person entered into a Stock Purchase
Agreement (the "Additional Purchase Agreement") by and among the Issuer, the
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Reporting Person and Fargo. Pursuant to the Additional Purchase Agreement, the
Reporting Person agreed to purchase up to 6,250,000 shares of Common Stock.
<PAGE>
Pursuant to Section 13.1 of the Additional Purchase Agreement, during the
Restricted Period (defined below), the Reporting Person has the right of first
refusal to purchase all (or part) of the equity securities that the Issuer may
propose to sell and issue from time to time, other than (i) any shares of Common
Stock issued in accordance with the stock option plans and warrants currently
reserved for issuance to employees, directors and advisors of the Issuer, (ii)
shares of Common Stock issued as consideration to third parties for product
development services or publishing or distribution rights, not to exceed 500,000
shares, (iii) shares of Common Stock issued in connection with any stock split,
stock dividend or reverse stock split, and (iv) shares of Common Stock issued in
connection with acquisitions of other entities by way of merger, share exchange,
sale of assets or otherwise.
Pursuant to Section 8.5 of the Additional Purchase Agreement, during the
period between July 20, 1999 and the earlier of the closing of the transactions
contemplated by the Additional Purchase Agreement (the "Additional Closing") or
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the termination of the Additional Purchase Agreement, the Issuer will not,
directly or indirectly, through any officer, director, employee, agent, 5%
stockholder, partner or otherwise, solicit or initiate, or participate in
discussions or negotiations with, or encourage the submission of bids, offers or
proposals by (or commence negotiations with or provide any information to), any
person or entity with respect to an acquisition of the Issuer, its business or
assets, or any interest therein, other than the Reporting Person.
Notwithstanding the foregoing, the Issuer may entertain a written unsolicited
bid or proposal from, and provide non-public information to, any party who
delivers such a written bid or proposal with respect to an acquisition of the
Issuer, its business or assets, but only if and so long as the Issuer's board of
directors determines in good faith by a majority vote (with the written
concurring and concurrent advice from outside legal counsel) that failing to
entertain such written bid or proposal would constitute a breach of the
fiduciary duties of the Issuer's board of directors under applicable law.
Furthermore, pursuant to Section 8.6 of the Additional Purchase Agreement,
during the Restricted Period, Fargo will not sell, assign, pledge, mortgage or
otherwise dispose of or transfer his Common Stock, or any other securities of
the Issuer, whether now owned or hereafter acquired, or agree to do any of the
foregoing, except to the Reporting Person.
Pursuant to Section 2 of the Additional Purchase Agreement, the Reporting
Person has agreed to loan to the Issuer an amount to be mutually agreed upon by
the Issuer and the Reporting Person, which loan will be evidenced by a
convertible promissory note (the "Additional Note") to be issued by the Issuer
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in favor of the Reporting Person.
In connection with the Additional Purchase Agreement, the Reporting Person
agreed to enter into additional agreements with the Issuer and Fargo, the
Reporting Person agreed to enter into an Exchange Agreement (the "Exchange
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Agreement") with Fargo whereby Fargo will exchange 2,000,000 shares of Interplay
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Common Stock owned by him (the "Fargo Shares") for 96,666 shares of the
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Reporting Person's Common Stock (the "Exchanged Shares"), based upon a valuation
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of the Interplay Common Stock of $4.00 per share and a valuation of the
Reporting Person's Common Stock of $82.76 per share. In order for the Reporting
Person to issue its Common Stock, certain conditions under French law must be
satisfied, including the appointment by a French court of an independent
auditor, the issuance by such auditor of a report with respect to the adequacy
of consideration received by the Reporting Person for the shares issued, and due
approval by the shareholders of the Reporting Person of the issuance of the
Reporting Person's Common Stock. Pursuant to Section 4.2 of the Exchange
Agreement, if these conditions have not been satisfied at the time of the
Additional Closing, Fargo and the Reporting Person shall enter into an "Interim
Closing" whereby Fargo shall deliver (i) to the Reporting Person an irrevocable
proxy granting the Reporting Person the right to vote the Fargo Shares and (ii)
to an escrow agent mutually agreed upon by Fargo and the Reporting Person the
Fargo Shares pursuant to an escrow agreement. Upon the consummation of the
Interim Closing, the Reporting Person shall be deemed to be the beneficial owner
of the Fargo Shares. If the conditions described above have not been satisfied
on or prior to December 31, 1999, then the escrow agent shall on the first
business day thereafter return to Fargo the Fargo Shares and the Exchange
Agreement shall be null and void unless otherwise agreed by Fargo and the
Reporting Person.
In connection with the Additional Purchase Agreement, the Reporting Person
also agreed to enter into a Stockholder Agreement (the "Stockholder Agreement")
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with the Issuer and Fargo, which shall be in effect (except as provided in
Section 2.1 of such agreement, as described below) until the Reporting Person
holds less than 50% of the fully-diluted common stock of the Issuer. The
Stockholder Agreement includes, among other provisions:
(a) pursuant to Section 2.1 of the Stockholder Agreement, an agreement
by the Reporting Person and Fargo that, until the earliest to occur of (i) the
termination of Fargo's employment for Cause or Fargo's resignation for other
than Good Reason, (ii) the termination of Herve Caen's employment other than for
<PAGE>
Cause or Caen's resignation for Good Reason, or (iii) the date that Fargo ceases
to hold at least 2,000,000 shares of Interplay Common Stock, each of the
Reporting Person and Fargo shall vote their shares of Interplay Common Stock to
elect to the Issuer's board of directors (x) two (2) individuals nominated by
Fargo, (y) two (2) individuals nominated by the Reporting Person and (z) two (2)
individuals mutually agreed upon by Fargo and the Reporting Person;
(b) pursuant to Section 3.4 of the Stockholder Agreement, a right of
first refusal in favor of the Company, if the proposed transferor is the
Reporting Person, and the Reporting Person, if the proposed transferor is Fargo,
in the event that either Fargo or the Reporting Person intends to transfer all
or a portion of its Interplay Common Stock (with certain exceptions from such
rights of first refusal, including "de minimis" transfers of shares by Fargo or
transfers by Titus to an affiliate);
(c) pursuant to Section 3.6 of the Stockholder Agreement, from the
Additional Closing through the earlier of the termination of Section 2.1 of the
Stockholder Agreement or the termination of the Stockholder Agreement in
accordance with its terms, neither Fargo nor the Reporting Person, nor any of
the Reporting Person's majority-owned subsidiaries will, without the prior
written consent of the other party: (i) acquire, offer to acquire, or agree to
acquire, directly or indirectly, by purchase or otherwise, any voting securities
or direct or indirect rights to acquire any voting securities of the Issuer or
the Reporting Person, or any material amount of the assets of the Issuer, or any
material amount of the assets of the Issuer or the Reporting Person, as the case
may be, or any subsidiary or division thereof outside the ordinary course of
business; (ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in the rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of the
Issuer or the Reporting Person, as the case may be, for the purpose of changing
or influencing the control of the Issuer or the Reporting Person, as the case
may be; or (iii) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any merger, business
combination, recapitalization, restructuring, liquidation or other extraordinary
transaction involving the Issuer or the Reporting Person, as the case may be, or
its securities or assets; provided, however, the foregoing restrictions shall
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not (x) preclude the Reporting Person from (A) acquiring the securities
contemplated by Article IV of the Stockholder Agreement and the shares of
Interplay Common Stock of the Additional Purchase Agreement and the transactions
contemplated hereby and thereby, including without limitation the transactions
contemplated by the Initial Purchase Agreement and the Universal Agreement (each
as defined in the Additional Purchase Agreement), (B) filing a Schedule 13D in
connection with the transactions contemplated by the Additional Purchase
Agreement or the Exchange Agreement, (C) voting its shares of Interplay Common
Stock within its discretion on any matter submitted for a vote or consent of the
Issuer's stockholders, (D) taking any other action contemplated by the
Additional Purchase Agreement, or (E) purchasing shares of Interplay capital
stock pursuant to open-market transactions on a national securities exchange or
in the over-the-counter market; provided, further, that the restrictions on the
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Reporting Person in Section 3.6 of the Stockholder Agreement shall lapse
automatically to the extent any person or entity other than the Reporting Person
or an affiliate of the Reporting Person takes any action with respect to the
matters described in clauses (ii) and (iii) above, or (y) preclude Fargo from
(A) acquiring the shares of the Reporting Person common stock pursuant to the
Exchange Agreement or (B) filing this Amendment No. 2 to Schedule 13D;
(d) pursuant to Section 4.1 of the Stockholder Agreement, if the
Issuer proposes to issue, sell, or grant (collectively, an "issuance") any
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equity securities or any securities convertible into or exchangeable for equity
securities (collectively, the "New Securities"), then the Issuer shall, no later
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than ten (10) business days prior to the consummation of such issuance, give
written notice to each of Fargo and the Reporting Person of such issuance (the
"Notice of Issuance"). Such Notice of Issuance shall describe such issuance,
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and contain an offer to each of Fargo and the Reporting Person (each, a
"stockholder") to sell to such stockholder, at the same price and for the same
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consideration to be paid by the proposed purchasers, such stockholder's pro rata
portion (which shall be a percentage, determined immediately prior to such
issuance, equal to the percentage of the fully-diluted common stock of the
Issuer held by such stockholder). Subject to the foregoing, if common stock is
being issued with other securities as a unit, each stockholder who desires to
accept such offer must purchase such unit in order for such acceptance to be
valid. If any such stockholder fails to accept such offer by written notice
within ten (10) business days after its receipt of the Notice of Issuance, the
Issuer shall proceed with such issuance, free of any right on the part of such
stockholder under Section 4.1 of the Stockholder Agreement in respect thereof.
Any issuance of New Securities more than forty-five (45) days after the
expiration of such ten business day period, or to a different issuee, or on
terms and conditions less favorable to the Issuer in any material respect than
those described in the notice to the stockholders, shall be subject to a new
notice to and new purchase rights by the stockholders under Section 4.1 of the
Stockholder Agreement. Section 4.1 shall not apply to the issuance of any
<PAGE>
Excluded Securities. For purposes of the Stockholder Agreement, "Excluded
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Securities" shall mean: (i) issuances of securities which have been approved
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prior to the date hereof (including without limitation issuances under the
Issuer's employee stock purchase plans described under Section 5.3 of the
Additional Purchase Agreement), provided that such issuances are permitted under
the Initial Purchase Agreement and the Additional Purchase Agreement (the
"Purchase Agreements"); (ii) issuances of securities which have been approved by
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the Issuer's board of directors and by the stockholders; (iii) New Securities
distributed or set aside to all holders of Interplay common stock on a per share
equivalent basis; (iv) issuances pursuant to the Purchase Agreements; and (v)
issuances of New Securities upon the grant, exercise or conversion of (x)
options or warrants to purchase shares of Interplay capital stock or (y)
securities which are convertible into shares of Interplay capital stock ((x) and
(y) referred to collectively as "Convertible Securities"), in each case where
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such Convertible Securities have been granted or issued prior to the date hereof
or have been granted or issued in accordance with the Stockholder Agreement;
(e) pursuant to Section 4.2 of the Stockholder Agreement, in the event
that the Issuer proposes to issue, sell or grant any Excluded Securities
pursuant to clauses (i), (ii) and (v) in the preceding paragraph, the Issuer
shall send a notice of such issuance to the Reporting Person in accordance with
the provisions concerning a Notice of Issuance (an "Excluded Securities
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Notice"). Following receipt of an Excluded Securities Notice, the Reporting
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Person shall have the option to purchase such number of Excluded Securities as
are necessary for the Reporting Person to maintain its percentage ownership of
the Issuer's fully diluted common stock at the same level as immediately prior
to such issuance, at the price and on the other terms and conditions upon which
such Excluded Securities are being issued, sold or granted (the "Excluded
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Securities Option"). The Excluded Securities Option shall be exercisable by the
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Reporting Person no later than thirty (30) calendar days after the Reporting
Person's receipt of an Excluded Securities Notice; provided, however, that in
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the case of Excluded Securities which are Convertible Securities, the Reporting
Person must exercise the Excluded Securities Option no later than thirty (30)
calendar days after its receipt of notice from the Issuer of the exercise or
conversion, as applicable, of such Excluded Securities;
(f) pursuant to Section 5.1 of the Stockholder Agreement, neither
Fargo nor the Reporting Person may transfer for value any Interplay capital
stock held by it unless the terms and conditions of such transfer include an
offer to the other stockholder to include in the transfer to the third party
transferee an amount of Interplay capital stock held by such other stockholder
(the "Tag-Along Stockholder"), which amount may not exceed the number of shares
---------------------
of Interplay capital stock derived by multiplying (i) the aggregate number of
shares of Interplay capital stock covered by the offer by (ii) a fraction the
numerator of which is the number of shares of Interplay capital stock owned by
the Tag-Along Stockholder at the time of the transfer and the denominator of
which is the total number of shares of Interplay capital stock held by Fargo and
the Reporting Person at the time of the transfer;
(g) pursuant to Section 6.1 of the Stockholder Agreement, the Issuer
shall not, and shall not permit any subsidiary to, engage in any of the
following actions or transactions, or enter into a contract or arrangement to
engage in any of such actions or transactions, without the written consent or
approval of Fargo and the Reporting Person:
(i) Authorize or issue, or obligate itself to issue, any other
equity security, including any indebtedness convertible into or exchangeable for
shares of equity securities of the Company or issued with (i) shares of
Interplay capital stock or (ii) warrants or other rights to purchase Interplay
capital stock or any other equity security, without compliance with the
provisions of Section 4.1 of the Stockholder Agreement;
(ii) Effect any recapitalization, or any dissolution,
liquidation, or winding up of the Company;
(iii) Permit any subsidiary to issue or sell, or obligate itself
to issue or sell, except to the Issuer or any wholly-owned subsidiary, any stock
of such subsidiary, without first offering the Reporting Person the right to
purchase such stock on the same terms and conditions as those offered to the
Issuer by any third party;
(iv) Amend its certificate of incorporation or amend or repeal
its by-laws;
(v) Increase the number of members of the Issuer's board of
directors;
<PAGE>
(vi) Take any action that would constitute a bankruptcy or
insolvency event for the Issuer or any subsidiary of the Issuer; or
(vii) Guarantee or otherwise become contingently obligated for the
payment of indebtedness of any person or entity (other than a wholly-owned
subsidiary of the Issuer), where such obligation is not related to the Issuer's
business.
In connection with the Additional Purchase Agreement, the Issuer agreed to
enter into employment agreements with each of Fargo and Herve Caen for a period
of three years from the date of the Additional Closing. Fargo shall be employed
as Chief Executive Officer and Chairman of the Board of the Issuer, and Herve'
Caen shall be employed as President of the Issuer.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Including 4,658,216 shares of Common Stock subject to the Option, 6,250,000
shares of Common Stock to be purchased at the Additional Closing and 2,000,000
shares of Common Stock to be acquired pursuant to the Exchange Agreement, the
Reporting Person currently beneficially owns up to 16,591,787 shares of Common
Stock, or up to approximately 57.2% of the shares of Common Stock outstanding
(based upon 22,770,712 shares of Common Stock issued and outstanding as of July
20, 1999 plus the shares to be purchased at the Additional Closing). The
Reporting Person may be entitled to up to an additional 1,338,229 shares of
Common Stock (the "Additional Shares") for no additional payment, pursuant to an
-----------------
adjustment mechanism for the price per share of the Common Stock acquired in the
Initial Purchase Agreement, as set forth in Sections 3.3 through 3.5 of the
Initial Purchase Agreement. The Reporting Person may be entitled to additional
shares of Common Stock, if and when the Note is converted into Conversion Stock
in accordance with its terms.
The Additional Shares, if any, would be issued as follows: on June 30, 1999
(the "Interim Valuation Date"), the Reporting Person received an additional
----------------------
number of shares of Common Stock (the "Interim Additional Shares") equal to the
-------------------------
difference, if any, between (i) the quotient of (a) $10,000,000 divided by (b)
the price per share on the Interim Valuation Date, less (ii) the 2,500,000
shares of Common Stock issued at the closing (the "Initial Shares"); and on
--------------
August 20, 1999 (the "Final Valuation Date"), the Reporting Person would receive
--------------------
shares of Common Stock (the "Final Additional Shares") equal to the difference,
-----------------------
if any, between (i) the quotient of (a) $10,000,000 divided by (b) the price per
share on the Final Valuation Date, less (ii) the Initial Shares. If the number
of Interim Additional Shares is less than the number of Final Additional Shares,
the Reporting Person shall receive the difference between the Final Additional
Shares and the Interim Additional Shares; if the number of Interim Additional
Shares is greater than the number of Final Additional Shares, the Reporting
Person shall promptly return to the Issuer the Interim Additional Shares in
exchange for the Final Additional Shares.
Notwithstanding the foregoing, in no event shall the issuance of the
Interim Additional Shares or the Final Additional Shares result in the Reporting
Person purchasing a number of shares (including the Initial Shares) from the
Issuer in excess of 19.99% of the issued and outstanding shares of Common Stock
immediately prior to the issuance of the Initial Shares, unless such issuance
has been approved by vote of the Issuer's stockholders in accordance with
Delaware law prior to the date of such issuance. In addition, each of Fargo and
Universal have granted an irrevocable proxy to the Reporting Person with respect
to voting in favor of or consenting to the issuance of 20% or more of the issued
and outstanding shares of Common Stock to the Reporting Person pursuant to the
Purchase Agreement.
In each of the calculations of the Interim Additional Shares and the Final
Additional Shares, the number of shares to be issued to the Reporting Person is
based upon the average closing price of the Common Stock on NASDAQ-NMS for the
10 trading days ending the day before the applicable valuation date; provided,
that in the event the price per share of Common Stock as so calculated would be
less than $2.00 per share, the price per share in any event shall be deemed to
be $2.00; and in the event the price per share of Common Stock as so calculated
would be more than $4.00 per share, the price per share in any event shall be
deemed to be $4.00.
In accordance with the provisions of the Initial Purchase Agreement, on the
Interim Valuation Date the Reporting Person was issued an additional 1,661,771
shares of Common Stock.
On February 24, 1999, the Reporting Person acquired 21,800 shares of Common
Stock through open-market purchases on NASDAQ-NMS. The price per share for such
shares was equal to $2.006.
