SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: February 12, 1999
INTERACTIVE MAGIC, INC.
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(Exact name of registrant as specified in charter)
NORTH CAROLINA
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(State of other jurisdiction of incorporation)
0-29750 56-2092059
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(Commission File Number) (IRS Employer Identification No.)
215 Southport Drive, Suite 1000, Morrisville, NC 27560
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (919) 461-0722
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Item 2. Acquisition or Disposition of Assets.
On February 12, 1999, the Company consummated the acquisition of
MPG-Net, Inc. ("MPGN") pursuant to an agreement and plan of merger dated January
25, 1999, as amended on February 12, 1999 ("Merger Agreement"). In consideration
for the merger and certain related obligations of MPGN, the Company released
from escrow 750,000 shares of the Company's common stock, par value $.10 per
share ("Common Stock"), 55,500 of which have been deposited into a second escrow
by certain former stockholders of MPGN to secure their indemnification
obligations under the Merger Agreement until February 12, 2000. The Company
granted certain registration rights with respect to the shares of the Company's
Common Stock issued in the merger.
MPGN develops, publishes and distributes interactive, real-time
entertainment for multi-user online play, as well as creates interactive
entertainment platforms on the Internet, such as online game channels, game hubs
and websites.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of the Businesses Acquired
To be filed by amendment within the time period specified by
Item 7 of Form 8-K.
(b) Pro Forma Financial Information
To be filed by amendment within the time period specified by
Item 7 of Form 8-K.
(c) Exhibits
10.27 Agreement and Plan of Merger ("Merger Agreement") by
and among the Company, iMagicOnline Corporation,
MPG-Net, Inc., Multiplayer Games Network, Inc.,
Tantalus, Inc., James Hettinger and Donn A. Clendenon
dated as of January 25, 1999(1)
10.32 Amendment No. 1 dated February 12, 1999 to the Merger
Agreement
10.33 Escrow Agreement dated as of February 12, 1999 by and
among the Company, Branch Banking and Trust Company,
Multiplayer Games Network, Inc., Tantalus, Inc. and
James Hettinger
10.34 Registration Rights Agreement dated as of February
12, 1999 by and among the Company, Multiplayer Games
Network, Inc. and Tantalus, Inc.
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10.35 Registration Rights Agreement dated as of February
12, 1999 by and among the Company, Andrew G. Burch,
IFM Venture Group and James Bailey
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(1) Incorporated herein by reference to the Company's Current
Report on Form 8-K dated January 25, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERACTIVE MAGIC INC.
By: /s/ Michael Oliver
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Michael Oliver, Chief Financial Officer
Dated: February 19, 1999
Exhibit 10.27
Amendment No. 1 to Agreement and Plan of Merger
Amendment No. 1 ("Amendment No. 1") dated as of February 8, 1999,
amending the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
January 25, 1999, by and among Interactive Magic, Inc., iMagicOnline
Corporation, MPG-Net, Inc., Multiplayer Games Network, Inc., Tantalus, Inc.,
Donn A. Clendenon and James Hettinger.
WHEREAS, the parties hereto desire to amend the Merger Agreement in
certain respects;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the meanings provided therefor in the Merger
Agreement.
2. Amendment to Merger Agreement. The Merger Agreement is
hereby amended as set forth in this Section 2.
Section 2.4 of the Merger Agreement is hereby amended to read
in its entirety as follows:
"2.4 Merger Consideration. The "Merger Consideration" shall
mean that number of shares of Purchaser Common Stock equal to 750,000,
reduced by any shares of Common Stock issued by Purchaser (i) to
Carolina Securities, Inc. or its designees in connection with the
Contemplated Transactions, and (ii) in order to discharge the
Indebtedness. The shares of Purchaser Common stock which constitute the
Merger Consideration are hereinafter referred to as the "Purchaser
Shares." Each Stockholder and Clendenon shall be entitled to receive
such number of Purchaser Shares as set forth on Schedule 2.4 hereto."
3. Miscellaneous. Except as expressly amended hereby, the
terms and conditions of the Merger Agreement shall continue in full force and
effect. This Amendment No. 1 is limited precisely as written and shall not be
deemed to be an amendment to any other term or condition of the Merger Agreement
or any of the documents referred to in the Merger Agreement or in any other
agreements, documents and instruments, such reference shall be to the Merger
Agreement as amended hereby.
4. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
5. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the state of Delaware without
giving effect to the provisions thereof relating to conflicts of law.
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IN WITNESS WHEREFORE, each of the Parties has caused this Agreement to
be executed as of the date first above written.
INTERACTIVE MAGIC, INC.
By: /s/ Michael Oliver
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Name: Michael Oliver
Title: Chief Financial Officer
iMAGIC ONLINE CORPORATION
By: /s/ Michael Oliver
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Name: Michael Oliver
Title: Chief Financial Officer
MPG-NET, INC.
By: /s/ James Hettinger
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Name: James Hettinger
Title: Chief Executive Officer
MULTIPLAYER GAMES NETWORK, INC.
By: /s/ James Hettinger
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Name: James Hettinger
Title: Chief Executive Officer
TANTALUS, INC.
By: /s/ James Hettinger
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Name: James Hettinger
Title: President
/s/ James Hettinger
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James Hettinger
/s/ Donn A. Clendenon
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Donn A. Clendenon
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Exhibit 10.33
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and dated as of February
12, 1999 by and among Interactive Magic, Inc., a North Carolina corporation (the
"Purchaser"), Branch Banking and Trust Company, a North Carolina banking
corporation (the "Escrow Agent"), Multiplayer Games Network, Inc. and Tantalus,
Inc., the stockholders of MPG-Net, Inc., a Delaware corporation (the
"Stockholders") and James Hettinger (the "Representative"), acting by virtue of
this Agreement as the representative of the Stockholders.
WITNESSETH:
WHEREAS, the Purchaser, iMagic Online Corporation, the Stockholders, Donn
Clendenon ("Clendenon"), the Representative and MPG-Net, Inc. (the "Company")
have entered into a Merger Agreement dated as of January 25, 1999 (the "Merger
Agreement") providing for the merger of the Company with and into I-Magic, in
connection with which the Stockholders and Clendenon shall receive as
consideration a number of shares of unregistered Common Stock of the Purchaser
(the "Purchaser Shares") determined pursuant to Section 2 of the Merger
Agreement, allocated among the Stockholders as provided in the Merger Agreement;
WHEREAS, pursuant to the Merger Agreement, the Purchaser, I-Magic, the
Stockholders and the Company have agreed that the Purchaser Indemnitees' rights
of indemnification under Section 9.1 of the Merger Agreement shall survive the
consummation of the transactions contemplated by the Merger Agreement and shall
be secured, pursuant to this Agreement, by a portion of the Purchaser Shares
issued to the Stockholders to be deposited in escrow with the Escrow Agent
pursuant to Section 3.4 of the Merger Agreement (such Purchaser Shares, together
with any accumulations thereto as provided herein, the "Escrow Shares"); and
WHEREAS, the Escrow Agent is willing to act in the capacity of Escrow
Agent hereunder subject to, and upon the terms and conditions of, this
Agreement;
NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth in this Agreement and of other good and valuable consideration, the
receipt and legal sufficiency of which they hereby acknowledge, and intending to
be legally bound hereby, and as an inducement for the execution and delivery of
the Merger Agreement, the parties hereto hereby agree as follows:
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ARTICLE I
DESIGNATION OF REPRESENTATIVE AND ESCROW AGENT;
CAPITAL SHARES SUBJECT TO ESCROW
1.1 Designation of Representative. Each of the Stockholders hereby
irrevocably constitutes, designates and appoints James Hettinger as such
Stockholder's true and lawful agent, representative and attorney-in-fact (the
"Representative", as defined above) for and with respect to all matters and
purposes of and under this Agreement, including without limitation execution and
delivery on behalf of such Stockholder of all such stock powers as the Escrow
Agent shall require to facilitate the distributions of Escrow Shares
contemplated by this Agreement. All action to be taken hereunder by the
Stockholders shall be taken by the Representative on their behalf unless
specifically provided to the contrary herein, and the Escrow Agent and the
Purchaser shall be entitled to rely exclusively on instructions, notices,
instruments and documents in the name of any Stockholder provided by the
Representative.
1.2. Designation of Escrow Agent. The Purchaser, on its own behalf and on
behalf of all Purchaser Indemnitees, and the Stockholders (by and through the
Representative) hereby mutually designate and appoint Branch Banking and Trust
Company, a North Carolina banking corporation, as Escrow Agent for the purposes
set forth herein. The Escrow Agent hereby accepts such appointment and agrees to
act in furtherance of the provisions of the Merger Agreement, but only upon the
terms and conditions provided in this Agreement.
1.3. Capital Stock Subject to Escrow. In accordance with Section 3.4 of
the Merger Agreement, upon execution of this Agreement and subject to compliance
by the Company and the Stockholders with the provisions of the Merger Agreement,
the Purchaser shall issue and the Purchaser and the Stockholders shall deliver,
or cause to be delivered, to the Escrow Agent on the date of the Closing (as
defined in the Merger Agreement) stock certificates (together with any other
certificates issued by the Purchaser in respect of the Escrow Shares, the
"Escrow Certificates") in the names of each of the Stockholders, each
accompanied by a stock power duly executed in blank, representing an aggregate
of 55,500 shares of Common Stock of Purchaser, issued in consummation of the
Merger, allocated among the Stockholders as set forth on Exhibit A to this
Agreement. The Escrow Agent shall hold and distribute the Escrow Certificates
and Escrow Shares in accordance with the terms hereof. Each Stockholder shall,
provide promptly upon the Escrow Agent's request such additional stock powers
duly executed in blank as the Escrow Agent shall require to facilitate the
distributions of Escrow Shares contemplated by this Agreement.