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The responses to Items 4 and 5 are incorporated herein by this reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
99.1 Stock Purchase Agreement dated March 18, 1999 by and among the Issuer, the Reporting Person and
Fargo. (1)
99.2 Letter Agreement dated March 18, 1999 by and among the Issuer, the Reporting Person and
Universal. (1)
99.3 Irrevocable Proxy dated March 18, 1999 by Fargo to the Reporting Person. (1)
99.4 Irrevocable Proxy dated March 18, 1999 by Universal to the Reporting Person. (1)
99.5 Letter of Intent dated May 12, 1999 by and among the Issuer, the Reporting Person and Fargo. (2)
99.6 Convertible Promissory Note dated May 12, 1999 issued by Fargo to the Reporting Person. (2)
99.7 Stock Purchase Agreement dated July 20, 1999 by and among the Issuer, the Reporting Person and Fargo.
99.8 Form of Stockholder Agreement by and among the Issuer, the Reporting Person and Fargo.
99.9 Exchange Agreement dated July 20, 1999 by and among the Reporting Person, Fargo, Herve Caen and
Eric Caen.
</TABLE>
(1) Previously filed as an exhibit to the Schedule 13D filed on March 29, 1999
(File No. 005-54323), which exhibit is incorporated herein by this
reference.
(2) Previously filed as an exhibit to the Schedule 13D/A filed on May 24, 1999
(File No. 005-54323), which exhibit is incorporated herein by this
reference.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 29, 1999
TITUS INTERACTIVE SA, a French corporation
By: /s/Herve Caen
--------------------------------------------------
Herve Caen, President
<PAGE>
EXHIBIT 99.7
------------------------------------------------------------------------
------------------------------------------------------------------------
INTERPLAY ENTERTAINMENT CORP.
----------------------------
STOCK PURCHASE AGREEMENT
----------------------------
6,250,000 SHARES OF COMMON STOCK
Dated as of July 20, 1999
------------------------------------------------------------------------
------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Authorization Of Investor Stock.................................................... 1
2. Sale And Purchase Of Investor Stock................................................ 1
3. Closing; Termination............................................................... 2
3.1 Closing...................................................................... 2
3.2 Termination.................................................................. 2
4. Register Of Investor Stock; Restrictions On Transfer Of Securities;
Removal Of Restrictions On Transfer Of Investor Stock.............................. 2
4.1 Register Of Investor Stock................................................... 2
4.2 Restrictions On Transfer..................................................... 3
4.3 Removal Of Transfer Restrictions............................................. 4
5. Representations And Warranties By The Company...................................... 4
5.1 Organization, Standing, Etc.................................................. 5
5.2 Qualification................................................................ 5
5.3 Capital Stock................................................................ 5
5.4 Investor Stock............................................................... 6
5.5 Indebtedness For Borrowed Money.............................................. 6
5.6 Shareholder List............................................................. 6
5.7 Corporate Acts And Proceedings............................................... 7
5.8 Compliance With Laws And Other Instruments................................... 7
5.9 Binding Obligations.......................................................... 7
5.10 Securities Laws.............................................................. 7
5.11 No Brokers Or Finders........................................................ 8
5.12 Financial Statements......................................................... 8
5.13 Changes...................................................................... 8
5.14 Material Agreements Of The Company........................................... 9
5.15 Employees.................................................................... 9
5.16 Tax Returns And Audits....................................................... 9
5.17 Patents And Other Intangible Assets.......................................... 10
5.18 Employment Benefit Plans; Erisa.............................................. 11
5.19 Title To Property And Encumbrances; Leases................................... 11
5.20 Condition Of Properties...................................................... 12
5.21 Insurance Coverage........................................................... 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.22 Litigation................................................................... 12
5.23 Registration Rights.......................................................... 12
5.24 Licenses..................................................................... 12
5.25 Interested Party Transactions................................................ 13
5.26 Minute Books................................................................. 13
5.27 Computer Software............................................................ 13
5.28 Interplay Web Site And Systems............................................... 13
5.29 Product Returns.............................................................. 14
5.30 Disclosure................................................................... 14
6. Representations And Warranties Of Investor.......................................... 14
6.1 Organization, Standing, Etc.................................................. 14
6.2 Corporate Acts And Proceedings............................................... 14
6.3 Compliance With Laws And Other Instruments................................... 14
6.4 Binding Obligations.......................................................... 14
6.5 No Brokers Or Finders........................................................ 15
7. Conditions Of Parties' Obligations.................................................. 15
7.1 Conditions Of Investor's Obligations At The Closing.......................... 15
(a) No Errors, Etc...................................................... 15
(b) Compliance With Agreement........................................... 15
(c) No Default.......................................................... 15
(d) Certificate Of Company.............................................. 15
(e) Opinion Of The Company's Counsel.................................... 15
(f) Qualification Under State Securities Laws........................... 15
(g) Supporting Documents................................................ 15
(h) Proceedings And Documents........................................... 16
(i) Employment Agreements............................................... 16
(j) Lender's Consent.................................................... 16
(k) Waiver Of Existing Rights Agreement................................. 16
(l) Government And Other Consents....................................... 16
(m) Stockholder Agreement............................................... 16
(n) Exchange Agreement.................................................. 17
(o) Termination Of Shareholders' Agreement.............................. 17
(p) Operating Plan...................................................... 17
(q) Universal Option.................................................... 17
7.2 Conditions Of Company's Obligations.......................................... 17
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8. Covenants Of The Company And Fargo.................................................. 17
8.1 Maintain Insurance........................................................... 17
8.2 Compliance With Initial Purchase Agreement................................... 17
8.3 Compliance With Section 7.................................................... 17
8.4 Use Of Proceeds.............................................................. 18
8.5 Exclusivity.................................................................. 18
8.6 Restriction On Transfer Of Fargo's Common Stock.............................. 18
8.7 Fargo Voting Covenant........................................................ 18
8.8 HSR Filing................................................................... 18
8.9 Development Of Extended Operating Plan....................................... 18
8.10 Maintenance of Distribution Agreements; Negotiations for Distribution
Agreement.................................................................... 19
9. Covenants Of Investor............................................................... 19
9.1 Compliance With Legal Requirements........................................... 19
9.2 Additional Financing......................................................... 19
9.3 Compliance With Initial Purchase Agreement................................... 19
9.4 Maintenance of Distribution Arrangements; Negotiations For Distribution
Agreement.................................................................... 19
10. Registration Of Investor Stock...................................................... 20
10.1 Required Registration........................................................ 20
10.2 Registration Procedures...................................................... 20
10.3 Expenses..................................................................... 21
10.4 Indemnification.............................................................. 22
10.5 Reporting Requirements Under The Exchange Act................................ 23
10.6 Investor Information......................................................... 24
10.7 Transferability Of Registration Rights....................................... 24
10.8 Suspension Of Registration Obligations In Initial Purchase Agreement;
Reinstatement Of Registration Obligations In Event Of Termination............ 24
11. Enforcement......................................................................... 24
11.1 Survival Of Representations And Warranties................................... 24
11.2 Indemnification.............................................................. 24
11.3 Injunctive Relief............................................................ 27
11.4 No Implied Waiver............................................................ 27
12. Rights Of First Refusal............................................................. 27
12.1 Subsequent Offerings......................................................... 27
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
12.2 Exercise Of Rights........................................................... 27
12.3 Issuance Of Equity Securities To Other Persons............................... 27
12.4 Excluded Securities.......................................................... 28
12.5 Termination Of Rights........................................................ 28
13. Definitions......................................................................... 28
14. Miscellaneous....................................................................... 31
14.1 Waivers And Amendments....................................................... 31
14.2 Rights Of Investor........................................................... 32
14.3 Notices...................................................................... 32
14.4 Severability................................................................. 33
14.5 Assignment; Parties In Interest.............................................. 33
14.6 Headings..................................................................... 34
14.7 Choice Of Law; Jurisdiction And Venue........................................ 34
14.8 Publicity.................................................................... 34
14.9 Counterparts................................................................. 34
14.10 Entire Agreement; Effect On Initial Purchase Agreement....................... 34
14.11 Attorneys' Fees.............................................................. 34
14.12 Arbitration.................................................................. 35
</TABLE>
iv
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of July 20,
---------
1999 among INTERPLAY ENTERTAINMENT CORP., a Delaware corporation (the
"Company"), TITUS INTERACTIVE SA, a French corporation ("Titus" or the
------- -----
"Investor"), and to the extent expressly provided herein, BRIAN FARGO, an
--------
individual ("Fargo"). Capitalized terms not otherwise defined herein shall have
-----
the meanings ascribed thereto in Section 13 hereof.
R E C I T A L S
- - - - - - - -
A. The Company, Investor and Fargo have previously entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement") dated March 18, 1999,
------------------------
whereby, among other things, the Company agreed to sell and Investor agreed to
purchase up to Five Million (5,000,000) Shares of the Company's Common Stock (as
defined below), and the parties consummated the purchase and sale contemplated
by the Stock Purchase Agreement.
B. The Stock Purchase Agreement contemplated a merger or other
business combination between the Company and Investor, referred to in the
Stock Purchase Agreement as a "Permitted Transaction." Subsequent to the
---------------------
consummation of the Initial Purchase Agreement, the Company and Investor
entered into a Letter of Intent as of May 12, 1999 (the "Letter of Intent")
----------------
whereby, among other things, the Company and Investor entered into a nonbinding
expression of intent with respect to a Permitted Transaction and amended the
Stock Purchase Agreement in certain limited respects. The Stock Purchase
Agreement, as amended by the Letter of Intent, shall be referred to herein from
time to time as the "Initial Purchase Agreement."
--------------------------
C. The parties hereby desire to effect a Permitted Transaction, on the
terms and conditions set forth herein.
THE PARTIES hereby agree as follows:
1. Authorization of Investor Stock. The Company has authorized the
-------------------------------
issue and sale of Six Million Two Hundred Fifty Thousand (6,250,000) shares (the
"Investor Stock") of its Common Stock, par value $.001 per share ("Common
- --------------- ------
Stock").
- -----
2. Sale and Purchase of Investor Stock. Upon the terms and subject to
-----------------------------------
the conditions herein contained, the Company agrees to sell to Investor, and
Investor agrees to purchase from the Company, at the Closing (as hereinafter
defined) on the Closing Date (as hereinafter defined) the Investor Stock at a
price in the aggregate of Twenty-Five Million Dollars ($25,000,000) (the
"Purchase Payment"). The parties acknowledge that Investor has previously paid
----------------
the Company Five Million Dollars (the "Deposit"), in accordance with the Letter
-------
of Intent, which Deposit the Company shall repay in accordance with the
Convertible Promissory Note dated as of May 12, 1999 (the "Initial Note").
------------
Simultaneously with the execution of this Agreement, Investor shall make
additional payments to the Company as mutually agreed upon by the Company and
Investor, which amounts the Company shall repay in accordance with the
Convertible Promissory Note dated as of the date hereof (the "Additional Note").
---------------
3. Closing; Termination.
--------------------
<PAGE>
3.1 Closing. The closing of the sale to and purchase by Investor
-------
of the Investor Stock (the "Closing") shall occur at the offices of Paul,
-------
Hastings, Janofsky & Walker LLP, 555 South Flower Street, Twenty-Third Floor,
Los Angeles, California, at the hour of 10:00 A.M., Pacific time, on the first
business day after the date upon which all of the conditions to Investor's and
the Company's obligations hereunder have been satisfied (or waived in accordance
with the terms hereof), or at such later time or day as the Investor and the
Company shall agree (the "Closing Date"). At the Closing, the Company shall
------------
deliver to Investor a certificate evidencing the Investor Stock which shall be
registered in Investor's name, against delivery to the Company of payment by
check or wire transfer in an amount equal to (a) the Purchase Payment less (b)
the Deposit (the Net Purchase Payment"). Simultaneously therewith, each of the
--------------------
Initial Note and the Additional Note shall be tendered to the Company by the
Investor in satisfaction of the balance of the Purchase Payment.
3.2 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing Date by written notice from the terminating party, delivered in
accordance with Section 14.3, specifying the reason therefor:
(a) by mutual agreement of the parties hereto;
(b) by Investor if (i) any condition precedent to Closing set
forth in Section 7.1 of this Agreement has not been met on or before September
30, 1999, (ii) the Closing has not occurred on or before September 30, 1999 for
any reason other than (I) a material default by Investor in its obligations
hereunder or (II) failure to consummate the transactions contemplated by the
Exchange Agreement attached hereto as Exhibit E, where such failure is solely
---------
due to the inability of Investor to issue to Fargo the Exchanged Shares (as
described therein) as of such date, or (iii) the Company has committed any
material breach or default under the terms of this Agreement, which breach or
default is not cured within ten (10) days after Company's receipt of written
notice thereof;
(c) by the Company if (i) any condition precedent to Closing set
forth in Section 7.2 of this Agreement has not been met on or before September
30, 1999, (ii) the Closing has not occurred on or before September 30, 1999 for
any reason other than (I) a material default by the Company in its obligations
hereunder or (II) failure to consummate the transactions contemplated by the
Exchange Agreement attached hereto as Exhibit E, where such failure is solely
---------
due to the inability of Investor to issue to Fargo the Exchanged Shares (as
described therein) as of such date, or (iii) the Investor has committed any
material breach or default under the terms of this Agreement, which breach or
default is not cured within ten (10) days after Investor's receipt of written
notice thereof.
4. Register of Investor Stock; Restrictions on Transfer of
-------------------------------------------------------
Securities; Removal of Restrictions on Transfer of Investor Stock.
- -----------------------------------------------------------------
4.1 Register of Investor Stock. The Company or its duly appointed
---------------------------
agent shall maintain a register for the shares of Investor Stock, in which it
shall register the issue and sale of all such shares. All transfers of the
Investor Stock shall be recorded on the register maintained by the Company or
its agent, and the Company shall be entitled to regard the registered holder of
the Investor Stock as the actual holder of the Investor Stock so registered
until the Company or its agent is required to record a transfer of such Investor
Stock on its register. Subject to Section 4.2(c) hereof, the Company or
2
<PAGE>
its agent shall be required to record any such transfer when it receives the
shares of Investor Stock to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.
4.2 Restrictions on Transfer.
------------------------
(a) Investor understands and agrees that the shares of Investor
Stock it will be acquiring have not been registered under the Securities Act,
and that accordingly they will not be fully transferable except as permitted
under various exemptions contained in the Securities Act, or upon satisfaction
of the registration and prospectus delivery requirements of the Securities Act.
Investor acknowledges that it must bear the economic risk of its investment in
the Investor Stock for an indefinite period of time (subject, however, to the
Company's obligation to effect the registration of the Investor Stock under the
Securities Act in accordance with this Agreement) since they have not been
registered under the Securities Act and therefore cannot be sold unless they are
subsequently registered or an exemption from registration is available.
(b) Investor hereby represents and warrants to the Company that
(i) 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 it has agreed to purchase, 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
3
<PAGE>
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, (B) a transfer
to an Affiliate of Investor, or (C) a sale to be effected in accordance with
Rule 144 of the Commission under the Securities Act (or any comparable
exemption).
(iv) Investor agrees that, if the Investor Stock is issued
in accordance herewith prior to the Final Valuation Date (as defined in Section
13 hereof), neither it nor any of its affiliates will, during the period between
the Closing Date and the Final Valuation Date, (A) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any of the Investor
Stock or (B) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the
Investor Stock, whether any such transaction described in clause (A) or (B)
above is to be settled by delivery of the Investor Stock, in cash or otherwise.
Investor agrees that the certificates evidencing the Investor Stock, if such
Investor Stock is issued during the period between the Closing Date and the
Final Valuation Date, and each certificate issued in transfer thereof, will bear
the following legend:
"The sale, pledge, hypothecation or transfer of the securities
represented by this certificate is subject to the terms and conditions
(including certain adjustment provisions) of a certain Stock Purchase
Agreement by and between the Corporation and the holder hereof.
Copies of such agreement may be obtained upon written request to the
secretary of the Corporation."
(v) Investor consents to the Company's making a notation
on its records or giving instructions to any transfer agent of the Investor
Stock in order to implement the restrictions on transfer of the Investor Stock
mentioned in this subsection (c).
4.3 Removal of Transfer Restrictions. Any legend endorsed on a
--------------------------------
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
---------------------------------------------
Investor to enter into this Agreement and to purchase the Investor Stock, the
Company hereby covenants with, and represents and warrants to, Investor, as of
the date hereof, except as set forth on the Schedule of Exceptions delivered to
Investor concurrently herewith, as follows (unless the context otherwise
requires, the "Company" shall refer to the Company and its Subsidiaries,
collectively):
4
<PAGE>
5.1 Organization, Standing, etc. The Company is a corporation duly
----------------------------
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.
------------
5.2 Qualification. The Company is duly qualified, licensed or
--------------
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned or leased makes
such qualification, licensing or domestication necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company.
5.3 Capital Stock. The authorized capital stock of the Company
-------------
consists of 50,000,000 shares of Common Stock, and 5,000,000 shares of Preferred
Stock, and the Company has no authority to issue any other capital stock. No
shares of Preferred Stock have been issued prior to the Closing; 22,770,712
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 the date hereof, the Company has (A) reserved a total of
154,356 shares of Common Stock for issuance to employees, officers and directors
under a 1991 stock purchase plan, under which options to purchase a total of
154,356 shares have been granted, but neither exercised nor forfeited by the
holder thereof, (B) reserved a total of 353,050 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 353,050 shares have been granted, but
neither exercised nor forfeited by the holder thereof, and (C) reserved a total
of 2,353,425 shares of Common Stock for issuance to employees, officers and
directors under a 1997 stock incentive plan, under which options to purchase
1,905,700 shares have been granted, but neither exercised nor forfeited by the
holder thereof, (D) reserved a total of 200,000 shares of Common Stock for
issuance to employees and officers under an Employee Stock Purchase Plan, of
which 56,102 shares have been granted, but neither exercised nor forfeited by
the holder thereof, and (E) reserved a total of 572,874 shares of Common Stock
for issuance upon the exercise of options granted outside the Company's option
plans, of which 572,874 shares have been granted, but neither exercised nor
forfeited by the holder thereof. The Company has reserved a total of 400,000
shares for issuance upon exercise of outstanding warrants issued by the Company.