1.4. Value of Escrow Shares. For all purposes pursuant to this Agreement,
including without limitation the distribution of Escrow Shares, the value of
each Escrow Share shall be equal to the Fair Market Value (as defined in the
Merger Agreement) per share of Purchaser's Common Stock at the Effective Time.
The Purchaser and the Representative shall certify to the Escrow Agent the Fair
Market Value, expressed as a dollar amount, and the Escrow Agent shall be
entitled to rely exclusively on such certification without reference to the
terms of the Merger Agreement.
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ARTICLE II
TREATMENT OF ACCUMULATIONS TO ESCROW SHARES
2.1. Duration of Escrow. The Escrow Agent shall hold the Escrow Shares as
provided in this Agreement until complete distribution thereof in accordance
with the applicable provisions of Articles 3 and 4 hereof.
2.2. Additional Property Subject to Escrow. At any time after the date
hereof and prior to the distribution of the Escrow Shares either (i) by delivery
to the Stockholders in accordance with Article 3 hereof or (ii) by delivery to
the Purchaser in accordance with Article 4 hereof, or by a combination of (i)
and (ii), if any of the Stockholders shall become entitled to receive or shall
receive in connection with the Escrow Shares any (i) non-taxable distribution of
securities of the Purchaser or of any other entity including, without
limitation, any certificate in connection with any increase or reduction of
capital, reclassification, recapitalization, merger, business combination,
consolidation, sale of assets, stock split-up or spin-off; or (ii) any
non-taxable distribution of stock options, warrants or rights, whether as an
addition to or in substitution of or exchange for any of the Escrow Shares; or
(iii) non-taxable stock dividend or other non-taxable distribution payable in
securities or property of any description, all of the shares of capital stock,
or other property resulting from any such distribution, stock option, warrant,
right or stock dividend shall be deemed to be Escrow Shares and shall be subject
to the terms hereof to the same extent as the original Escrow Shares. Any cash
dividends and any taxable stock dividends paid with respect to the Escrow Shares
shall be paid immediately by the Purchaser to the Stockholders in accordance
with their respective interests in the Escrow Shares. Each of the Stockholders
shall recognize as income on a current basis all of the cash dividends which
such Stockholder receives, and for any non-cash dividend and any other
non-taxable distribution shall, through the Representative, deliver such
property to the Escrow Agent and execute stock powers or other appropriate
instruments of transfer for all shares, options, warrants or rights as required
for transfer hereunder.
2.3. Retained Voting and Other Rights. The Escrow Agent shall hold the
Escrow Shares and any additional property acquired with respect thereto pursuant
to Section 2.2 above in safekeeping and dispose thereof only in accordance with
the terms of this Agreement. The Escrow Agent may treat the Representative as
the duly authorized agent and representative of the Stockholders with respect to
any additional property related to the Escrow Shares. The Escrow Agent shall
hold the Escrow Shares in accordance with this Agreement and shall vote the
Escrow Shares in accordance with the written proxies (if any) provided by each
corresponding Stockholder. The Escrow Agent shall not vote any Escrow Shares as
to which the Escrow Agent has not received written proxies from the
corresponding Stockholder.
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ARTICLE III
DISTRIBUTION OF ESCROW SHARES UPON TERMINATION OF AGREEMENT
3.1. Deadline For Claims and Termination of Agreement. The Purchaser shall
not be entitled to assert any claim against the Escrow Shares after February 12,
2000 ("Claims Deadline"); PROVIDED, HOWEVER, that any claim made in good faith
and in writing on or prior to the Claims Deadline (whether or not formal legal
action shall yet have been commenced based upon such claim) shall continue,
subject to final resolution as provided herein. This Agreement shall terminate
upon complete distribution of the Escrow Shares in accordance with this
Agreement.
3.2. Distribution of Escrow Shares Upon Termination of Agreement.
(a) Within five (5) business days after the Claims Deadline, the Escrow
Agent shall deliver to the Stockholders Escrow Certificates representing that
portion of the Escrow Shares (the "Distribution Proceeds") not otherwise subject
to claims pursuant to Article 4 below, in proportion to the initial deposits of
shares made on their behalf by the Purchaser. Thereafter, the balance of the
Escrow Shares shall continue to be held by the Escrow Agent in accordance with
the terms of this Agreement until all claims asserted against the Escrow Shares
have been finally resolved in accordance with Article 4 below; whereupon, the
balance of the Escrow Shares shall be distributed to the Stockholders as
provided above in full discharge of the Escrow Agent's obligations under this
Agreement.
(b) Notwithstanding the foregoing, in the event that under any of the
provisions contained herein, the Escrow Agent would be required to deliver
fractional interests in Escrow Shares to the Stockholders, the Purchaser shall
be entitled at its option to purchase from the Escrow Agent, at any time prior
to the Escrow Agent's delivery of Escrow Certificates representing Escrow
Shares, such fractional interests in Escrow Shares as shall be necessary to
eliminate such fractional interests, at a purchase price calculated according to
the fair market value per share of the Purchaser's Common Stock at the Effective
Time, as determined in accordance with Section 1.4 above. In such event, the
Escrow Agent shall distribute to the Stockholders who otherwise would have been
entitled to fractional interests in Escrow Shares, the cash equivalent of such
fractional shares (based on the purchase price as described above). To
facilitate the Purchaser's right to repurchase fractional shares, the Escrow
Agent shall notify the Purchaser in writing not less than one (1) business day
prior to any delivery of Escrow Certificates to any Stockholder.
3.3 Share Distributions. Whenever the Escrow Agent is required to make a
disbursement of Escrow Certificates and Escrow Shares pursuant to this
Agreement, the Escrow Agent shall complete the blank stock powers deposited by
the Stockholders with the Escrow Agent pursuant to Section 1.3 hereof, and shall
deliver to the Purchaser (a) such stock powers, (b) all of the Escrow
Certificates then held in escrow, and (c) instructions to issue new share
certificates (i) to the person to whom the disbursement shall be made, for that
number of Purchaser Shares to which such person is entitled, and (ii) to the
Stockholders, for any remaining
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balance of Escrow Shares that are required to be held by the Escrow Agent after
such disbursement. The Purchaser promptly shall deliver to the Escrow Agent all
such share certificates prepared at the Escrow Agent's instructions, for
disbursement by the Escrow Agent hereunder. The time for performance of the
Escrow Agent's obligation to disburse Escrow Certificates pursuant to this
Agreement shall be extended by any unreasonable delay in the Purchaser's
response to the instructions delivered by the Escrow Agent pursuant to this
Section 3.3.
ARTICLE IV
DELIVERY OF CAPITAL STOCK AND OTHER PROPERTY OUT OF ESCROW
4.1. Claims Against Escrow Shares. If, at any time on or prior to the
Claims Deadline, the Purchaser (on its own behalf or on behalf of any other
Purchaser Indemnitee) shall assert a claim for indemnification pursuant to
Section 9.1 of the Merger Agreement, the Purchaser shall submit to the Escrow
Agent and to the Representative a written claim in good faith signed by an
authorized officer of the Purchaser stating: (i) that a Purchaser Indemnitee has
incurred or reasonably believes it may incur Damages and the reasonable estimate
of the amount of any such Damages; (ii) in reasonable detail, the facts alleged
as the basis for such claim and the section or sections of the Merger Agreement
alleged as the basis or bases for the claim; and (iii) if the Damages have
actually been incurred, the number of Escrow Shares to which such Purchaser
Indemnitee is entitled with respect to such Damages, which shall be determined
by dividing the amount thereof by the fair market value per share of the Escrow
Shares as of the Effective Time, as certified to the Escrow Agent in accordance
with Section 1.4 above. If the claim is for Damages which such Purchaser
Indemnitee reasonably believes it may incur or is otherwise unliquidated, the
written claim of the Purchaser shall state the reasonable estimate of such
Damages, in which event a claim shall be deemed to have been asserted against
the Escrow Shares on behalf of the Purchaser in the amount of such estimated
Damages, but no payment or distribution shall be made by the Escrow Agent out of
the Escrow Shares until such Damages have actually been incurred and the
Purchaser submits a notice to the Escrow Agent and the Representative in
accordance with clause (iii) of this Section 4.1, whether or not the Damages are
incurred prior to the Claims Deadline.
4.2. Resolution of Asserted Claims Against the Escrow Shares. If, within
fifteen (15) days after the Purchaser gives notice to the Escrow Agent and the
Representative of an asserted claim pursuant to Section 4.1 (iii) above that the
Purchaser Indemnitee has incurred actual Damages, the Representative shall fail
to notify the Escrow Agent and the Purchaser, in writing, that the
Representative reasonably disputes in good faith the right of the Purchaser
Indemnitee to indemnity in respect of the asserted claim, then the Escrow Agent,
at the expiration of such fifteen (15) day period, shall make immediate payment
to the Purchaser, out of the Escrow Shares (taken on a pro rata basis as to each
Stockholder in proportion to their initial deposits of Escrow Shares hereunder),
of the amount of the asserted claim by delivering to the Purchaser Escrow
Certificates representing the number of Escrow Shares having an aggregate value
(as certified to the Escrow Agent in accordance with Section 1.4 above) equal to
the amount of the claim.