Under the terms thereof, to the extent that any outstanding award under the 1991
stock purchase plan or 1994 stock option plan expires or terminates prior to
exercise of such award in full, or if shares issued upon exercise are
repurchased by the Company, the unexercised portion or repurchased shares shall
be added to the pool of shares under the 1997 stock incentive plan and shall
thereafter be available for grant under the terms of such 1997 stock incentive
plan. Each of the 1991 stock purchase plan and 1994 stock option plan has been
terminated with respect to future grants of shares of Common Stock. Except as
expressly provided in the Initial Purchase Agreement and this Agreement, the
5
<PAGE>
Company has no outstanding subscription, option, warrant, call, contract,
demand, commitment, convertible security or other instrument, agreement or
arrangement of any character or nature whatsoever under which the Company is or
may be obligated to issue Common Stock, Preferred Stock or other Equity Security
(as hereinafter defined) of any kind. Neither the offer nor the issuance or
sale of the Investor Stock constitutes or will constitute an event, under any
Equity Security or any anti-dilution or similar provision of any agreement or
instrument to which the Company is a party or by which it is bound or affected,
which shall either increase the number of shares or units of Equity Securities
issuable upon conversion of any securities (whether stock or Indebtedness for
Borrowed Money (as hereinafter defined)) or upon exercise of any warrant or
right to subscribe to or purchase any stock or similar security (including
Indebtedness for Borrowed Money), or decrease the consideration per share or
unit of Equity Security to be received by the Company upon such conversion or
exercise.
5.4 Investor Stock. The Investor Stock has been duly authorized and
--------------
validly issued, and upon payment to the Company of the Net Purchase Payment and
cancellation of the Initial Note and the Additional Note at the Closing, will be
fully paid and nonassessable Common Stock, free and clear of all Liens and
restrictions, other than Liens that might have been created by Investor and
restrictions imposed by (i) Section 4.2 hereof, (ii) applicable state securities
laws, (iii) the Securities Act and (iv) the Stockholder Agreement.
5.5 Indebtedness for Borrowed Money. The Company has no Indebtedness
-------------------------------
for Borrowed Money except as disclosed on the Balance Sheet or on Schedule 5.5
------------
hereto.
5.6 Shareholder List. Schedule 5.6 hereto contains a true and
---------------- ------------
complete list of the names and addresses of all persons or entities known to the
Company, based on Schedules 13D and/or 13G filed by such persons or entities or
otherwise based on the Company's actual knowledge, to be the beneficial holders
of more than five percent (5%) of the outstanding Common Stock and of the
holders of all outstanding options, warrants or other rights to purchase from
the Company more than five percent (5%) of Common Stock. With respect to
holders of more than 5% of Common Stock, Schedule 5.6 contains, to the Company's
------------
knowledge, a true and complete description of the number of shares held by each
such holder. With respect to each option set forth on such Schedule, Schedule
--------
5.6 sets forth the date of grant, the number of shares subject thereto, the
- ---
exercise price, vesting schedule and expiration date. With respect to the
warrants set forth on such Schedule, Schedule 5.6 sets forth the date of issue
------------
of each warrant, the number of shares of Common Stock subject to the warrant,
the exercise price and expiration date. Except as provided on Schedule 5.6, and
------------
except for the Investor, no holder of Common Stock or any other security of the
Company or any other Person is entitled to any preemptive right, right of first
refusal or similar right from the Company or, to the Company's knowledge, any
Person as a result of the issuance of the Investor Stock or otherwise. Except
as provided on Schedule 5.6, there is no voting trust, agreement or arrangement
------------
among any of the beneficial holders of Common Stock of the Company affecting the
exercise of the voting rights of such stock.
5.7 Corporate Acts and Proceedings. All corporate acts and
------------------------------
proceedings required for the authorization, execution and delivery of this
Agreement, the offer, issuance and delivery of the Investor Stock and the
performance of this Agreement have been lawfully and validly taken or will have
been so taken prior to the Closing.
6
<PAGE>
5.8 Compliance with Laws and Other Instruments. The business and
------------------------------------------
operations of the Company have been and are being conducted in accordance with
all applicable federal, state and local laws, rules and regulations, except to
the extent that noncompliance with laws, rules and regulations would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The execution, delivery and performance by the Company of this Agreement (a)
will not require from the Board or stockholders of the Company any consent or
approval that has not been validly and lawfully obtained, (b) will not require
any authorization, consent, approval, license, exemption of or filing or
registration with any domestic or, to best of the Company's knowledge, foreign,
court or governmental department, commission, board, bureau, agency or
instrumentality of government, except such as shall have been lawfully and
validly obtained prior to the Closing, (c) will not cause the Company to violate
or contravene (i) any provision of law, (ii) any rule or regulation of any
agency or government, domestic or foreign, (iii) any order, writ, judgment,
injunction, decree, determination or award, or (iv) any provision of the Amended
and Restated Certificate of Incorporation or Amended and Restated Bylaws of the
Company, (d) will not violate or be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under,
any indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement or other agreement, lease or instrument, commitment
or arrangement to which the Company is a party or by which the Company or any of
its properties, assets or rights is bound or affected, which in any such case
would have a Material Adverse Effect on the Company, and (e) will not result in
the creation or imposition of any Lien, other than Liens in favor of the
Investor. The Company is not in violation of, or (with or without notice or
lapse of time or both) in default under, any term or provision of its Amended
and Restated Certificate of Incorporation or Amended and Restated Bylaws or of
any indenture, loan or credit agreement (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
-------------------
and binding obligation of the Company and is enforceable against the Company in
accordance with its terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally.
5.10 Securities Laws. Based in part upon the representations of
---------------
Investor in Section 4.2, the offer, issue and sale of the Investor Stock are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
5.11 No Brokers or Finders. No Person has, or as a result of the
---------------------
transactions contemplated herein will have, any right or valid claim against the
Company or the Investor for any commission, fee or other compensation as a
finder or broker, or in any similar capacity based upon obligations incurred by
the Company.
7
<PAGE>
5.12 Financial Statements. Included in the Company's Annual Report
--------------------
on Form 10-K for the year ended December 31, 1998 is the Company's audited
balance sheet (the "Balance Sheet") as of December 31, 1998 (the "Balance Sheet
------------- -------------
Date"), and the audited statement of operations for the twelve-month period then
- ----
ended. Included in the Company's Registration Statement on Form S-1 effective
June 19, 1998 (the "Form S-1") are the Company's audited balance sheets as of
--------
April 30, 1996 and 1997, and December 31, 1997, and the audited statements of
operations, cash flow and shareholders' equity for each of the periods then
ended, together with the related opinion thereon of Arthur Andersen LLP,
independent certified public accountants. Included in the Company's Report on
10-Q for the quarterly period ended March 31, 1999 (the "Form 10-Q") are the
---------
Company's unaudited balance sheet as of March 31, 1999 and the unaudited
statement of operations for the three-month period then ended. 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
-------
Schedule 5.13 hereto, the Company has not (a) incurred any material debts,
- -------------
obligations or liabilities, absolute, accrued, contingent or otherwise, whether
due or to become due in excess of $250,000, except current liabilities incurred
in the usual and ordinary course of business, none of which (individually or in
the aggregate) materially and adversely affects the business, finances,
properties or prospects of the Company, (b) discharged or satisfied any Liens
other than those securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheet and current liabilities incurred
since the Balance Sheet Date, in each case in the usual and ordinary course of
business, (c) mortgaged, pledged or subjected to Lien any of its assets,
tangible or intangible, (d) sold, transferred or leased any of its assets of
value exceeding $250,000 except in the usual and ordinary course of business,
(e) canceled or compromised any debt or claim, or waived or released any right,
of value exceeding $250,000, (f) suffered any physical damage, destruction or
loss (whether or not covered by insurance) materially and adversely affecting
the properties, business or prospects of the Company, (g) encountered any labor
difficulties or labor union organizing activities, (h) made or granted any wage
or salary increase to any executive officer other than in the ordinary course of
business or entered into any employment agreement, (i) issued or sold any shares
of capital stock or other securities or granted any options with respect
thereto, (j) modified any Equity Security, except to the extent disclosed on
Schedule 5.6 hereto, (k) declared or paid any dividends on or made any other
- ------------
distributions with respect to, or purchased or redeemed, any of its outstanding
Equity Securities, (l) suffered or experienced any change in, or condition
affecting, the condition (financial or otherwise) of the Company as a whole
other than changes, events or conditions in the usual and ordinary course of its
business, none of which (either by itself or in conjunction with all such other
changes, events and conditions) has been 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.
8
<PAGE>
5.14 Material Agreements of the Company. Except as expressly set
----------------------------------
forth in this Agreement, the Balance Sheet, as disclosed in the Index (compiled
pursuant to Item 601 of Regulation S-K of the Commission) to the Company's
filings under the Securities Act and the Exchange Act or as disclosed on
Schedule 5.14 hereto, the Company is not a party to any written or oral
- -------------
agreement, instrument or arrangement not made in the ordinary course of business
that is material to the Company and is either (a) an agreement with any labor
---
union, (b) an agreement for the purchase of fixed assets or for the purchase of
materials, supplies or equipment over $250,000, (c) an agreement for the
employment of any officer on other than an at-will basis, (d) an indenture, loan
or credit agreement, note agreement, deed of trust, mortgage, security
agreement, promissory note or other agreement or instrument relating to or
evidencing Indebtedness for Borrowed Money in excess of $250,000 or subjecting
any asset or property of the Company to any Lien, (e) a guaranty of any
Indebtedness, (f) a lease or agreement under which the Company is lessee of or
holds or operates any property, real or personal, owned by any other Person
under which payments to such Person exceed $250,000 per annum, (g) a lease or
agreement under which the Company is lessor or permits any Person to hold or
operate any property, real or personal, owned or controlled by the Company
having a value over $250,000 other than in the ordinary course of business, (h)
an agreement granting any preemptive right, right of first refusal or similar
right to any Person, (i) a covenant not to compete or other restriction on its
ability to conduct a business or engage in any other activity, or (j) an
agreement to register securities under 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. Fargo and David Perry (collectively, "Designated Key
--------- --------------
Employees") are in the full-time employ of the Company and/or 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
----------------------
tax returns of the Company have been accurately prepared and duly and timely
filed, and all federal, state and local taxes required to be paid with respect
to the periods covered by such returns have been paid. The Company is not
delinquent in the payment of any material tax, assessment or governmental
charge. Except as set forth on Schedule 5.16 hereto, there is not currently
-------------
pending against the Company any tax deficiency proposed or assessed against it
and the Company has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge for any tax period
for which the statute of limitations has not expired. Except as set forth on
Schedule 5.16 hereto, none of the Company's federal income tax returns nor any
- -------------
state or
9
<PAGE>
foreign income or franchise tax returns has ever been audited by
governmental authorities in any of the last five (5) tax years. The reserves
for taxes, assessments and governmental charges reflected in the Balance Sheet
are and will be sufficient for the payment of all unpaid taxes, assessments and
governmental charges payable by the Company with respect to the period ended on
the Balance Sheet Date.
5.17 Patents and Other Intangible Assets.
-----------------------------------
(a) Except as disclosed on Schedule 5.17 hereto, the Company
-------------
(i) owns or has the right to use all patents, trademarks, service marks, trade
names, copyrights, licenses and rights with respect to the foregoing, used in or
necessary for the conduct of its business as now conducted and proposed to be
conducted, (ii) to the Company's knowledge, is not infringing upon or otherwise
acting adversely to the right or claimed right of any Person under or with
respect to any patent, trademark, service mark, trade name, copyright or license
with respect thereto, where such infringement would have a Material Adverse
Effect on the Company.
(b) The Company owns or has the right to use all product rights,
manufacturing rights, trade secrets, including know-how, negative know-how,
formulas, patterns, compilations, programs, devices, methods, techniques,
processes, inventions, designs, technical data, computer software (in both
source code and object code forms and all documentation therefor), including
without limitation the Operational Software (as hereinafter defined) (all of the
foregoing of which are collectively referred to herein as "intellectual
------------
property") required for or incident to the conduct of the Company's business, as
- --------
it is presently conducted, in each case free and clear of any right, Lien or
claim of others, including without limitation former employers of its employees,
except for rights reserved by the licensors of such intellectual property and
rights granted by the Company pursuant to license, publishing and distribution
agreements, and except where such right, lien or claim would not have a Material
Adverse Effect on the Company.
(c) Since its organization, the Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
intellectual property and all Inventions (as defined below). Without limiting
the generality of the foregoing, except as set forth on Schedule 5.17, each of
-------------
the Company's present employees has signed an agreement with the Company in the
form provided to Investor, and each of the Company's past employees has signed
an agreement with the Company substantially in the form provided to Investor,
except, in either such case, where the failure to do so would not have a
Material Adverse Effect on the Company. As used herein, "Inventions" means all
----------
inventions, developments and discoveries which during the period of an
employee's or other Person's service to the Company he or she makes or conceives
of, either solely or jointly with others, that relate to any subject matter with
which his or her work for the Company may be concerned, or relate to or are
connected with the business, products, services or projects of the Company, or
relate to the actual or demonstrably anticipated research or development of the
Company or involve the use of the Company's time, material, facilities or trade
secret information.
(d) Except for license, publishing and distribution agreements
with third parties entered into in the ordinary course of business, and except
as disclosed on Schedule 5.17 hereto, the Company has not sold, transferred,
-------------
assigned, licensed or subjected to any Lien, any intellectual property, trade
secret, know-how, invention, design, process, computer software or technical
data, or any interest therein, necessary for the development, manufacture, use,
operation or sale of any product listed on Schedules 5.27(a) and 5.27(b) hereto.
-----------------------------
10
<PAGE>
(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 mark, trade name, copyright, trade secret,
proprietary right, process or other intellectual property of any other Person,
which could reasonably be expected to have a Material Adverse Effect on the
Company.
5.18 Employment Benefit Plans; ERISA. Except for the Interplay
-------------------------------
Productions 401(k) Profit Sharing Plan (the "Plan"), as described in Schedule
---- --------
5.18, the Company does not maintain or make contributions to any pension, profit
- ----
sharing or other employee retirement benefit plan. The Plan has been maintained
in compliance with all applicable laws, ordinances, rules, regulations, permits,
orders, writs, judgments, injunctions, decrees, determinations and awards of any
agency, government, or arbitrator. The Company has no material liability with
respect to the Plan or any other such plan (including, without limitation, any
unfunded liability or any accumulated funding deficiency) or any material
liability to the Pension Benefit Guaranty Corporation or under Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
-----
respect to the Plan or any multi-employer pension benefit plan, nor would the
Company have any such liability if the Plan or any multi-employer plan were
terminated or if the Company withdrew, in whole or in part, from the Plan or any
multi-employer plan. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will
constitute a termination of employment or other event entitling any person to
any additional or other benefits, or that would otherwise modify benefits or the
vesting of benefits, provided under the Plan.
5.19 Title to Property and Encumbrances; Leases. The Company has
------------------------------------------
good and marketable title to all of its properties and assets, including without
limitation the properties and assets reflected in the Balance Sheet and the
properties and assets used in the conduct of its business, except for properties
disposed of in the ordinary course of business since the Balance Sheet Date and
except for properties held under valid and subsisting leases which are in full
force and effect and which are not in default, subject to no Lien, except those
which are shown and described on the Balance Sheet and except for Permitted
Liens (as hereinafter defined). All material leases under which the Company is
lessee of any real or personal property are valid, enforceable and effective in
accordance with their terms; there is not under any such lease any existing or
claimed default by the Company or event or condition which with notice or lapse
of time or both would constitute a default by the Company. Except as disclosed
on Schedule 5.19 hereto, no material lease under which the Company is lessee of
-------------
any real property contains any provision which either (i) treats a sale or
transfer of any or all of the outstanding stock of the Company or a merger of
the Company with another Person as an assignment of the Company's leasehold
interest, or (ii) otherwise requires the consent of the lessor in the event of
any such sale, transfer or merger.
11
<PAGE>
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 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 the Initial Purchase Agreement, the Company
has not agreed to register under the Securities Act any of its authorized or
outstanding securities.
5.24 Licenses. The Company possesses from the appropriate agency,
--------
commission, board and governmental body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
which are necessary for the Company to engage in the business currently
conducted by it and proposed to be conducted (except where the failure to so
hold would not have a Material Adverse Effect on the Company), including without
limitation the development, manufacture, use, sale and marketing of its existing
and proposed products and services; and all such certificates, licenses,
permits, authorizations and rights have been lawfully and validly issued and are
in full force and effect.
5.25 Interested Party Transactions. Except as disclosed on Schedule
----------------------------- --------
5.25 hereto, no officer, director or 5% shareholder of the Company or any
- ----
Affiliate of any such Person or the Company has, either directly or indirectly,
(a) a material interest in any Person which (i) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (ii) purchases from or sells or furnishes to the Company any
goods or services, or (b) a beneficial interest in any
12
<PAGE>
transaction, contract or agreement to which the Company is a party or by which
it is bound or affected.
5.26 Minute Books. The minute books of the Company provided to
------------
Paul, Hastings, Janofsky & Walker 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 a list of all computer software games currently in active development by
or on behalf of "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 "interplay.com" and in
connection therewith to use the registered service mark and trade name
"Interplay" and in so doing is not acting in conflict with any patent,
trademark, service mark, trade name, copyright, trade secret, license or other
proprietary right with respect thereto, except where such conflict would not
have a Material Adverse Effect on the Company.
(b) The Company has not received any communication from any
Person that the Web Site or the conduct of the Company's business is in
violation of any law, rule or regulation or in conflict with any patent,
trademark, service mark, trade name, copyright, trade secret, license or other
proprietary right with respect thereto, except where such violation or conflict
would not have a Material Adverse Effect on the Company.
5.29 Product Returns. Schedule 5.29 hereto sets forth the Company's
--------------- -------------
experience with respect to the return of any of its products sold or leased for
the three (3) year period ended on December 31, 1998 and for the three (3) month
period ended March 31, 1999.
5.30 Disclosure. To the Company's knowledge, the information
----------
contained in this Agreement, in the Form 10-Q, the Balance Sheet and the Form S-
1, and in any writing furnished pursuant hereto or in connection herewith, taken
as a whole, is true, complete and correct (except that with respect to the Form
10-Q, the Balance Sheet and the Form S-1, the information contained therein
shall be true, complete and correct as of the date thereof), and does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or herein or necessary to make the
13
<PAGE>
statements therein or herein, in light of the circumstances under which they
were made, not misleading.
6. Representations and Warranties of Investor. In order to induce the
------------------------------------------
Company to enter into this Agreement and to issue the Investor Stock, Investor
hereby covenants with, and represents and warrants to, the Company as follows:
6.1 Organization, Standing, etc. Investor is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of France, and
has all requisite corporate power and authority to enter into this Agreement,
and to carry out the provisions hereof and thereof.
6.2 Corporate Acts and Proceedings. All corporate acts and
------------------------------
proceedings required for the authorization, execution and delivery of this
Agreement by Investor, and the performance of this Agreement by Investor, have
been lawfully and validly taken or will have been so taken prior to the Closing.
6.3 Compliance with Laws and Other Instruments. The execution,
------------------------------------------
delivery and performance by Investor of this Agreement (a) will not require from
the board of directors or stockholders of Investor any consent or approval that
has not been validly and lawfully obtained, (b) will not require any
authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality of government, except such as shall have
lawfully and validly obtained prior to the Closing, (c) will not cause Investor
to violate or contravene (i) any provision of law, (ii) any rule or regulation
of any agency or government, domestic of foreign, (iii) any order, writ,
judgment, injunction, decree, determination or award binding upon Investor, or
(iv) any provision of the charter documents of Investor, (d) will not violate or
be in conflict with, result in a breach of or constitute (with or without notice
or lapse of time or both) a default under, any indenture, loan or credit
agreement, note agreement, deed of trust, mortgage, security agreement or other
material agreement, lease or instrument, commitment or arrangement to which
Investor is a party or by which Investor or any of its properties, assets or
rights is bound or affected, which in any case would have a Material Adverse
Effect on Investor.
6.4 Binding Obligations. This Agreement constitutes the legal,
-------------------
valid and binding obligations of Investor and is enforceable against Investor in
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:
14
<PAGE>
(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 Stradling Yocca Carlson & Rauth, a professional corporation,
counsel for the Company, a favorable opinion dated the Closing Date
substantially in the form of Exhibit A hereto.
---------
(f) Qualification Under State Securities Laws. All
-----------------------------------------
registrations, qualifications, permits and approvals required under applicable
state securities laws shall have been obtained for the lawful execution,
delivery and performance of this Agreement, including without limitation the
offer, sale, issue and delivery of the Investor Stock.
(g) Supporting Documents. Investor shall have received the
--------------------
following:
(1) Copies of resolutions of the Board, certified by the
Secretary of the Company, authorizing and approving the execution, delivery and
performance of this Agreement, and all other documents and instruments to be
delivered pursuant hereto and thereto, and taking all such other actions as
required by the Delaware General Corporation Law with respect to this Agreement
(including without limitation, if necessary, approval by the stockholders of the
Company), and the transactions contemplated hereby;
(2) A certificate of incumbency executed by the Secretary
of the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subsection (1) above and
further certifying that the Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws of the Company delivered to the Investors at the
time of the execution of this Agreement have been validly adopted and have not
been amended or modified; and
(3) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as Investor or
its special counsel, Paul, Hastings, Janofsky & Walker LLP ("Investor Counsel"),
----------------
may reasonably request.
15
<PAGE>
(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) Employment Agreements. The Company shall have entered into
---------------------
a three-year employment agreement with Brian Fargo in substantially the form
attached hereto as Exhibit B, and a three-year employment agreement with Herve
---------
Caen in substantially the form attached hereto as Exhibit C.
---------
(j) 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).
(k) 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.
(l) 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 Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
(m) Stockholder Agreement. The Company, Investor and Fargo
---------------------
shall have entered into the Stockholder Agreement substantially in the form of
Exhibit D hereto.
- ---------
(n) Exchange Agreement. Investor and Fargo shall have
------------------
entered into the Exchange Agreement substantially in the form of Exhibit E
---------
hereto, and Fargo shall have delivered the proxy to Investor and the Interplay
Shares (each as defined in the Exchange Agreement) into escrow as contemplated
therein.
(o) Termination of Shareholders' Agreement. The Shareholders'
--------------------------------------
Agreement dated March 30, 1994 by and among the Company, Fargo and MCA Inc.
shall have been terminated and be of no further force or effect.
(p) Operating Plan. Titus and Fargo shall have jointly
--------------
developed the Operating Plan for the operation of the Company for the period
beginning the first day of the month following the Closing Date and ending
December 31, 1999.
16
<PAGE>
(q) Universal Option. Universal shall have delivered to
----------------
Investor the shares of Option Stock (as defined therein).
7.2 Conditions of Company's Obligations. The Company's obligation
-----------------------------------
to issue and sell the Investor Stock to Investor on the Closing Date is subject
to the fulfillment prior to or at the Closing Date of the conditions precedent
specified in paragraphs (f), (i), (j), (k), (l), (m), (n), (o) and (q) of
Section 7.1 hereof, to the approval of the Company's stockholders of the
transactions contemplated hereby, and to the accuracy in all material respects
of the representations of Investor in Section 4.2 and Section 6 of this
Agreement.
8. Covenants of the Company and Fargo. The Company agrees that unless
----------------------------------
Investor otherwise agrees in writing, from the date hereof through the later of
the Final Valuation Date (as defined below) or the effective date of
registration statement with respect to the Investor Shares (the "Adjustment
----------
Period"), unless another period is expressly provided for in this Section 8, the
- ------
Company (and each of its Subsidiaries unless the context otherwise requires)
and, to the extent expressly provided herein, Fargo, will do the following:
8.1 Maintain Insurance. Maintain in full force and effect (a) 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, and
(b) the life insurance policy on the life of Fargo, for the benefit of Investor,
in accordance with Section 8.18 of the Initial Purchase Agreement.
8.2 Compliance With Initial Purchase Agreement. Continue to comply
------------------------------------------
with the following covenants and agreements binding upon the Company set forth
in the Initial Purchase Agreement in accordance with their respective terms:
Sections 8.1, 8.3 through 8.9, 8.11, 8.12, 8.15, 8.17 and 9, including Sections
9.1 through 9.4.
8.3 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.
8.4 Use of Proceeds. Use the proceeds from the sale of the
---------------
Investor Stock hereunder solely for the purposes set forth on Schedule 8.4
------------
hereto.
8.5 Exclusivity. The Company will not, between the date hereof and
-----------
the earlier of the Closing or the termination of this Agreement (the "Restricted
----------
Period"), directly or indirectly, through any officer, director, employee,
- ------
agent, 5% stockholder, partner or otherwise, (a) solicit or initiate, or
participate in discussions or negotiations with, or encourage the submission of
bids, offers or proposals by (or commence negotiations with or provide any
information to), any Person with respect to an acquisition of the Company, its
business or assets, or any interest therein, other than Investor, or (b) provide
any non-public information concerning the Company, its business or assets, to
any Person, other than Investor, except for product developers, distributors,
publishers and licensees under agreements with the Company entered into in the
ordinary course of business consistent with past practices, except for the
Company's lender. Notwithstanding the foregoing, the Company may entertain a
written unsolicited bid or proposal from, and provide non-public information to,
any party who delivers such a
17
<PAGE>
written bid or proposal with respect to an acquisition of the Company, its
business or assets, but only if and so long as the Board determines in good
faith by a majority vote (with the written concurring and concurrent advice from
outside legal counsel) that failing to entertain such written bid or proposal
would constitute a breach of the fiduciary duties of the Board under applicable
law. The Company shall notify Investor in writing promptly upon receipt of any
bids, offers or proposals received, written or oral. The Company further agrees
that it will not engage any broker, financial advisor or other consultant on a
basis which might provide such broker, financial advisor or consultant with an
incentive to initiate or encourage proposals or offers from other parties with
respect to the Company, its business or assets, or any interest therein. The
Company shall not commence any proceeding to merge, consolidate, liquidate or
dissolve the Company or obligate itself to do so.
8.6 Restriction on Transfer of Fargo's Common Stock. During the
-----------------------------------------------
Restricted Period, Fargo shall not sell, assign, pledge, mortgage or otherwise
dispose of or transfer his Common Stock, or any other securities of the Company,
whether now owned or hereafter acquired, or agree to do any of the foregoing,
except to Investor.
8.7 Fargo Voting Covenant. Fargo hereby agrees, if necessary, to
---------------------
vote his shares of Common Stock in favor of the issuance and sale of the
Investor Stock.
8.8 HSR Filing. From the date hereof through the Closing, to the
----------
extent that Investor is required in connection with the transactions
contemplated hereby, or the transactions contemplated by the Initial Purchase
Agreement or the Universal Agreement, to file a notification and report form in
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or the rules and regulations promulgated thereunder (collectively, the
"HSR Act"), the Company shall agree to fully cooperate with Investor to enable
-------
Investor to promptly make such filing and to respond to any requests for
additional information in connection therewith.
8.9 Development of Extended Operating Plan. The Company and Fargo
--------------------------------------
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, 2000 (the "Extended Operating
------------------
Plan").
- ----
8.10 Maintenance of Distribution Arrangements; Negotiations for
----------------------------------------------------------
Distribution Agreement. The Company shall continue to distribute certain of
- ----------------------
Investor's products to those accounts previously agreed upon by the Company and
Investor on the terms previously agreed upon by the parties. The Company shall
enter into good faith negotiations with Investor involving the grant by Investor
to the Company (or a newly formed entity jointly owned by the Company and
Investor) of exclusive rights to distribute in North America all or a portion of
Investor's products related to console gaming systems, in exchange for
consideration to be mutually agreed upon by the Company and Investor.
9. Covenants of Investor. Investor agrees that, unless the Company
---------------------
otherwise agrees in writing, during the Restricted Period (unless another period
is expressly provided for in this Section 9) Investor will do the following:
9.1 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
18
<PAGE>
information to, the Company in connection with any such requirements
imposed upon Investor in connection therewith or herewith.
9.2 Additional Financing. Use its commercially reasonable efforts
--------------------
to raise additional debt or equity financing in the European capital markets
following the Closing on terms and conditions reasonably acceptable to Investor
(the "Investor Financing"). If Investor can raise such Investor Financing, and
------------------
such Investor Financing is in the form of debt or debt and equity, provide the
Company with an unsecured line of credit (the "Line of Credit") for a term of
--------------
one year in an aggregate principal amount equal to the lesser of (a) thirty
percent (30%) of the Investor Financing or (b) Fifteen Million Dollars
($15,000,000), in either case with an interest rate and other material terms
substantially the same as the Investor Financing. If Investor can raise such
Investor Financing, and such financing is solely in the form of equity, the
interest rate payable and other material terms with respect to such Line of
Credit would have an interest rate and other material terms substantially the
same as the terms of any intercompany indebtedness between Investor and its
subsidiary, Titus Software Corporation, which interest rate shall be the lowest
rate permitted by applicable law. Investor shall, from time to time, execute
and deliver commercially reasonable Subordination agreements with respect to any
senior lender of the Company.
9.3 Compliance With Initial Purchase Agreement. Except as
------------------------------------------
expressly provided otherwise herein, continue to comply with all covenants and
agreements binding upon Investor set forth in the Initial Purchase Agreement.
9.4 Maintenance of Distribution Arrangements; Negotiations for
----------------------------------------------------------
Distribution Agreement. Investor shall continue to permit the Company to
- ----------------------
distribute certain of Investor's products to those accounts previously agreed
upon by the Company and Investor on the terms previously agreed upon by the
parties. Investor shall enter into good faith negotiations with the Company
involving the grant by Investor to the Company (or a newly formed entity jointly
owned by the Company and Investor) of exclusive rights to distribute in North
America all or a portion of Investor's products related to console gaming
systems, in exchange for consideration to be mutually agreed upon by the Company
and Investor.
19
<PAGE>
10. Registration of Investor Stock.
------------------------------
10.1 Required Registration. On the date which is one business day
---------------------
after the Closing Date (the "Registration Date"), the Company shall prepare and
-----------------
file a registration statement under the Securities Act, on a form selected by
the Company, covering all Investor Stock (which registration statement may also
cover all of the shares to be registered under the Initial Purchase Agreement
under the terms and conditions set forth therein) 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 (x) the Investor Stock covered thereby has been sold, or (y) by which
all Investor Stock covered thereby may be sold under Rule 144(k).
Notwithstanding the foregoing, if (i) prior to the Registration Date, the
Company shall become ineligible to use Form S-3 or (ii) prior to such date the
Company enters into an agreement to cause a sale or other disposition of all or
substantially all of the assets or outstanding Common Stock of the Company and
the Investor would be materially prejudiced in such transaction by holding
unregistered Common Stock, then in either of such cases the Company shall
promptly prepare and file such registration statement on Form S-1. Without
limiting the generality of clause (ii) in the preceding sentence, the parties
agree that Investor would be materially prejudiced in such transaction in the
event that it is unable to dispose of the shares of Investor Stock immediately
upon the consummation of such transaction.
10.2 Registration Procedures. When the Company effects the
-----------------------
registration of the Investor Stock under the Securities Act pursuant to Section
10.1 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;
20
<PAGE>
(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 Investor 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 Investor 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.
10.3 Expenses. With respect to any registration effected pursuant
--------
to Section 10.1 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 10.3 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.
21
<PAGE>
10.4 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
Investor 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
Investor Stock).
(c) Promptly after receipt by a party indemnified pursuant to
the provisions of paragraph (a) or (b) of this Section 10.4 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
22
<PAGE>
indemnifying party will not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 10.4 and shall not
relieve the indemnifying party from liability under this Section 10.4 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 10.4 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
Investor 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 Investor 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.
10.5 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
23
<PAGE>
10.5 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 Investor 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.
10.6 Investor Information. The Company may require Investor to
--------------------
furnish the Company such information with respect to Investor and the
distribution of the Investor 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.
10.7 Transferability of Registration Rights. Notwithstanding
--------------------------------------
anything to the contrary in this Section 10, the rights of the Investor under
this Section 11 shall automatically transfer to any transferee of at least ten
percent (10%) of the Investor Stock in accordance with Section 14.5 hereof.
10.8 Suspension of Registration Obligations in Initial Purchase
----------------------------------------------------------
Agreement; Reinstatement of Registration Obligations in Event of Termination.
- ----------------------------------------------------------------------------
The Company's obligations set forth in this Section 10 shall be deemed to
relieve the Company of its obligations set forth in Section 11 of the Initial
Purchase Agreement; provided, however, that if this Agreement is terminated
-----------------
prior to the Closing Date, then the Company's obligations in Section 11 of the
Initial Purchase Agreement shall be reinstated as set forth therein; provided,
--------
further, that upon such reinstatement Section 11.1 of the Initial Purchase
- -------
Agreement shall be deemed amended to (a) replace "June 21, 1999" in the first
sentence thereof with the first business day following the date of termination
of this Agreement, and (b) include in the definition of "Registrable Stock" all
shares of Common Stock into which the Initial Note and/or Additional Note have
been converted, if any, in accordance therewith.
11. Enforcement.
-----------
11.1 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.
11.2 Indemnification.
---------------
(a) Subject to Section 11.2(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
-------
24
<PAGE>
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
25
<PAGE>
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 11.2 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 14.13 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
26
<PAGE>
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 11.3, the provisions of this
Section 11.2 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.
11.3 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 11.2(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.
11.4 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.
12. Rights of First Refusal.
-----------------------
12.1 Subsequent Offerings. Investor shall have the right of first
--------------------
refusal to purchase all (or any part of all) Equity Securities that the Company
may, from time to time, propose to sell and issue between the date hereof and
the Closing Date, other than the Equity Securities excluded by Section 12.4
hereof.
12.2 Exercise of Rights. If and each time the Company proposes to
------------------
issue any Equity Securities, it shall give Investor written notice of its
intention, describing the Equity Securities, the price, and the general terms
and conditions upon which the Company proposes to issue the same. Investor
shall have ten (10) days from the giving of such notice to agree to purchase
Equity Securities for the price and upon the terms and conditions specified in
the notice by giving written notice to the Company.
12.3 Issuance of Equity Securities to Other Persons. If Investor
----------------------------------------------
fails to exercise in full the rights of first refusal within such ten (10) day
period by giving the agreement referred to in Section 12.2, the Company shall
have ninety (90) days thereafter to complete the sale of the Equity Securities
in respect of which Investor's rights were not exercised, at a price and upon
general terms and conditions no more favorable to the purchasers thereof than
specified in the Company's notice to the Investors pursuant to Section 12.2
hereof. If the Company has not sold all of such Equity Securities within such
ninety (90) days, the Company shall not thereafter issue or sell any of such
Equity Securities, without first offering such securities to Investor in the
manner provided above.
12.4 Excluded Securities. The rights of first refusal established
-------------------
by this Section 12 shall have no application to (a) any shares of Common Stock
issued in accordance with the stock option plans and warrants currently reserved
for issuance to
27
<PAGE>
employees, directors and advisors, as described in Sections 5.3 and 5.6, and
Schedule 5.6, (b) shares of Common Stock issued as consideration to
- ------------
third parties for product development services or publishing or distribution
rights, not to exceed 500,000 shares, (c) shares of Common Stock issued in
connection with any stock split, stock dividend or reverse stock split, and (d)
shares of Common Stock issued in connection with acquisitions of other entities
by way of merger, share exchange, sale of assets or otherwise.
12.5 Termination of Rights. The Company's obligations set forth in
this Section 12 shall be deemed to relieve the Company of its obligations set
forth in Section 13 of the Initial Purchase Agreement; provided, however, that
-------- -------
if this Agreement is terminated prior to the Closing Date, then the Company's
obligations in Section 13 of the Initial Purchase Agreement shall be reinstated
as set forth therein.
13. Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Section 13 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
13 and those accounting terms used in this Agreement not defined in this Section
13 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 13 and those accounting
terms appearing in this Agreement but not defined in this Section 13 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.
Capitalized terms not otherwise defined herein shall have their respective
meanings in the Initial Purchase Agreement.
"Action" shall have the meaning assigned to it in Section 11.2(a).
------
"Affiliate" shall have the meaning assigned to it in Rule 405 of the
---------
Commission under the Securities Act.
"Agreement" shall mean this Agreement.
---------
"Balance Sheet" and "Balance Sheet Date" shall have the meanings
------------- ------------------
assigned to these terms in Section 5.12 hereof.