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4.3. Resolution of Disputed Claims Against Escrow Shares. If, within the
fifteen (15) day period after notice of an asserted claim is given to the Escrow
Agent and the Representative under Section 4.1 above, the Representative shall
notify the Escrow Agent and the Purchaser, in writing, that the Representative
reasonably disputes in good faith the asserted claim made by the Purchaser
against the Escrow Shares, then the Representative and the Purchaser shall use
their respective reasonable best efforts to effect a settlement and compromise
of such asserted claim. Any Damage established by reason of any such settlement
and compromise shall be certified in writing to the Escrow Agent by the
Representative and the Purchaser, and the Escrow Agent shall pay to the
Purchaser out of the Escrow Shares, by transfer to the Purchaser of a number of
Escrow Shares set forth in the certification received from the Purchaser and the
Representative (taken on a pro rata basis as to each Stockholder in proportion
to their initial deposits of Escrow Shares hereunder), any amount due and owing
to the Purchaser by reason of such settlement and compromise. If any such
settlement and compromise so certified to the Escrow Agent establishes that no
amount shall be due and owing to the Purchaser under the asserted claim, then
the Escrow Agent shall treat the asserted claim as rejected by mutual agreement
of the parties, and the asserted claim shall be totally disregarded by the
Escrow Agent as if never the subject of assertion against the Escrow Shares.
4.4. Unresolved Claims Against Escrow Shares. If the Purchaser and the
Representative are unable to settle and compromise any disputed claim asserted
against the Escrow Shares, the Escrow Agent shall not make any payment or
distribution out of the Escrow Shares with respect to such unresolved asserted
claim unless and until the Escrow Agent shall have received either:
(a) a certificate signed on behalf of the Purchaser and the
Representative certifying the amount of the asserted claim in dispute and
directing payment thereof; or
(b) a certified copy of an award of an arbitrator referred to in
Article 7 hereof determining the amount of the asserted claim in dispute; or
(c) a certified copy of a final judgment of a court of competent
jurisdiction determining the amount of the asserted claim in dispute, certified
by the party providing such copy as being binding and nonappealable.
Upon receipt of any such certification, the claim shall be treated as a resolved
asserted claim pursuant to Section 4.2 above, and the Escrow Agent shall pay and
distribute Escrow Shares in the manner described in Section 4.2.
ARTICLE V
RESPONSIBILITIES AND DUTIES OF ESCROW AGENT
5.1. Rights, Duties, Liabilities and Immunities of Escrow Agent. The
Purchaser and the Stockholders (by and through the Representative) hereby agree
as follows with respect to the rights, duties, liabilities and immunities of the
Escrow Agent:
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(a) The Escrow Agent shall act as a depository only and shall not be
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness, or validity of the Escrow Shares deposited with it, or any part
thereof, nor shall the Escrow Agent be responsible for evaluating the merits of
any claim asserted against the Escrow Shares; rather, the Representative, acting
for and on behalf of the Stockholders, shall be responsible for disputing any
such claim in the manner specified herein. The Escrow Agent shall have no
implied duties or obligations, and shall not be charged with knowledge or notice
of any fact except as specifically provided herein.
(b) The parties shall hold the Escrow Agent harmless for any action
taken in reliance upon any written certificate, notice, request, waiver,
consent, receipt or other paper or document furnished to it, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and acceptability of any information therein contained which the
Escrow Agent in good faith believes to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for any error of judgment,
or for any act done or steps taken or made by it in good faith, or for any
mistake of fact or law, or for any things which it may do or refrain from doing
in connection herewith, except due to the Escrow Agent's own gross negligence or
intentional misconduct. In no event shall the Escrow Agent be liable for
incidental, indirect, special, consequential or punitive damages.
(d) The Escrow Agent may consult with and obtain advice from its own
legal counsel in the event of any question as to any of the provisions of this
Agreement or its duties hereunder, and the Escrow Agent shall incur no liability
and shall be fully protected in acting in good faith in accordance with the
opinion and instructions of such counsel.
(e) The Escrow Agent shall have no duties except those expressly set
forth herein, and shall not be bound by any notice of a claim or demand with
respect thereto, or any waiver, modification, amendment, termination or
rescission of this Agreement, unless in a writing received by it, and, if its
duties or rights herein are affected, unless it shall have given its prior
written consent thereto.
(f) The Escrow Agent is not a party to, is not bound by and is not
required to enforce the Merger Agreement or any other agreement (other than this
Agreement) to which the Escrow Shares may relate.