"Board" shall mean the Board of Directors of the Company.
-----
"Claim" shall have the meaning assigned to it in Section 11.2(b).
-----
"Closing" and "Closing Date" shall have the meanings assigned to
------- ------------
these terms in Section 3.1.
"Common Stock" shall have the meaning assigned to it in Section 1
------------
hereof.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Damages" shall have the meaning assigned to it in Section 11.2(a).
-------
28
<PAGE>
"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.
"Deposit" shall have the meaning assigned to it in Section 2.
-------
"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.
"Final Valuation Date" shall have the meaning assigned to it in the
--------------------
Initial Purchase Agreement.
"Form 10-Q" shall have the meaning assigned to it in Section 5.12.
---------
"Form S-1" shall have the meaning assigned to it in Section 5.12.
--------
"GAAP" shall have the meaning assigned to it in Section 5.12.
----
"Indebtedness" shall mean any obligation of the Company or any
------------
Subsidiary which under GAAP 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.
29
<PAGE>
"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.
"Initial Purchase Agreement" shall have the meaning assigned to it in
--------------------------
the Recitals.
"Investor Counsel" shall have the meaning assigned to it in Section
----------------
7.1(g)(3).
"Investor Financing" shall have the meaning assigned to it in Section
------------------
9.2.
"Investor Stock" shall have the meaning assigned to it in Section 1.
--------------
"Letter of Intent" shall have the meaning assigned to it in the
----------------
Recitals.
"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.
"Line of Credit" shall have the meaning assigned to it in Section
--------------
9.2.
"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.
"Note" shall have the meaning assigned to it in Section 3.
----
"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.
30
<PAGE>
"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.
"Restricted Period" shall have the meaning assigned to it in Section
-----------------
8.5.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Stock Purchase Agreement" shall have the meaning assigned to it in
------------------------
the Recitals.
"Subsidiary" shall mean any corporation, association or other business
----------
entity at least fifty percent (50%) of the outstanding voting stock of which is
at the time owned or controlled directly or indirectly by the Company or by one
or more of such subsidiary entities or both, where "voting stock" means any
shares of stock having general voting power in electing the board of directors
(irrespective of whether or not at the time stock of any other class or classes
has or might have voting power by reason of any contingency).
"Universal Agreement" shall mean the letter agreement dated as of
-------------------
March 18, 1999, by and among the Company, Investor and Universal Studios, Inc.
"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
31
<PAGE>
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.
16815 Von Karman Avenue
Irvine, California 92606
Attention: Mr. Brian Fargo, Chairman and
Chief Executive Officer
Telecopier: (949) 252-0667
with a copy to:
K.C. Schaaf, Esq.
Stradling Yocca Carlson & Rauth, a professional corporation
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Telecopier: (949) 725-4100
if to Investor to:
Titus Interactive SA
c/o Titus Software Corporation
20432 Corisco Street
Chatsworth, California 91311
Attention: Mr. Herve Caen, Chairman and
Chief Executive Officer
Telecopier: (818) 709-6537
with copies to:
Titus Interactive SA
Parc de l'esplanade
12, Rue Enrico Fermi
Saint Thibault des Vignes
77462 Lagny sur Marne Cedex
France
Telecopier: 011-33-1-60-31-59-60
and
Robert A. Miller, Jr., Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street - 23rd Floor
Los Angeles, California 90071
Telecopier: (213) 627-0705
32
<PAGE>
if to Fargo to:
Mr. Brian Fargo
c/o Interplay Entertainment Corp.
16815 Von Karman Avenue
Irvine, California 92606
Telecopier: (949) 252-0667
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 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
--------
33
<PAGE>
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.
14.9 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.
14.10 Entire Agreement; Effect on Initial Purchase Agreement. This
------------------------------------------------------
Agreement, and the Exhibits, Schedules, certificates, and documents referred to
herein, together with the Initial Purchase Agreement, and all exhibits,
schedules, certificates and documents referred to therein, constitute the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersede all prior understandings (including the Letter of Intent, except and
solely to the extent that such Letter of Intent, by its terms, is binding upon
the parties) with respect to the subject matter hereof, and no representation or
warranty not included herein has been relied upon by any party hereto. Without
limiting the generality of the foregoing, the Initial Purchase Agreement shall
continue in full force and effect in accordance with its terms, as expressly
amended hereby; provided, that in the event of any inconsistency between the
--------
terms of this Agreement and the terms of the Initial Purchase Agreement, the
terms of this Agreement shall control; and provided, further, that upon the
-------- -------
Closing, Section 10.3 of the Initial Purchase Agreement shall be deleted in its
entirety, and shall have no further force or effect.
14.11 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.
14.12 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.
34
<PAGE>
[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/ Brian Fargo
-------------------------------
An Authorized Officer
TITUS INTERACTIVE SA, a French
corporation
By: /s/ Herve Caen
-------------------------------
An Authorized Officer
/s/ Brian Fargo
-----------------------------------
Brian Fargo
35
<PAGE>
EXHIBIT 99.8
EXECUTION COPY
STOCKHOLDER AGREEMENT
---------------------
This STOCKHOLDER AGREEMENT (this "Agreement") is entered into as of
---------
_________, 1999, by and among INTERPLAY ENTERTAINMENT CORP., a Delaware
corporation (the "Company"), TITUS INTERACTIVE SA, a French corporation
-------
("Titus"), and BRIAN FARGO, an individual ("Fargo"; and together with Titus, the
----- -----
"Stockholders").
------------
RECITALS
--------
WHEREAS, the Company, Titus and Fargo have entered into a Stock
Purchase Agreement dated as of July 20, 1999 (the "Stock Purchase Agreement"),
------------------------
whereby the Company will issue and sell and Titus will purchase 6,250,000 shares
of common stock of the Company for an aggregate purchase price of $25,000,000;
WHEREAS, the parties hereto further deem it in their best interests
and in the best interest of the Company to provide for the consistent and
uniform management of the Company, to regulate certain of their rights in
connection with their interests in the Company and to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Company Stock (as
hereinafter defined), and desire to enter into this Agreement in order to
effectuate those purposes and the transactions contemplated by the Stock
Purchase Agreement; and
WHEREAS, as a condition to the closing of the transactions
contemplated by the Stock Purchase Agreement, the Company, Titus and Fargo have
agreed to enter into this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings:
"Accredited Investor" shall have the meaning set forth for such term
-------------------
in Regulation D.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
---
and regulations promulgated thereunder.
1
<PAGE>
"Affiliate" shall mean with respect to a Person, any other Person that
---------
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities or by agreement or otherwise.
"Board of Directors" shall mean the Board of Directors of the Company.
------------------
"Caen Employment Agreement" shall mean the Employment Agreement dated
-------------------------
as of the Closing Date between the Company and Herve Caen.
"Change of Control" shall mean a transaction or series of transactions
-----------------
after the consummation of which Titus holds less than fifty percent (50%) of the
Fully-Diluted Common Stock of the Company (or the voting securities of the
surviving Person or parent of such surviving Person).
"Closing" shall mean the closing of the transactions contemplated by
-------
the Stock Purchase Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Common Stock" shall mean, at any time, the common stock, no par
------------
value, of the Company.
"Company Stock" shall mean, at any time, the then outstanding shares
-------------
of capital stock of the Company, including without limitation the shares of
Common Stock.
"Effective Date" shall mean the date on which the Closing occurs.
--------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Fargo Employment Agreement" shall mean the Employment Agreement dated
--------------------------
as of the Closing Date between the Company and Fargo.
"Fully-Diluted Common Stock" shall mean, at any time, the then
--------------------------
outstanding Common Stock of the Company plus (without duplication) all shares of
Common Stock issuable, whether at such time or upon the passage of time or the
occurrence of future events, upon the exercise, conversion or exchange of all
then-outstanding securities of the Company which can be converted or exchanged
into Common Stock.
"Holder of Securities" shall have the meaning set forth in Section
--------------------
3.1.
"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.
2
<PAGE>
"Initial Stock Purchase Agreement" shall mean the Stock Purchase
--------------------------------
Agreement dated as of March 18, 1999, by and among the Company, Titus and Fargo,
as amended through the date hereof.
"issuance" shall have the meaning set forth in Section 4.1.
--------
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge
arising by statute or other law.
"New Securities" shall have the meaning set forth in Section 4.1.
--------------
"Notice" shall have the meaning set forth in Section 7.4.
------
"Notice of Issuance" shall have the meaning set forth in Section 4.1.
------------------
"Permitted Transfer" shall mean any Transfer pursuant to Section 3.3.
------------------
"Person" shall mean an individual, partnership, limited liability
------
company, association, joint venture, corporation, trust or unincorporated
organization, a government or any department, agency or political subdivision
thereof or other entity.
"Purchase Agreements" shall mean the Stock Purchase Agreement and the
-------------------
Initial Stock Purchase Agreement.
"Regulation D" shall mean Regulation D as promulgated under the Act,
------------
as amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
---
"Stock Purchase Agreement" shall have the meaning set forth in the
------------------------
Recitals.
"Subsidiary" shall mean any Person a majority of the voting equity of
----------
which is, at the time as of which any determination is being made, owned by the
Company directly or through one or more Subsidiaries.
"Tag-Along Formula" shall have the meaning set forth in Section
-----------------
5.1(b).
"Tag-Along Notice" shall have the meaning set forth in Section 5.1(d).
----------------
"Tag-Along Shares" shall have the meaning set forth in Section 5.1(b).
----------------
"Tag-Along Stockholder" shall have the meaning set forth in Section
---------------------
5.1(b).
"Transfer" shall have the meaning set forth in Section 3.1.
--------
"Transferee" shall have the meaning set forth in Section 3.2.
----------
"Transferee Terms" shall have the meaning set forth in Section 5.1(c).
----------------
3
<PAGE>
"Transfer Shares" shall have the meaning set forth in Section 5.1(a).
---------------
ARTICLE II
BOARD OF DIRECTORS; VOTING OF CAPITAL STOCK;
CERTAIN OTHER MATTERS
---------------------
2.1 Board of Directors. Immediately following the Closing, until the
------------------
earliest of (a) the termination of Fargo's employment with the Company for
"Cause" or Fargo's resignation other than for "Good Reason" (each, as defined in
the Fargo Employment Agreement), or (b) the termination of Caen's employment
with the Company other than for "Cause" or Caen's resignation for "Good Reason"
(each, as defined in the Caen Employment Agreement), or (c) the date that Fargo
ceases to hold at least Two Million (2,000,000) shares of Common Stock, the
parties hereto shall take all action within their respective powers as
stockholders, including the voting of Common Stock, required to cause the Board
of Directors to consist of seven (7) directors, who shall be designated as
follows:
(a) Titus shall designate, in the aggregate, two (2) directors of the
Company;
(b) Fargo shall designate, in the aggregate, two (2) directors of the
Company;
(c) the Stockholders shall mutually designate, in the aggregate, three
(3) directors of the Company.
Each Stockholder hereby agrees to vote all shares of voting Common
Stock owned beneficially or of record by it to effect the election of all
directors so designated.
2.2 Removal. If a director designated and elected pursuant to Section 2.1
-------
hereof:
(a) has been designated by Titus and Titus requests that such director
be removed (with or without cause) by written notice thereof to the Company and
Fargo;
(b) has been designated by Fargo and Fargo requests that such director
be removed (with or without cause) by written notice thereof to the Company and
Titus,
then such director shall be removed, with or without cause, upon the affirmative
vote of holders of a majority of the outstanding shares of voting Common Stock,
and each Stockholder hereby agrees to vote all shares of voting Common Stock
owned beneficially or of record by such Stockholder to effect such removal upon
such request.
2.3 Vacancies. In the event that a vacancy is created on the Board of
---------
Directors at any time by the death, disability, retirement, resignation, removal
(with or without cause) or otherwise, or if for any other reason there shall
exist or occur any vacancy on the Board of Directors, each Stockholder hereby
agrees to cause the directors designated by such Stockholder to vote for that
individual designated to fill such vacancy and serve as a director by whichever
of the Stockholders that had designated (pursuant to Section 2.1 hereof) the
director whose death, disability, retirement, resignation or removal (with or
without cause) resulted in such vacancy on the Board of Directors (in the manner
set forth in Section 2.1) or, if the vacancy is filled by Stockholders of the
Company, to vote and cause to be voted all shares of voting Common Stock owned
beneficially or of record by such Stockholder to elect the individual designated
to fill such
4
<PAGE>
vacancy; provided, however, that such other individual so designated may not
-------- -------
previously have been a director of the Company who was removed for cause from
its Board of Directors.
2.4 Actions of the Board of Directors. The parties shall take all actions
---------------------------------
necessary to provide that:
(a) The By-Laws of the Company shall provide that the presence of a
majority of the directors shall be necessary to constitute a quorum at any
meeting of the Board of Directors.
(b) The By-Laws of the Company shall also provide that any action of
the Board of Directors requires the vote of a majority of the directors present
at a meeting with respect to which a quorum is in attendance.
(c) The By-Laws of the Company shall further provide that the Board of
Directors may only take actions with respect to matters described as proposed
subjects for action in the written notice of meeting circulated as provided in
the By-Laws; provided, however, that the By-Laws shall also provide that this
-------- -------
limitation can be waived by the majority vote of the directors in attendance at
a meeting of the Board of Directors with respect to which (i) a quorum, (ii) at
least one designee of Titus and (iii) at least one designee of Fargo are
present.
2.5 Covenant to Vote. Each Stockholder hereby agrees to take all actions
----------------
necessary to call, or to cause the Company and the appropriate officers and
directors of the Company to call, a special or annual meeting of Stockholders of
the Company and to vote and cause to be voted all shares of voting stock of the
Company owned beneficially or of record by such Stockholder at any such annual
or special meeting in favor of, or take all action by written consent in lieu of
any such meeting, necessary to ensure that the number of directors constituting
the entire Board of Directors is consistent with, and that the election as
members of the Board of Directors of those individuals so designated is in
accordance with, and to otherwise effect the intent of, this Article II. In
addition, each Stockholder agrees to vote and cause to be voted the shares of
such voting stock owned beneficially or of record by such Stockholder upon any
other matter arising under this Agreement submitted to a vote of the
stockholders of the Company in a manner so as to implement the terms of this
Agreement.
2.6 Interested Party Transactions. At any time after the date hereof, in
-----------------------------
the event that any matter is submitted to a vote of the Company's stockholders
in which either Stockholder or any Affiliate of either Stockholder has any
material interest, other than an interest as a stockholder of the Company that
is proportional to the interests of all other stockholders of the Company, then,
unless a majority of the members of the Board of Directors not nominated by or
otherwise affiliated with such Stockholder have approved such matter, such
Stockholder shall abstain from voting his shares of Common Stock with respect to
such matter.
2.7 Other Activities of Titus; No Fiduciary Duties. It is understood and
----------------------------------------------
accepted that Titus and its Affiliates have or may hereafter have interests in
other business ventures that are or may be competitive with the activities of
the Company and that, to the fullest extent permitted by law, nothing in this
Agreement shall limit the current or future business activities of Titus or any
of its Affiliates, whether or not such activities are competitive with those of
the Company or otherwise. Nothing in this Agreement shall limit in any manner
the ability of Titus to exercise its rights under this Agreement or (except as
expressly set forth herein) as a stockholder of the Company and this Agreement
shall not create, or be deemed or interpreted to create, any fiduciary or
similar duty of Titus owing to Stockholder or the Company. The foregoing
provision shall not be deemed to limit any obligations of any party under
applicable law.
5
<PAGE>
ARTICLE III
TRANSFERS OF COMPANY STOCK AND WARRANTS
---------------------------------------
3.1 General. No party to this Agreement who is a holder of any Company
-------
Stock (a "Holder of Securities") shall, directly or indirectly, sell, assign,
--------------------
pledge, encumber, hypothecate, gift, bequest or otherwise transfer, whether for
value or no value and whether voluntarily or involuntarily (including, without
limitation, by operation of law or by judgment, levy, attachment, garnishment,
bankruptcy or other legal or equitable proceedings, (in each case, a
"Transfer")) Company Stock except in accordance with this Agreement. The
--------
Company shall not, and shall not permit any transfer agent or registrar for the
Company Stock to, Transfer upon the books of the Company any shares of Company
Stock by any Holder of Securities to any Transferee (as hereinafter defined), in
any manner, except in accordance with this Agreement, and any purported Transfer
not in compliance with this Agreement shall be void.
3.2 Legends; Shares Subject to this Agreement. In the event a Holder of
-----------------------------------------
Securities shall Transfer any shares of Company Stock (including any such
Company Stock acquired after the date hereof) pursuant to Section 3.3(a), 3.3(b)
or 3.3(c) to any Person (all Persons acquiring shares of Company Stock pursuant
to any such Section, regardless of the method of Transfer, shall be referred to
herein collectively as "Transferees" and individually as a "Transferee") in
----------- ----------
accordance with this Agreement, such securities shall nonetheless bear legends
as provided in the Stock Purchase Agreement and in Section 7.1 hereof.
3.3 Permitted Transfers by the Holders of Securities. No Holder of
------------------------------------------------
Securities shall, directly or indirectly, Transfer any shares of Company Stock
except under the following conditions:
(a) any Holder of Securities may make a Transfer of Company
Stock to any Affiliate of such Holder of Securities; provided that such
--------
Transferee agrees to be bound by this Agreement in the same manner as such
Holder of Securities;
(b) pursuant to an exercise of the tag-along rights set forth in
Article V hereof;
(c) any Stockholder may make a Transfer after such Stockholder
has complied with (i) the provisions of Section 3.4 and (ii) (if applicable) the
terms of Article V hereof with respect to the provisions of tag-along rights;
and
(d) any Stockholder may make one or more Transfers of an
aggregate of One Million (1,000,000) shares of Company Stock held by such
Stockholder during any consecutive twelve-month period, so long as such
Transfers do not exceed, in the aggregate, Eighty-Three Thousand Three Hundred
Thirty-Three (83,333) shares in any calendar month (each, a "De Minimis
----------
Transfer"); provided, that such Stockholder has complied with the provisions of
- -------- --------
Section 3.4 hereof. Any Transferee of a De Minimis Transfer shall not be bound
by the terms of this Agreement.