(g) From and at all times after the date of this Agreement, the
Purchaser and the Stockholders (collectively, the "Indemnitors") shall, to the
fullest extent permitted by law, indemnify and hold harmless the Escrow Agent
and each director, officer, employee, attorney, agent and affiliate of the
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys' fees, costs and expenses) incurred by or asserted against
any of the Indemnified Parties from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any way
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relating to the performance by the Escrow Agent hereunder or any claim, demand,
suit, action or proceeding (including any inquiry or investigation) by any
person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Escrow Agreement or any transactions contemplated herein, whether or not
any such Indemnified Party is a party to any such action, proceeding, suit or
the target of any such inquiry or investigation; PROVIDED HOWEVER, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability to the extent finally determined by a court of competent jurisdiction,
subject to no further appeal, to have resulted from the gross negligence or
willful misconduct of such Indemnified Party; AND PROVIDED FURTHER, the
Indemnitors shall pay the Escrow Agent's reasonable actual day-to-day expenses,
disbursements and advances (including reasonable attorneys' fees) incurred or
made by the Escrow Agent in connection with performing the Escrow Agent's
obligations hereunder other than in connection with any dispute concerning any
Escrow Shares. If any such action or claim shall be brought or asserted against
any Indemnified Party, such Indemnified Party shall promptly notify the
Indemnitors in writing, and the Indemnitors shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Such
Indemnified Party shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by such Indemnified Party in its
reasonable discretion) in any such action and to participate in the defense
thereof, and the fees and expenses of such counsel shall be paid by such
Indemnified Party, except that the Indemnitors (or any one of them, as
applicable) shall be required to pay such fees and expenses if: (a) the
Indemnitors agree to pay such fees and expenses, (b) the Indemnitors shall fail
to assume the defense of such action or proceeding or shall fail, in the
reasonable discretion of such Indemnified Party, to employ counsel satisfactory
to the Indemnified Party in any such action or proceeding, (c) any one of the
Indemnitors is the plaintiff in any such action or proceeding or (d) the named
parties to any such action or proceeding (including any impleaded parties)
include both the Indemnified Party and any one of the Indemnitors, and the
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to such Indemnitor. The Indemnitors shall be liable to pay
reasonable actual fees and expenses of counsel pursuant to the preceding
sentence. All such fees and expenses payable by the Indemnitors pursuant to the
foregoing sentence shall be paid from time to time as incurred, both in advance
of and after the final disposition of such action or claim. All amounts advanced
by the Indemnitors hereunder shall be subject to complete reimbursement of the
Indemnitors by the Indemnified Party in the event of a determination that such
Indemnified Party is not entitled to indemnity hereunder, as provided above. The
obligations of the Indemnitors under this Section shall survive any termination
of this Escrow Agreement and the resignation or removal of the Escrow Agent. The
Stockholders and the Purchaser shall be jointly and severally liable to
Indemnified Parties for the obligations under this subsection (g); PROVIDED
HOWEVER THAT AS between the Purchaser and the Stockholders, the prevailing party
in any such litigation shall be entitled to collect from the non-prevailing
party all amounts that such prevailing party has paid to any Indemnified Party
pursuant to this subsection (g). The Purchaser shall have the option at any time
to pay any amount due to an Indemnified Party in satisfaction of the
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Stockholders' undisputed obligations hereunder, and upon any such payment, the
Purchaser may treat the amount of such payment as an immediate, undisputed
liquidated claim against the Escrow Shares pursuant to Section 4.2 above.
(h) The Escrow Agent is authorized, in its discretion, to comply
with orders issued or process entered by any court with respect to the Escrow
Shares, without determination by the Escrow Agent of such court's jurisdiction
in the matter. If any portion of the Escrow Certificates or Escrow Shares is at
any time attached, garnished or levied upon under any court order, or in case
the payment, assignment, transfer, conveyance or delivery of any such property
shall be stayed or enjoined by any court order, or in case any order, judgment
or decree shall be made or entered by any court affecting such property or any
part thereof, then and in any such event, the Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon it
without the need for appeal or other action; and if the Escrow Agent complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other person or entity by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
(i) If, at any time, there shall exist any dispute with respect to
the holding or disposition of any portion of the Escrow Shares or any other
obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is
unable to determine, to the Escrow Agent's sole satisfaction, the proper
disposition of any portion of the Escrow Shares or the Escrow Agent's proper
actions with respect to its obligations hereunder, or if the Purchaser and the
Representative have not within thirty (30) days of the furnishing by the Escrow
Agent of a notice of resignation pursuant to Section 5.3 hereof appointed a
successor escrow agent to act hereunder, then the Escrow Agent may, in its sole
discretion, take either or both of the following actions upon written notice to
Purchaser and the Representative:
(i) Hold and decline to make further disbursements of Escrow
Certificates representing the Escrow Shares that the Escrow Agent would
otherwise be obligated to make hereunder until such dispute or uncertainty
shall be resolved to the sole satisfaction of the Escrow Agent or until a
successor Escrow Agent shall have been appointed (as the case may be);
(ii) Petition (by means of an interpleader action or any other
appropriate method) the Superior Court for Wake County, North Carolina, or
if said Court should be without subject matter jurisdiction or should
decline to exercise jurisdiction, any other state or federal court of
competent jurisdiction in North Carolina, for instructions with respect to
such dispute or uncertainty, and deposit into such court the Escrow
Certificates representing all Escrow Shares for holding and disposition in
accordance with the instructions of such court.
The Escrow Agent shall have no liability to the Purchaser, the Stockholders or
any other person with respect to any such actions taken pursuant to this Section
5.1(i), specifically including any
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liability or claimed liability that may arise, or be alleged to have arisen, out
of or as a result of any delay in the disbursement of Escrow Shares or any delay
in or with respect to any other action required or requested of the Escrow
Agent, except for any resulting from the gross negligence or willful misconduct
of the Escrow Agent.
5.2. Compensation. The Escrow Agent shall receive a one-time acceptance
fee of $250 and a fee of $1,500 per year for its services hereunder. These fees
shall be payable by the Purchaser, which shall pay the acceptance fee and the
annual fee for the first year upon the execution of this Agreement. Except for
the first year's fee, annual fee payments shall be subject to proration in the
event that the escrow arrangement terminates before the end of a year.
5.3. Successor Escrow Agent. The Escrow Agent or any successor to it
hereafter appointed may at any time resign by giving notice in writing to the
Representative and the Purchaser, and such resignation shall become effective
and the Escrow Agent shall be discharged from its prospective duties hereunder
upon the appointment of a successor Escrow Agent as hereinafter provided. In the
event of any such resignation, a successor Escrow Agent shall be appointed by
mutual written consent of the Representative and the Purchaser. Any successor
Escrow Agent shall deliver to the Representative and the Purchaser a written
instrument accepting the appointment hereunder, and thereupon it shall succeed
to all the rights and duties of the Escrow Agent hereunder and shall be entitled
to receive all assets then held by the predecessor Escrow Agent hereunder.
ARTICLE VI
THE REPRESENTATIVE
6.1. General. The Representative may be removed and a new Representative
or Representatives may be appointed at any time and from time to time by the
written agreement of each of the Stockholders. Any such removal and appointment
shall be effective upon receipt by the Escrow Agent and the Purchaser of a duly
executed copy of the instrument appointing the new Representative. In the event
that the Representative shall resign or otherwise cease to act as the
Representative, the Stockholders shall immediately select a successor
Representative to act hereunder.
6.2. Responsibility. The Representative shall have no liability to the
Stockholders with respect to any action taken by him or her under this
Agreement, except with respect to the Representative's negligence or willful
misconduct. The Representative may act in reliance upon the advice of counsel in
reference to any matter in connection with this Agreement and shall not incur
any liability to the Stockholders, or any one of them, for any action taken in
good faith in accordance with such advice. All Stockholders (inclusive of the
Representative) shall jointly and severally indemnify the Representative,
ratably according to their respective interests in the Escrow Shares, from and
against any and all Damages incurred in connection with the Representative's
actions under this Agreement or by virtue of acting in his capacity as the
Representative, except to the extent resulting from the Representative's
negligence or willful misconduct.
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ARTICLE VII
ARBITRATION
7.1. Resolution of Disputed Claims. Subject to any prior resolution in the
manner described in Section 4.3 above, any unresolved dispute under this
Agreement with respect to any matter that is the subject of an asserted claim
against the Escrow Shares shall be submitted to and settled by binding
arbitration in accordance with the Commercial Rules, existing at the date
thereof, of the American Arbitration Association. The dispute shall be submitted
by the Representative (on behalf of any Stockholders) or the Purchaser (on
behalf of the Purchaser Indemnitees) to one arbitrator agreed to by the
Representative and the Purchaser or, if the Representative and the Purchaser
cannot agree on one arbitrator, then each shall select one arbitrator, and those
two arbitrators shall select a third arbitrator. The arbitrators shall hear the
dispute in Raleigh, North Carolina or another mutually agreeable location
determined in good faith by the Representative and the Purchaser. Each
arbitrator must be experienced in the subject matter in dispute.
ARTICLE VIII
MISCELLANEOUS
8.1. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Stockholders (directly and by and through the
Representative), the Purchaser, the Purchaser Indemnitees (by and through the
Purchaser), I-Magic and the Escrow Agent, and their respective successors,
heirs, and assigns.
8.2. Waiver of Consent. No failure or delay on the part of any party
hereto in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement,
nor consent to any departure by any party therefrom, shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any party in any case shall entitle such party
to any other or further notice or demand in similar or other circumstances.
8.3. Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.4. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered by registered or certified
mail or by recognized overnight courier, postage prepaid, addressed as-follows:
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If to the Purchaser or I-Magic, to:
Interactive Magic, Inc.
Post Office Box 13491
Research Triangle Park, North Carolina 27709
Attention: President.
Facsimile No.: (919) 461-0723
with a copy to its counsel,
Bachner, Tally, Polevoy & Misher, LLP
380 Madison Avenue
New York, New York 10017
Attention: Jill Cohen, Esq.