In the event of any Transfer pursuant to Section 3.3(a), 3.3(b) or 3.3(c), the
Company shall cause the Transferee to execute a copy of this Agreement and the
Transferee shall be subject to this Agreement and may further Transfer shares of
Company Stock to Transferees only in compliance with this Agreement as if such
Transferee were the original transferor. A Transferee of a Holder of Securities
pursuant to Section 3.3(a), 3.3(b) or 3.3(c) shall be treated for purposes of
this
6
<PAGE>
Agreement as if such Transferee is the same category of Person (Fargo or Titus)
as is the transferor on the date of this Agreement and shall in all respects be
bound by the actions taken pursuant to Section 7.10.
3.4 Right of First Refusal. A Stockholder that desires in good faith to
----------------------
Transfer any Company Stock (other than a Transfer covered by Section 3.3(a) or
3.3(b) (the "Offeror Stockholder") shall deliver a written notice of such intent
-------------------
(the "Refusal Notice") to the Company, if the transferor is Titus, and to Titus,
--------------
if the transferor is Fargo. The party receiving the Refusal Notice shall be
referred to herein as the "Offeree." The Refusal Notice shall contain (i) a
-------
description of the proposed Transfer transaction and the terms thereof including
the number and type of securities proposed to be transferred (collectively, the
"Refusal Securities"), (ii) the name of each Person to whom or in favor of whom
------------------
the proposed Transfer is to be made (the "Refusal Transferee"), (iii) a
------------------
description of the consideration to be received by the Offeror Stockholder upon
Transfer of the Refusal Securities and (iv) an offer to sell to the Offeree all,
but not less than all, of such Refusal Securities which are the subject of the
Refusal Notice (the "Refusal Offer"). The Refusal Notice shall be accompanied
-------------
by a copy of any written offer by the Refusal Transferee relating to such
proposed Transfer (e.g. any executed letter of intent stating the terms of such
----
offer). Each Refusal Offer shall contain the same terms and conditions, and
shall be for the same consideration, as described in the Refusal Notice. In the
event that the Refusal Offer provides payment of non-cash consideration for all
or a portion of the Refusal Securities, the Offeree shall have the right to pay
the purchase price in the form of cash equal in amount to the value of the non-
cash consideration. If the Offeror Stockholder and the Offeree cannot agree on
such cash value within ten (10) days following delivery of the Refusal Offer,
the valuation (the "Valuation") shall be made by an appraiser of recognized
---------
standing selected by mutual agreement of the Offeror Stockholder and the Offeree
or, if the parties cannot agree on an appraiser within twenty (20) days after
delivery of the Refusal Offer, each shall select an appraiser of recognized
standing and the two appraisers so selected shall designate a third appraiser of
recognized standing, whose Valuation shall be determinative of such value of the
non-cash consideration. Within ten (10) business days after the Refusal Notice
is delivered by the Offeror Stockholder to the Offeree (or, if later, the
delivery of the Valuation), the Offeree may, by written notice delivered to the
Offeror Stockholder (the "Refusal Acceptance Notice"), accept the offer to
-------------------------
acquire all, but not less than all, of the Refusal Securities as described in
the Refusal Notice. If the Offeree does not deliver a Refusal Acceptance Notice
to the Offeror Stockholder within such ten business day period, then the Offeror
Stockholder may proceed with the Transfer of the Refusal Securities to the
Refusal Transferee without any further obligations under this Section 3.4.
Transfers pursuant to the Refusal Acceptance Notice shall occur not more than
ninety (90) calendar days after the date on which the Refusal Acceptance Notice
has been delivered to the Offeror Stockholder by the Offeree. Titus may freely
assign all or a portion of its right of first refusal pursuant to this Section
3.4 to Herve Caen and/or Eric Caen, and the Company may freely assign all or a
portion of its right of first refusal pursuant to this Section 3.4 to Fargo.
3.5 No Agreements. Except as set forth in Section 3.3, no Holder of
-------------
Securities shall grant any irrevocable proxy or any other proxy inconsistent
with this Agreement or enter into or agree to be bound by any voting trust with
respect to any shares of Company Stock nor shall any Holder of Securities enter
into any stockholder agreements or arrangements of any kind with any Person with
respect to any shares of Company Stock (whether or not such agreements and
arrangements are with the other parties to this Agreement or Holders of
Securities who are not parties to this Agreement), including agreements or
arrangements with respect to the acquisition, disposition or voting (if
applicable) of any shares of Company Stock, except this Agreement, nor shall any
Holder of Securities act, for any reason, as a member of a group or in concert
with any other persons in connection with the acquisition, disposition (other
than a disposition pursuant to
7
<PAGE>
the terms of this Agreement) or voting (if applicable) of any shares of Company
Stock, except to the extent consistent with this Agreement.
3.6 Standstill. Each Stockholder agrees that for a period from and after
----------
the date hereof until the earlier of (a) the termination of the provisions of
Section 2.1 hereof in accordance with its terms or (b) the termination of this
Agreement in accordance with its terms, neither it nor any of its Subsidiaries
will, without the prior written consent of the other party: (i) acquire, offer
to acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities or direct or indirect rights to acquire any
voting securities of the Company or Titus, as the case may be, or any Subsidiary
thereof, or any material amount of the assets of the Company or Titus, as the
case may be, or any Subsidiary or division thereof outside the ordinary course
of business; (ii) make, or in any way participate in, directly or indirectly,
any "solicitation" of "proxies" (as such terms are used in the rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
Person with respect to the voting of, any voting securities of the Company or
Titus, as the case may be, for the purpose of changing or influencing the
control of the Company or Titus, as the case may be; or (iii) make any public
announcement with respect to, or submit a proposal for, or offer of (with or
without conditions) any merger, business combination, recapitalization,
restructuring, liquidation or other extraordinary transaction involving the
Company or Titus, as the case may be, or its securities or assets; provided,
--------
however, the foregoing restrictions shall not (x) preclude Titus from (A)
- -------
acquiring the securities contemplated by Article IV of this Agreement and the
shares of Common Stock of the Stock Purchase Agreement and the transactions
contemplated hereby and thereby, including without limitation the transactions
contemplated by the Initial Purchase Agreement and the Universal Agreement (each
as defined in the Stock Purchase Agreement), (B) filing a Schedule 13D in
connection with the transactions contemplated by the Stock Purchase Agreement or
the Exchange Agreement among Titus, Fargo, Herve Caen and Eric Caen of even date
herewith (the "Exchange Agreement"), (C) voting its shares of Common Stock
------------------
within its discretion on any matter submitted for a vote or consent of the
Company's stockholders, (D) taking any other action contemplated by the Stock
Purchase Agreement, or (E) purchasing shares of Company Stock pursuant to open-
market transactions on a national securities exchange or in the over-the-counter
market; provided, further, that the restrictions on Titus in this Section 3.6
-------- -------
shall lapse automatically to the extent any Person other than Titus or an
Affiliate of Titus takes any action with respect to the matters described in
clauses (ii) and (iii) above, or (y) preclude Fargo from (A) acquiring the
shares of Titus common stock pursuant to the Exchange Agreement or (B) filing a
Schedule 13D in connection with the transactions contemplated by the Stock
Purchase Agreement or the Exchange Agreement.
ARTICLE IV
PREEMPTION
----------
4.1 Certain Purchase Rights. If the Company proposes to issue, sell, or
-----------------------
grant (collectively, an "issuance") any equity securities or any securities
--------
convertible into or exchangeable for equity securities (collectively, the "New
---
Securities"), then the Company shall, no later than ten (10) business days prior
- ----------
to the consummation of such issuance, give written notice to each of the
Stockholders of such issuance (the "Notice of Issuance"). Such Notice of
------------------
Issuance shall describe such issuance, and contain an offer to each such
Stockholder to sell to such Stockholder, at the same price and for the same
consideration to be paid by the proposed purchasers, such Stockholder's pro rata
portion (which shall be a percentage, determined immediately prior to such
issuance, equal to the percentage of the Fully-Diluted Common Stock held by such
Stockholder). Subject to the foregoing, if Common Stock is being issued with
other
8
<PAGE>
securities as a unit, each Stockholder who desires to accept such offer must
purchase such unit in order for such acceptance to be valid. If any such
Stockholder fails to accept such offer by written notice within ten (10)
business days after its receipt of the Notice of Issuance, the Company shall
proceed with such issuance, free of any right on the part of such Stockholder
under this Section 4.1 in respect thereof. Any issuance of New Securities more
than forty-five (45) days after the expiration of such ten business day period,
or to a different issuee, or on terms and conditions less favorable to the
Company in any material respect than those described in the notice to the
Stockholders, shall be subject to a new notice to and new purchase rights by the
Stockholders under this Section 4.1. This Section 4.1 shall not apply to the
issuance of any Excluded Securities. For purposes of this Agreement, "Excluded
--------
Securities" shall mean: (a) issuances of securities which have been approved
- ----------
prior to the date hereof (including without limitation issuances under the
Company's employee stock purchase plans described under Section 5.3 of the Stock
Purchase Agreement), provided that such issuances are permitted under the
Purchase Agreements; (b) issuances of securities which have been approved by the
Board of Directors in accordance with this Agreement and by the stockholders;
(c) New Securities distributed or set aside to all holders of Common Stock on a
per share equivalent basis; (d) issuances pursuant to the Purchase Agreements;
and (e) issuances of New Securities upon the grant, exercise or conversion of
(i) options or warrants to purchase shares of Company Stock or (ii) securities
which are convertible into shares of Company Stock ((i) and (ii) shall be
referred to collectively as "Convertible Securities"), in each case where such
----------------------
Convertible Securities have been granted or issued prior to the date hereof or
have been granted or issued in accordance with this Agreement.
4.2 Purchase Rights Upon Issuance of Excluded Securities. In the event
----------------------------------------------------
that the Company proposes to issue, sell or grant any Excluded Securities
pursuant to subsections (a), (b) and (e) of Section 4.1 hereof, the Company
shall send a notice of such issuance to Titus in accordance with the provisions
concerning a Notice of Issuance as set forth in Section 4.1 hereof (an "Excluded
--------
Securities Notice"). Following receipt of an Excluded Securities Notice, Titus
- -----------------
shall have the option to purchase such number of Excluded Securities as are
necessary for Titus to maintain its percentage ownership of the Company's Fully
Diluted Common Stock at the same level as immediately prior to such issuance, at
the price and on the other terms and conditions upon which such Excluded
Securities are being issued, sold or granted (the "Excluded Securities Option").
--------------------------
The Excluded Securities Option shall be exercisable by Titus no later than
thirty (30) calendar days after Titus' receipt of an Excluded Securities Notice;
provided, however, that in the case of Excluded Securities which are Convertible
- -------- -------
Securities, Titus must exercise the Excluded Securities Option no later than
thirty (30) calendar days after Titus' receipt of notice from the Company of the
exercise or conversion, as applicable, of such Excluded Securities.
ARTICLE V
TAG-ALONG RIGHTS
----------------
5.1 Tag-Along Procedures.
--------------------
(a) Tag-Along Right. Subject to Section 5.3, no Stockholder shall
---------------
Transfer for value to any Person or group of Persons shares of Company Stock
(the "Transfer Shares") held by such Stockholder (a "Selling Stockholder")
--------------- -------------------
unless the terms and conditions of such Transfer shall include an offer (the
"Offer") to the other Stockholder (the "Tag-Along Stockholder"), at the same
- ------ ---------------------
price and on the same terms and conditions as the Selling Stockholder has agreed
to sell the Transfer Shares, to include in the Transfer to the third party
Transferee an amount of Company Stock determined in accordance with this Section
5.1.
9
<PAGE>
(b) Obligation of Transferee to Purchase. The Transferee of the
------------------------------------
Selling Stockholder shall purchase from the Tag-Along Stockholder the number of
shares of Company Stock owned or controlled by the Tag-Along Stockholder that
the Tag-Along Stockholder desires to require the Transferee to purchase (the
"Tag-Along Shares"); provided, however, that the number of Tag-Along Shares to
---------------- -------- -------
be sold by each Tag-Along Stockholder shall not exceed the number of shares of
Company Stock derived by multiplying (i) the aggregate number of shares of
Company Stock covered by the Offer by (ii) a fraction the numerator of which is
the number of shares of Company Stock owned by the Tag-Along Stockholder at the
time of the Transfer and the denominator of which is the total number of shares
of Company Stock held by the Stockholders at the time of the Transfer (the "Tag-
---
Along Formula").
- -------------
(c) Notice. In the event a Selling Stockholder proposes to Transfer
------
any Transfer Shares, it shall notify, or cause to be notified, in writing, the
Tag-Along Stockholder of each such proposed Transfer. Such notice shall be
given not more than sixty (60) nor less than twenty (20) calendar days prior to
the proposed sale date and set forth: (i) the name of the Transferee and the
number of Transfer Shares proposed to be transferred, (ii) the proposed amount
and form of consideration and terms and conditions of payment offered by the
Transferee (the "Transferee Terms"), (iii) that the Transferee has been informed
----------------
of the "tag-along right" provided for in this Section 5.1, and has agreed to
purchase any Tag-Along Shares from the Tag-Along Stockholder in accordance with
the terms hereof, and (iv) the proposed sale date.
(d) Exercise. The tag-along right may be exercised by the Tag-Along
--------
Stockholder by delivery of a written notice to the Selling Stockholder (the
"Tag-Along Notice") within fifteen (15) business days following receipt of the
- -----------------
notice specified in the preceding subsection. The Tag-Along Notice shall state
the number of Tag-Along Shares that the Tag-Along Stockholder wishes to include
in such Transfer to the Transferee, which number may exceed the total number of
Transfer Shares proposed to be transferred but which may not exceed the total
number of shares of Company Stock owned or controlled by the Tag-Along
Stockholder. Upon the giving of a Tag-Along Notice, the Tag-Along Stockholder
shall be entitled and obligated to sell the number of Tag-Along Shares set forth
in the Tag-Along Notice, subject to adjustment pursuant to the Tag-Along
Formula, to the Transferee on the Transferee Terms; provided, however, the
-------- -------
Selling Stockholder shall not consummate the sale of any Transfer Shares offered
by them if the Transferee does not purchase all Tag-Along Shares which the Tag-
Along Stockholder is entitled and desires to sell pursuant hereto. After
expiration of the fifteen (15) business day period referred to above, if the
provisions of this Section 5.1 have been complied with in all respects, the
Selling Stockholder shall have the right, for a period of forty-five (45)
calendar days from the expiration of the fifteen (15) business day period
referred to above, to Transfer the Transfer Shares to the Transferee on the
Transferee Terms without further notice to any other party.
(e) Proportional Indemnity. Anything to the contrary contained herein
----------------------
notwithstanding, any indemnity provided by any Stockholder making a Transfer
pursuant to this Article V shall be in proportion to and limited to the
consideration received by such Stockholder for the Company Stock transferred by
such Stockholder, as a percentage of all consideration received by all
Stockholders for all Company Stock transferred pursuant to this Article V.
5.2 Closing. At the closing of the purchase of the shares of Company
-------
Stock subject to this Article V, the holders of Company Stock who are making the
Transfer shall deliver certificates evidencing such shares, duly endorsed, or
accompanied by written instruments of transfer in form reasonably satisfactory
to the Transferee, free and clear of any adverse claim against payment of the
purchase price therefor.
10
<PAGE>
5.3 Exceptions. The foregoing notwithstanding, this Article V shall not
----------
apply to any sale of shares of Company Stock pursuant to Section 3.3(a).
ARTICLE VI
RESTRICTIONS AND LIMITATIONS
----------------------------
6.1 Restrictions and Limitations Upon Major Decisions. Notwithstanding
-------------------------------------------------
the provisions of the Certificate of Incorporation and By-Laws of the Company,
the Company shall not, and shall not permit any Subsidiary to, engage in any of
the following actions or transactions, or enter into a contract or arrangement
to engage in any of such actions or transactions, without the written consent or
approval of Fargo and Titus:
(a) Authorize or issue, or obligate itself to issue, any other equity
security, including any indebtedness convertible into or exchangeable for shares
of equity securities of the Company or issued with (i) shares of Company Stock
or (ii) warrants or other rights to purchase Company Stock or any other equity
security, without compliance with the provisions of Section 4.1 hereof;
(b) Effect any recapitalization, or any dissolution, liquidation, or
winding up of the Company;
(c) Permit any Subsidiary to issue or sell, or obligate itself to
issue or sell, except to the Company or any wholly-owned Subsidiary, any stock
of such Subsidiary, without first offering Titus the right to purchase such
stock on the same terms and conditions as those offered to the Company by any
third party;
(d) Amend its Certificate of Incorporation or amend or repeal its By-
Laws;
(e) Increase the number of members of the Board of Directors;
(f) Take any action that would constitute a bankruptcy or insolvency
event for the Company or any Subsidiary of the Company; or
(g) Guarantee or otherwise become contingently obligated for the
payment of Indebtedness of any Person (other than a wholly-owned Subsidiary),
where such obligation is not related to the Company's business.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Endorsement of Stock Certificates. Each certificate evidencing shares
---------------------------------
of the Company Stock held by any Stockholder will bear a legend reading
substantially as follows until the transfer restrictions with respect to such
shares contained in this Agreement are no longer effective:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A STOCKHOLDER AGREEMENT
11
<PAGE>
DATED AS OF _____________, 1999, A COPY OF EACH OF WHICH MAY BE OBTAINED
FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT COMPLYING
WITH THE TERMS AND CONDITIONS OF SUCH AGREEMENTS."
7.2 Term. Except as expressly provided in Section 2.1, this Agreement
----
shall commence on the date hereof and continue in full force and effect until
the earlier to occur of (a) a Change of Control or (b) the termination of Herve
Caen as President of the Company without Cause (as defined in the Employment
Agreement dated as of the date hereof by and between Caen and the Company),
except for the provisions of Section 3.4, which shall survive for a period of
three (3) years following such termination.
7.3 Injunctive Relief. It is hereby agreed and acknowledged that it will
-----------------
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved Person will be irreparably
damaged and will not have an adequate remedy at law. Any such Person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
7.4 Notices. Any and all notices, designations, consents, offers,
-------
acceptances, or other communications provided for herein (each a "Notice") shall
------
be given in writing personally by hand-delivery, overnight courier, telegram, or
telecopy which shall be addressed, or sent, to the respective addresses or
telecopy numbers as follows (or such other address or telecopy number as the
Company or any Stockholder may specify for itself to the Company and all other
Stockholders by Notice):
if to the Company to:
Interplay Entertainment Corp.
16815 Von Karman Avenue
Irvine, California 92606
Attention: Mr. Brian Fargo, Chairman and
Chief Executive Officer
Telecopier: (949) 252-0667
with a copy to:
K.C. Schaaf, Esq.
Stradling Yocca Carlson & Rauth, a professional corporation
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Telecopier: (949) 725-4100
if to Titus to:
Titus Interactive SA
c/o Titus Software Corporation
20432 Corisco Street
12
<PAGE>
Chatsworth, California 91311
Attention: Mr. Herve Caen, Chairman and
Chief Executive Officer
Telecopier: (818) 709-6537
with copies to:
Titus Interactive SA
Parc de l'esplanade
12, Rue Enrico Fermi
Saint Thibault des Vignes
77462 Lagny sur Marne Cedex
France
Telecopier: 011-33-1-60-31-59-60
and
Robert A. Miller, Jr., Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street - 23rd Floor
Los Angeles, California 90071
Telecopier: (213) 627-0705
if to Fargo to:
Mr. Brian Fargo
c/o Interplay Entertainment Corp.
16815 Von Karman Avenue
Irvine, California 92606
Telecopier: (949) 252-0667
All Notices shall be deemed effective, delivered and received (a) at the time
delivered by hand, if personally delivered; (b) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified above and receipt
thereof is confirmed; (c) if given by overnight courier, on the business day
immediately following the day on which such Notice is delivered to a reputable
overnight courier service; or (d) if given by telegram, when such Notice is
delivered at the address specified above.
Whenever pursuant to this Agreement any Notice is required to be given by any
Holder of Securities to any other Holder(s) of Securities, such Holder of
Securities may request from the Company a list of addresses of all Holders of
Securities of the Company, which list shall be promptly furnished to such Holder
of Securities.
7.5 Assignment. Except for transfers of Company Stock as set forth herein
----------
(including Permitted Transfers), neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party hereto without the prior
written consent of the other parties hereto. Subject to the foregoing (and to
the provisions of Section 7.10 hereof), this Agreement shall inure to the
benefit of and be binding upon the parties, and permitted successors and assigns
of each of the parties; and any transferees, successors and assigns of any
Stockholder shall be bound by the terms and conditions of this Agreement, and
any other agreement or commitment of such
13
<PAGE>
Stockholder to the other parties hereto. If any Stockholder shall acquire any
additional shares of Company Stock in any manner, whether by operation of law or
otherwise, such Company Stock shall be held subject to all of the terms of this
Agreement.
7.6 Governing Law; Jurisdiction and Venue; Attorneys' Fees. This Agreement
------------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to the principles of conflicts of laws. The parties
hereto 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 or the subject matter
hereof, 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. In the event of any dispute, controversy or proceeding between
Titus and Fargo concerning this Agreement or the subject matter hereof, the
prevailing party shall be entitled to receive from the non-prevailing party its
costs and expenses, including reasonable attorneys' fees.
7.7 Headings. The headings in this Agreement are inserted herein for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
7.9 Entire Agreement. This Agreement, together with the other writings
----------------
referred to herein and therein, contain the entire agreement among the parties
hereto with respect to the subject matter contained herein, and supersede all
prior agreements, negotiations and understandings, whether written or oral, with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings relating to such subject matter other than those set
forth in this Agreement and such other writings.
7.10 Amendments and Waiver. Any provision of this Agreement may be amended
---------------------
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Stockholders. Any amendment or waiver effected
in accordance with this Section 7.10 shall be binding upon each party hereto.
In the event of the amendment or modification of this Agreement in accordance
with its terms, the Stockholders shall cause the Board of Directors to meet
within thirty (30) calendar days following such amendment or modification or as
soon thereafter as is practicable for the purpose of adopting any amendment to
the Certificate of Incorporation and By-Laws of the Company that may be required
as a result of such amendment or modification to this Agreement, and, if
required, proposing such amendments to the Stockholders entitled to vote
thereon. No action taken pursuant to this Agreement shall be deemed to
constitute a waiver by the party taking such action of compliance with any
covenants or agreements contained herein. No failure to exercise and no delay
in exercising any right, power or privilege of a party hereunder shall operate
as a waiver or a consent to the modification of the terms hereof unless given by
that party in writing. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach.
7.11 Inspection. So long as this Agreement shall be in effect, this
----------
Agreement shall be made available for inspection by any Stockholder at the
principal offices of the Company.
14
<PAGE>
7.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts each of which
when so executed shall be deemed to be an original and all of which together
shall constitute one and the same Agreement.
7.13 Not for Benefit of Third Parties. This Agreement is not made for the
--------------------------------
benefit of any third party.
7.14 Recapitalizations, Exchanges, Etc., Affecting Company Stock. The
-----------------------------------------------------------
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to shares of the Company Stock outstanding as of the date hereof,
and to any and all shares of capital stock of the Company or any successor or
assigns of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, or in substitution for, such
shares, and shall be approximately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof.
7.15 Arbitration. Except for actions to obtain injunctions or other
-----------
equitable remedies, all disputes among 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 unanimously select an arbitrator; provided, that if the parties cannot
--------
agree upon an arbitrator within seven (7) days, such arbitrator shall be
selected by the AAA upon application of any party. Judgment upon the award of
the agreed upon arbitrator or the so chosen arbitrator, as the case may be,
shall be binding and may be entered in any court of competent jurisdiction.
15
<PAGE>
[SIGNATURE PAGE TO STOCKHOLDER AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers or partners thereunto duly authorized, as of the day
and year first above written.
INTERPLAY ENTERTAINMENT CORP.,
a Delaware corporation
By:_________________________________
Name:
Its:
TITUS INTERACTIVE SA,
a French corporation
By:_________________________________
Name:
Its:
____________________________________
Brian Fargo
16
<PAGE>
EXHIBIT 99.9
EXECUTION COPY
EXCHANGE AGREEMENT
------------------
This EXCHANGE AGREEMENT (this "Agreement") is made and entered into as of
----------
the 20th day of July, 1999, by and among TITUS INTERACTIVE SA, a French
corporation ("Titus"), BRIAN FARGO, an individual ("Fargo"), HERVE CAEN, an
------ ------
individual, and ERIC CAEN, an individual (together, the "Caens").
------
RECITALS
--------
WHEREAS, Interplay Entertainment Corp., a Delaware corporation
("Interplay"), Titus and Fargo are entering into a Stock Purchase Agreement (the
----------
"Stock Purchase Agreement") whereby Interplay will issue and sell and Titus will
-------------------------
purchase 6,250,000 shares of common stock of Interplay for an aggregate purchase
price of $25,000,000;
WHEREAS, it is a condition to the closing of the transactions contemplated
by the Stock Purchase Agreement that Titus, Fargo and the Caens enter into this
Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Exchange of Shares. Upon the terms and subject to the conditions
------------------
herein contained, at the Closing (as hereinafter defined) on the Closing Date
(as hereinafter defined), Fargo will exchange Two Million (2,000,000) shares of
common stock, no par value, of Interplay (the "Interplay Common Stock") owned by
-----------------------
him (the "Interplay Shares") for Ninety-Six Thousand Six Hundred Sixty-Six
-----------------
(96,666) shares of common stock, par value Twenty-Five (25) Francs per share, of
Titus (the "Titus Common Stock") (such shares of Titus Common Stock shall be
-------------------
referred to as the "Exchanged Shares"). Such exchange ratio is calculated based
-----------------
upon a valuation of Interplay Common Stock of Four Dollars ($4.00) per share and
a valuation of Titus Common Stock of Eighty-Two and 76/100 Dollars ($82.76) per
share.
2. Restrictions on Transfer; Holding Period; Lock-Up Period. Fargo hereby
--------------------------------------------------------
agrees that the Exchanged Shares will be subject to the following restrictions
upon Transfer (as defined below), in addition to the restrictions set forth in
Section 3:
2.1 Restrictions on Transfer.
------------------------
(a) Fargo understands and agrees that the Exchanged Shares have not
been registered under any French or United States securities laws, and that
accordingly they will not be fully transferable except as permitted under
various exemptions contained in such laws. Fargo acknowledges that he must bear
the economic risk of its investment in the Exchanged Shares for an indefinite
period of time (subject,
<PAGE>
however, to Titus' obligation under Section 3.1(b) of this Agreement) since they
have not been registered under French or United States securities laws and
therefore cannot be sold unless they are subsequently registered or an exemption
from registration is available.
(b) Fargo hereby represents and warrants to Titus that he is acquiring
the Exchanged Shares for investment purposes only, for his own account, and not
as nominee or agent for any other 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 (collectively, "Person"), and not with the view to, or for
-------
resale in connection with, any distribution thereof.
(c) Fargo hereby agrees with Titus as follows:
(i) Subject to Section 2.1(d) below, the certificates
evidencing the Exchanged Shares and each certificate issued in transfer thereof,
will bear such legend or legends as may be appropriate to effectuate the
purposes of this Agreement, and as may be required under any applicable law.
(ii) Fargo will not sell, transfer, assign, pledge, hypothecate
or otherwise dispose of any or all of the Exchanged Shares without first
providing Titus with an opinion of counsel to the effect that such sale,
transfer, assignment, pledge, hypothecation or other disposition will be exempt
from any registration, disclosure, qualification or other like requirements
under French or United States securities laws.
(iii) Fargo consents to Titus' making a notation on its records
or giving instructions to any transfer agent of the Exchanged Shares in order to
implement the restrictions on transfer of the Exchanged Shares mentioned in this
subsection (c).
(d) Any legend endorsed on a certificate evidencing Exchanged Shares
pursuant to Section 2.1(c)(i) hereof and any stop transfer instructions and
record notations with respect to such Exchanged Shares shall be removed and
Titus shall issue a certificate without such legend to the holder of such
Exchanged Shares (a) if such Exchanged Shares are registered under French
securities laws or (b) if Fargo provides Titus with an opinion of counsel (which
may be counsel for Titus) reasonably acceptable to Titus to the effect that a
public sale or transfer of such Exchanged Shares may be made without
registration under French securities laws.
2.2 Holding Period. Fargo understands and agrees that, pursuant to
--------------
the restrictions of Le Nouveau Marche (the "Stock Exchange"), he will not be
---------------
permitted to sell, transfer or otherwise dispose of, or pledge, collateralize or
hypothecate any of the Exempt Exchanged Shares, or enter into any contract,
option, or other arrangement with respect to any of the foregoing (each, a
"Transfer"), any of the Restricted Exchanged Shares for a period (the "Holding
- ---------- -------
Period") commencing on the date of the issuance of the Exchanged Shares and
- -------
ending on July 8, 2000. The "Restricted Exchanged Shares" shall mean those
shares representing eighty percent (80%) of the Exchanged Shares.
2.3 Lock-Up Period. With respect to the Exchanged Shares which are
--------------
not subject to the restrictions set forth in Section 2.2 (the "Exempt Exchanged
----------------
Shares"), Fargo agrees not to Transfer any of such Exempt Exchanged Shares for a
- -------
period (the
2
<PAGE>
"Lock-Up Period") commencing on the date of the issuance of the Exchanged Shares
---------------
and ending on the date which is two hundred seventy (270) days following the
Closing Date.
3. Sale of Exchanged Shares; Right of First Refusal; Tag-Along Rights.
------------------------------------------------------------------
3.1 Sale of Exchanged Shares. Following the expiration of the
------------------------
Holding Period or Lock-Up Period, as applicable:
(a) Fargo shall have the right, from time to time, to elect, by
written notice to Titus, to require Titus to arrange for the sale of all or any
portion of such Exchanged Shares on the Stock Exchange on Fargo's behalf;
provided, however, that Titus shall have the right to elect that such sale of
- -------- -------
the Exchanged Shares be to Titus, or to Herve Caen and/or Eric Caen on the terms
and conditions set forth in Section 3.2 with respect to the right of first
refusal; provided, however, that notwithstanding the provisions of Section 3.2,
-------- -------
such sale shall be made at the then-current trading price of Titus Common Stock.
(b) If Titus (or either of the Caens) does not exercise the right
of first refusal pursuant to Section 3.2, or if Titus is unable to arrange a
sale of such Exchanged Shares within sixty (60) days following receipt of notice
from Fargo, then Titus shall, at Fargo's option, either (i) repurchase such
Exchanged Shares for cash at a purchase price equal to the average closing
trading price per share of Titus Common Stock for the ten (10) trading days
immediately preceding the date of such notice or (ii) exchange such Exchanged
Shares for shares of Interplay Common Stock at an exchange rate based upon the
average closing trading price per share of Interplay Common Stock and Titus
Common Stock for the ten (10) trading days immediately preceding the date of
such notice.
3.2 Right of First Refusal. If after expiration of the Holding
----------------------
Period or Lock-Up Period, as applicable, Fargo desires in good faith to Transfer
any of the Exchanged Shares, he shall deliver a written notice of such intent
(the "Refusal Notice") to Titus. The Refusal Notice shall contain (a) a
---------------
description of the proposed Transfer transaction and the terms thereof including
the number of Exchanged Shares proposed to be transferred (collectively, the
"Refusal Securities"), (b) the name of each Person to whom or in favor of whom
- --------------------
the proposed Transfer is to be made (the "Refusal Transferee"), (c) a
-------------------
description of the consideration to be received by Fargo upon Transfer of the
Refusal Securities and (d) an offer to sell to Titus or its nominee all, but not
less than all, of such Refusal Securities which are the subject of the Refusal
Notice (the "Refusal Offer"). The Refusal Notice shall be accompanied by a copy
--------------
of any written offer by the Refusal Transferee relating to such proposed
Transfer (e.g. any executed letter of intent stating the terms of such offer).
----
Each Refusal Offer shall contain the same terms and conditions, and shall be for
the same consideration, as described in the Refusal Notice. In the event that
the Refusal Offer provides payment of non-cash consideration for all or a
portion of the Refusal Securities, Titus shall have the right to pay the
purchase price in the form of cash equal in amount to the value of the non-cash
consideration. If Fargo and Titus cannot agree on such cash value within ten
(10) days following delivery of the Refusal Offer, the valuation (the
"Valuation") shall be made by an appraiser of recognized standing selected by
---------
mutual agreement of Fargo and Titus or, if the parties cannot agree on an
appraiser within twenty (20) days after delivery of the Refusal Offer, each
shall select an appraiser of recognized standing and the two appraisers so
selected shall designate a third appraiser of recognized standing, whose
Valuation shall be
3
<PAGE>
determinative of such value of the non-cash consideration. Within ten (10)
business days after the Refusal Notice is delivered by Fargo to Titus (or, if
later, the delivery of the Valuation), Titus may, by written notice delivered
to Fargo (the "Refusal Acceptance Notice"), accept the offer to acquire all,
-------------------------
but not less than all, of the Refusal Securities as described in the Refusal
Notice. If Titus does not deliver a Refusal Acceptance Notice to Fargo within
ten (10) business days after the Refusal Notice is delivered by Fargo to Titus,
then Fargo may proceed with the Transfer of the Refusal Securities to the
Refusal Transferee without any further obligations under this Section 3.2.
Transfers pursuant to the Refusal Acceptance Notice shall occur not more than
ninety (90) calendar days after the date on which the Refusal Acceptance Notice
has been delivered to Fargo by Titus. Titus shall have the right, in its sole
discretion, to transfer all or a portion of its right of first refusal set forth
in this Section 3.2 to Herve Caen and/or Eric Caen.
3.3 Binding Upon Transferee. The obligations of Fargo under Section
-----------------------
3.2 shall be binding upon each Transferee to whom shares of the applicable
Exchanged Shares are Transferred by Fargo. Prior to the consummation of any
Transfer, Fargo shall cause the Transferee to execute an agreement in form and
substance reasonably satisfactory to Titus, providing that such Transferee shall
fully comply with the terms of this Agreement.
3.4 Fargo Tag-Along Rights.
----------------------
(a) Tag-Along Right. Neither Herve Caen nor Eric Caen (in such
---------------
case, a "Selling Stockholder") shall, directly or indirectly, sell, assign,
-------------------
pledge, encumber, hypothecate, gift, bequest or otherwise transfer, whether for
value or no value and whether voluntarily or involuntarily (including, without
limitation, by operation of law or by judgment, levy, attachment, garnishment,
bankruptcy or other legal or equitable proceedings, (in each case, a "Transfer")
---------
for value to any transferee (a "Transferee") shares of Titus Common Stock which
-----------
in the aggregate equal or exceed fifty percent (50%) of the aggregate holdings
of Titus Common Stock held by the Caens on the date prior to such proposed
Transfer (the "Transfer Shares") held by such Stockholder (a "Selling
---------------- -------
Stockholder") unless the terms and conditions of such Transfer shall include an
- ------------
offer (the "Offer") to Fargo (the "Tag-Along Stockholder"), at the same price
------ ----------------------
and on the same terms and conditions as the Selling Stockholder has agreed to
sell the Transfer Shares, to include in the Transfer to the third party
Transferee an amount of Titus Common Stock determined in accordance with this
Section 3.4.
(b) Obligation of Transferee to Purchase. The Transferee of the
------------------------------------
Selling Stockholder shall purchase from the Tag-Along Stockholder the number of
shares of Titus Common Stock owned or controlled by the Tag-Along Stockholder
that the Tag-Along Stockholder desires to require the Transferee to purchase
(the "Tag-Along Shares"); provided, however, that the number of Tag-Along Shares
----------------- -------- -------
to be sold by each Tag-Along Stockholder shall not exceed the number of shares
of Titus Common Stock derived by multiplying (i) the aggregate number of shares
of Titus Common Stock covered by the Offer by (ii) a fraction the numerator of
which is the number of shares of Titus Common Stock owned by the Tag-Along
Stockholder at the time of the Transfer and the denominator of which is the
total number of shares of Titus Common Stock held by the Stockholders at the
time of the Transfer (the "Tag-Along Formula").
------------------
(c) Notice. In the event a Selling Stockholder proposes to
------
Transfer any Transfer Shares, it shall notify, or cause to be notified, in
writing, the Tag-
4
<PAGE>
Along Stockholder of each such proposed Transfer. Such notice shall be given not
more than sixty (60) nor less than twenty (20) calendar days prior to the
proposed sale date and set forth: (i) the name of the Transferee and the number
of Transfer Shares proposed to be transferred, (ii) the proposed amount and form
of consideration and terms and conditions of payment offered by the Transferee
(the "Transferee Terms"), (iii) that the Transferee has been informed of the
----------------
"tag-along right" provided for in this Section 3.4, and has agreed to purchase
any Tag-Along Shares from the Tag-Along Stockholder in accordance with the terms
hereof, and (iv) the proposed sale date.
(d) Exercise. The tag-along right may be exercised by the Tag-
--------
Along Stockholder by delivery of a written notice to the Selling Stockholder
(the "Tag-Along Notice") within fifteen (15) business days following receipt
----------------
of the notice specified in the preceding subsection. The Tag-Along Notice shall
state the number of Tag-Along Shares thatthe Tag-Along Stockholder wishes to
include in such Transfer to the Transferee, which number may exceed the total
number of Transfer Shares proposed to be transferred but which may not exceed
the total number of shares of Titus Common Stock owned or controlled by the Tag-
Along Stockholder. Upon the giving of a Tag-Along Notice, the Tag-Along
Stockholder shall be entitled and obligated to sell the number of Tag-Along
Shares set forth in the Tag-Along Notice, subject to adjustment pursuant to the
Tag-Along Formula, to the Transferee on the Transferee Terms; provided,
--------
however, the Selling Stockholder shall not consummate the sale of any Transfer
- -------
Shares offered by them if the Transferee does not purchase all Tag-Along Shares
which the Tag-Along Stockholder is entitled and desires to sell pursuant hereto.
After expiration of the fifteen (15) business day period referred to above, if
the provisions of this Section 3.4 have been complied with in all respects, the
Selling Stockholder shall have the right, for a period of forty-five (45)
calendar days from the expiration of the fifteen (15) business day period
referred to above, to Transfer the Transfer Shares to the Transferee on the
Transferee Terms without further notice to any other party.
(e) Proportional Indemnity. Anything to the contrary contained
----------------------
notwithstanding, any indemnity provided by any Stockholder making a Transfer
pursuant to this Section 3.4 shall be in proportion to and limited to the
consideration received by such Stockholder for the Titus Common Stock
transferred by such Stockholder, as a percentage of all consideration received
by all Stockholders for all Titus Common Stock transferred pursuant to this
Section 3.4.
(f) No Limitation on Section 3.1. Nothing in this Section 3.4
----------------------------
shall in any way limit Fargo's rights under Section 3.1 hereof.
(g) No Limitation on Permitted Transfers. The foregoing
------------------------------------
notwithstanding, the rights and obligations set forth in Section 2 and this
Section 3 shall not apply to any Permitted Transfer. For purposes of this
Agreement, a "Permitted Transfer" shall mean (i) any Transfer by a Stockholder
------------------
to such Stockholder's ancestors, descendants or spouse or to a trust for the
benefit of such individuals or (ii) any bona fide gift or (iii) any Transfer by
a Stockholder to an entity that is wholly owned, and will remain wholly owned,
by such Stockholder (or such Stockholder and one or more of the individuals
referred to in the preceding clause (i)); provided, that (a) as a condition
--------
precedent to any Transfer made pursuant to one of the exemptions provided in
clause (i), (ii) or (iii), (1) the Stockholder proposing the Permitted Transfer
shall inform the other Stockholders of such Transfer or gift prior to effecting
it, and (2) the transferee or donee shall furnish the other Stockholders and
Titus with a written agreement to be bound by
5
<PAGE>
and comply with all provisions of this Agreement, and such transferee or donee
shall be treated as a "Stockholder" for all purposes of this Agreement, (b) in
the case of a Transfer in trust, such Stockholder shall become the trustee or,
with such Stockholder's spouse, a co-trustee of such trust, (c) in the case of a
Transfer not in trust, as a condition precedent to such Transfer such
Stockholder shall retain an irrevocable proxy to vote the transferred shares of
Titus Common Stock and (d) in the case of a Transfer described in clause (iii),
as a condition precedent to the Transfer all holders of equity or other
ownership interests in such entity shall enter into an agreement with the other
Stockholders and Titus, which shall be mutually satisfactory to the other
Stockholders, Titus and the transferee, under which the outstanding equity or
other ownership interests in such transferee shall be subjected to the same
restrictions against Transfer that appear in this Agreement.
4. Closing; Satisfaction of Conditions to Closing; Escrow Arrangement.
------------------------------------------------------------------
4.1 Closing. Subject to satisfaction of the conditions set forth in
-------
Section 4.2, the closing of the exchange of the Interplay Shares for the
Exchanged Shares (the "Closing") shall occur at the offices of Paul, Hastings,
-------
Janofsky & Walker LLP, 555 South Flower Street, Twenty-Third Floor, Los Angeles,
California, concurrently with the closing of the other transactions contemplated
by the Stock Purchase Agreement (the "Closing Date"). At the Closing, Titus
-------------
will deliver to Fargo a certificate evidencing the Exchanged Shares, which shall
be registered in Fargo's name, against surrender to Titus by Fargo of the
Interplay Shares.
4.2 Satisfaction of Conditions to Closing; Interim Closing.
------------------------------------------------------
Notwithstanding the provisions of Section 4.1, Fargo acknowledges and agrees
that, in order for Titus to issue the Exchanged Shares: (a) an independent
auditor appointed by a court sitting in France shall have issued a report with
respect to the adequacy of consideration received by Titus for the Exchanged
Shares; (b) the shareholders of Titus shall have duly approved the issuance of
the Exchanged Shares after receipt of the report described in clause (a) above;
and (c) the Agreement shall have been duly executed and delivered by all the
respective parties thereto. If the conditions set forth in clauses (a) through
(c) of this Section 4.2 have not been satisfied on or before the Closing Date,
then, notwithstanding the provisions of Section 4.1, on the Closing Date the
parties shall consummate an interim closing (the "Interim Closing") whereby
---------------
Fargo shall deliver (i) to Titus a proxy (the "Proxy") in the form attached
------
hereto as Exhibit A and (ii) to the escrow agent the Interplay Shares pursuant
---------
to the Escrow Agreement attached hereto as Exhibit B (the "Escrow Agreement").
--------- -----------------
Upon the consummation of the Interim Closing, Titus shall be deemed to be the
beneficial owner of the Interplay Shares. Upon the satisfaction of the
conditions set forth in clauses (a) through (c) of this Section 4.2, the parties
shall use their reasonable best efforts to consummate the transactions
contemplated hereby as promptly as practicable. In the event that Titus has not
satisfied the conditions set forth in Section clauses (a) and (b) hereof which
are applicable to it on or prior to December 31, 1999, then the Escrow Agent
shall on the first business day thereafter return to Fargo the Interplay Shares
and this Agreement shall be null and void unless otherwise agreed by the
parties.
5. Representations and Warranties by Fargo. In order to induce Titus to
---------------------------------------
enter into this Agreement, Fargo hereby covenants with, and represents and
warrants to, Titus as follows:
6
<PAGE>
5.1 Binding Obligations. This Agreement has been duly executed and
-------------------
delivered by Fargo and constitutes the legal, valid and binding obligations of
Fargo and is enforceable against Fargo 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.
5.2 Ownership of Interplay Shares. Fargo owns of record and
-----------------------------
beneficially the Interplay Shares, free and clear of any and all mortgages,
pledges, security interests, encumbrances, liens or charges of any kind
(collectively, "Liens"), and upon the delivery to Titus of the Interplay Shares,
------
Titus will be the record and beneficial owner of the Interplay Shares, free and
clear of any and all Liens.
5.3 Compliance with Laws and Other Instruments. The execution,
------------------------------------------
delivery and performance by Fargo of this Agreement (a) will not require from
the board of directors or stockholders of Interplay 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 Fargo 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 Fargo.
5.4 No Proxy. Fargo has not granted nor is Fargo a party to any
--------
proxy, voting trust or other agreement which is inconsistent with, conflicts
with or violates any provision of this Agreement.
6. Representations and Warranties by Titus. In order to induce Fargo to
---------------------------------------
enter into this Agreement, Titus hereby covenants with, and represents and
warrants to, Fargo as follows:
6.1 Organization, Standing, etc. Titus 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 Capital Stock. The authorized capital stock of Titus consists of
-------------
10,100,000 shares of common stock, and Titus has no authority to issue any other
capital stock. 1,152,302 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,
or any condition, situation or set of circumstances that could reasonably be
expected to have an adverse effect, on Titus and its Subsidiaries, taken as a
whole (a "Material Adverse Effect"), the offer, issuance and sale of the shares
------------------------
of common stock were registered or qualified under French law.
6.3 Exchanged Shares. On or before the Closing, the Exchanged Shares
----------------
will have been duly authorized and validly issued, and upon the consummation of
the transactions contemplated hereby, will be fully paid and nonassessable, free
and clear of all Liens and restrictions, other than Liens that might have been
created by Fargo and restrictions imposed by this Agreement and applicable law.
7
<PAGE>
6.4 Corporate Acts and Proceedings. Except as disclosed on Schedule
------------------------------ --------
6.4 hereto, all corporate acts and proceedings required for the authorization,
- ---
execution and delivery of this Agreement by Titus, and the performance of this
Agreement by Titus, have been lawfully and validly taken or will have been so
taken prior to the Closing.
6.5 Compliance with Laws and Other Instruments. Except as disclosed
------------------------------------------
on Schedule 6.5, and except as provided in Section 4.2 and the Stock Purchase
------------
Agreement, the execution, delivery and performance by Titus of this Agreement
(a) will not require from the board of directors or stockholders of Titus 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
Titus 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 Titus,
or (iv) any provision of the charter documents of Titus, (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
Titus is a party or by which Titus or any of its properties, assets or rights is
bound or affected, which in any case would have a Material Adverse Effect.
6.6 Binding Obligations. This Agreement constitutes the legal, valid
-------------------
and binding obligations of Titus and is enforceable against Titus 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.
6.7 Financial Statements. Attached hereto as Schedule 6.7 is Titus'
-------------------- ------------
unaudited balance sheet (the "Balance Sheet") as of December 31, 1998 (the
--------------
"Balance Sheet Date") and the unaudited statement of operations for the twelve-
------------------
month period then ended. The foregoing financial statements (a) are in
accordance with the books and records of Titus, (b) present fairly the financial
condition of Titus at the Balance Sheet Date and the results of its operations
and cash flow for the period therein specified, and (c) have been prepared in
accordance with accounting principles generally accepted in France and applied
on a basis consistent with prior accounting periods, subject to normal year end
adjustments.
6.8 Litigation. Except as disclosed on Schedule 6.8 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 Titus' knowledge, threatened against or affecting
Titus or its properties, assets or business (existing or contemplated), 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. Except as disclosed on Schedule 6.8 hereto, Titus 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. Titus is not in
default with respect to any order, writ, judgment, injunction, decree,
determination or award of any
8
<PAGE>
court or of any governmental agency or instrumentality (whether federal, state,
local or foreign), except where such default would not have a Material Adverse
Effect.
6.9 Securities Laws. Based in part upon the representations of Fargo
---------------
in Sections 2.1 and 5, the offer, issue and sale of the Exchanged Shares are and
will be exempt from any registration, disclosure, qualification or other like
requirements under French securities laws.
6.10 No Brokers or Finders. No Person has, or as a result of the
---------------------
transactions contemplated herein will have, any right or valid claim against
Titus or Fargo 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 Titus.
6.11 Patents and Other Intangible Assets.
-----------------------------------
(a) Except as disclosed on Schedule 6.11 hereto, Titus (i) owns
-------------
or has the right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, used in or
necessary for the conduct of its business as now conducted, (ii) to Titus"
actual 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 mark, trade name, copyright or license with respect thereto,
where such infringement would have a material adverse effect on Titus.
(b) Except for license, publishing and distribution agreements
with third parties entered into in the ordinary course of business, and except
as disclosed on Schedule 6.11 hereto, Titus has not sold, transferred, assigned,
-------------
licensed or subjected to any Lien, any intellectual property, trade secret,
know-how, invention, design, process, computer software or technical data, or
any interest therein, necessary for the development, manufacture, use, operation
or sale of any product listed on Schedules 6.13(a) and 6.13(b) hereto.
(c) Titus has not received any communication alleging or stating
that Titus or any of its employees or other agents has violated or infringed, or
by conducting business as proposed, would violate or infringe, any patent,
trademark, service mark, trade name, copyright, trade secret, proprietary right,
process or other intellectual property of any other Person, which could
reasonably be expected to have a material adverse effect on Titus.
6.12 Title to Property and Encumbrances; Leases. Except where
------------------------------------------
failure to do so would not have a Material Adverse Effect, Titus 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). "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
9
<PAGE>
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 Titus or any subsidiary
of Titus 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.
6.13 Computer Software.
-----------------
(a) Except as set forth on Schedule 6.13(a) hereto, each of the
----------------
computer software programs developed by Titus that are listed on Schedule
--------
6.13(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 Titus' standard practices, and Titus
possesses both the source code and object code versions thereof.
(b) Attached as Schedule 6.13(b) hereto is a true and complete
----------------
list of all computer software games currently in active development by or on
behalf of Titus (the "Developing Software"). Schedule 6.13(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.
6.14 Disclosure. To the knowledge of Herve Caen, the information
----------
contained in this Agreement, the Balance Sheet, 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, 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.
7. Certificates. The certificates evidencing the Exchanged Shares, and
------------
each certificate issued in transfer thereof, will bear appropriate legends as
required by this Agreement and applicable law and the rules and regulations of
the Stock Exchange.
8. Enforcement.
-----------
8.1 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 5.1, 5.2, 6.3 and 6.6 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.
10
<PAGE>
8.2 Indemnification.
---------------
(a) Subject to Section 8.2(e) hereof, Titus hereby covenants and
agrees to defend, indemnify and save and hold harmless Fargo 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
-------
inaccuracy in or breach of, or failure to perform or observe, any
representation, warranty, covenant or agreement made by Titus 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 Titus.
(b) Subject to Section 8.2(e) hereof, Fargo hereby covenants and
agrees to defend, indemnify and save and hold harmless Titus, together with
officers, directors, shareholders, employees, attorneys and representatives and
each Person who controls Titus 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 Fargo 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
Fargo.
(c) 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 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
11
<PAGE>
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.
(d) 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.
(e) Any claim for indemnity under this Section 8.2 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 Orange County,
California, as provided in Section 9.4 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
12
<PAGE>
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.
(f) Anything to the contrary notwithstanding, (i) Fargo 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 Fargo
shall be indemnified and held harmless in respect of all Damages without regard
to the foregoing $100,000 limit, and (ii) the liability of Titus to Fargo shall
be limited to an amount equal to the valuation of the Exchanged Shares as
calculated in accordance with Section 1 above.
(g) Except as provided in Section 8.3, the provisions of this
Section 8.2 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.
8.3 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, and (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 8.2(b) before a court of competent jurisdiction.
8.4 No Implied Waiver. Except as expressly provided in this
-----------------
Agreement, no course of dealing between Titus and Fargo 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.
9. Miscellaneous.
-------------
9.1 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 Titus to:
Titus Interactive SA
c/o Titus Software Corporation
20432 Corisco Street
Chatsworth, California 91311
Attention: Mr. Herve Caen, Chairman and
Chief Executive Officer
Telecopier: (818) 709-6537
13
<PAGE>
with a copy to:
Robert A. Miller, Jr., Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street - 23rd Floor
Los Angeles, California 90071
Telecopier: (213) 627-0705
if to Fargo to:
Mr. Brian Fargo
c/o Interplay Entertainment Corp.
16815 Von Karman Avenue
Irvine, California 92606
Telecopier: (949) 252-0667
with a copy to:
K.C. Schaaf, Esq.
Stradling Yocca Carlson & Rauth, a professional corporation
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Telecopier: (949) 725-4100
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, as the case may be) 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).
9.2 Injunctive Relief. It is hereby agreed and acknowledged that it
-----------------
will be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved party will be irreparably
damaged and will not have an adequate remedy at law. Any such party shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
9.3 Survival of Representations and Warranties. Each party's
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representations and warranties made in this Agreement shall survive the
execution and delivery of this Agreement and of the consummation of the
transactions contemplated hereby.
9.4 Governing Law; Jurisdiction and Venue; Attorneys' Fees. This
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Agreement shall be governed by and construed in accordance with the internal
laws of the State of California, without regard to its conflicts of laws
principles. The parties hereto
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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 or the subject matter hereof, 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. In the event of any dispute, controversy or proceeding between or among
the parties concerning this Agreement or the subject matter hereof, the
prevailing party shall be entitled to receive from the non-prevailing party its
costs and expenses, including reasonable attorneys' fees.
9.5 Execution in Counterparts. This Agreement may be executed in one
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or more counterparts each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument.
9.6 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
9.7 Entire Agreement; Amendments and Waiver. This Agreement
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(including the Exhibits hereto) constitutes the entire agreement among Titus and
Fargo with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings, if any, relating to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings
relating to such subject matter other than those set forth in this Agreement and
such other writings. The terms and provisions of this Agreement may be waived,
or consent for the departure therefrom granted, only by a written document
executed by the party entitled to the benefits of such terms or provisions.
9.8 Limitation of Liability on Caens. It is acknowledged and agreed
--------------------------------
that Herve Caen and Eric Caen are entering into this Agreement solely in their
capacities as shareholders of Titus, and that they shall not be held personally
liable for any breaches of any representations and warranties of Titus
hereunder, or for any breaches of any obligations of Titus hereunder.
9.9 Arbitration. Except for actions to obtain injunctions or other
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equitable remedies, all disputes among 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 unanimously select an arbitrator; provided, that if the parties cannot
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agree upon an arbitrator within seven (7) days, such arbitrator shall be
selected by the AAA upon application of any party. Judgment upon the award of
the agreed upon arbitrator or the so chosen arbitrator, as the case may be,
shall be binding and may be entered in any court of competent jurisdiction.
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[EXCHANGE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
TITUS INTERACTIVE SA, a French corporation
By: /s/ Herve Caen
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An Authorized Officer
/s/ Brian Fargo
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Brian Fargo
/s/ Herve Caen
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Herve Caen
/s/ Eric Caen
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Eric Caen