Facsimile No.: (212) 682-5729
if to the Escrow Agent, to:
Branch Banking and Trust Company
223 West Nash Street
Wilson, North Carolina 27893
Attention: Corporate Trust Department
if to the Representative, to:
James Hettinger
900 Eisenhower Boulevard
Key West, Florida 33040
and if to any Stockholder, to such Stockholder at such Stockholder's address
appearing in the Purchaser's books and records, or (in each case) to such other
address as shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered or
mailed.
8.5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.6. Governing Law. The interpretation and construction of this Agreement,
and all matters relating thereto, shall be governed by the laws of the State of
Delaware, without regard to the choice of law provisions thereof. The
non-prevailing party in any dispute arising hereunder between the Purchaser and
the Stockholders (or the Representative acting on their behalf) shall bear and
pay the costs and expenses (including without limitation reasonable attorneys'
fees and expenses) incurred by the prevailing party or parties in connection
with
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<PAGE>
resolving such dispute, however resolved, including by arbitration. The
Purchaser may treat any such amount due from the Stockholders as an immediate,
undisputed liquidated claim against the Escrow Shares pursuant to Section 4.2
above.
8.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
8.8. Other Purchaser Remedies. The remedies available to the Purchaser
under this Agreement, including without limitation the right to assert claims
against the Escrow Shares, shall be in addition to and not to the exclusion of
any other rights or remedies available to the Purchaser under applicable law,
whether pursuant to this Agreement, the Merger Agreement or otherwise.
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<PAGE>
IN WITNESS WHEREOF, the Purchaser, I-Magic, each of the Stockholders and
the Escrow Agent have caused their corporate names to be hereunto subscribed by
their respective officers "hereunto duly authorized, and the Representative has
executed this Agreement, all as of the day and year first above written.
INTERACTIVE MAGIC, INC.
By: /s/ Michael Oliver
-------------------------------------
Name: Michael Oliver
Title: Chief Financial Officer
MULTIPLAYER GAMES NETWORK, INC.
By: /s/ James Hettinger
-------------------------------------
Name: James Hettinger
Title: Chief Executive Officer
TANTALUS, INC.
By: /s/ James Hettinger
-------------------------------------
Name: James Hettinger
Title: President
ESCROW AGENT:
BRANCH BANKING AND TRUST COMPANY
By: /s/ Margaret Smith
-------------------------------------
Name: Margaret Smith
Title: Vice President
REPRESENTATIVE:
/s/ James Hettinger
-------------------------------------
James Hettinger
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Exhibit 10.34
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of February 12, 1999 (the "Effective Date")
by and between Interactive Magic, Inc., a North Carolina corporation
("Purchaser"), and Multiplayer Games Network, Inc., Tantalus, Inc. and Donn A.
Clendenon (collectively, the "Stockholders").
WHEREAS, pursuant to a separate Agreement and Plan of Merger,
dated as of January 25, 1999, among MPG-Net, Inc., a Delaware corporation
("MPGN""), Purchaser, iMagicOnline Corporation ("I-Magic"), Jim Hettinger and
each of the Stockholders (the "Merger Agreement"), the Stockholders are
acquiring on the date hereof, shares of Common Stock of Purchaser, par value
$.10 per share (the "Common Stock") set forth opposite their names on Schedule A
(the "Equity Securities");
The Stockholders and Purchaser wish to establish certain
rights and obligations with respect to the Stockholders' Equity Securities.
It is therefore agreed as follows:
1. DEFINITIONS. In this Agreement, the following terms shall
have the meaning specified, unless the context otherwise requires:
1.1 "Affiliate" of an entity means any person or entity
who or which, directly or indirectly, controls, is under common control with or
is controlled by that entity. For the purposes of this definition, "control," as
used with respect to any entity, shall mean the beneficial ownership, directly
or indirectly, of a majority of the voting securities of that entity.
1.2 "Convertible Securities" means any evidence of
indebtedness, debt securities, shares of stock (other than Common Stock) or
other securities directly or indirectly convertible into or exchangeable for
Common Stock, including options and warrants.
1.3 "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, or any
successor act, all as the same shall be in effect at the time.
1.4 "Merger Documents" means the Merger Agreement and all
exhibits thereto.
1.5 "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
<PAGE>
1.6 "Registrable Securities" means the Equity Securities,
Common Stock or Common Stock issued or issuable upon exercise or conversion of
Convertible Securities.
1.7 "Registration Expenses" means all expenses incident
to Purchaser's performance of or compliance with SECTION 4, including, without
limitation, all registration and filing fees, all fees and expenses of complying
with securities or blue sky laws (including reasonable fees and disbursement of
counsel in connection with blue sky qualifications of the Registrable
Securities), rating agency fees, all printing expenses, messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing of the securities,
the fees and disbursements of counsel for Purchaser and of its independent
public accountants, including the expenses of any special audits required by or
incident to such performance and compliance, but excluding any fees and expenses
of counsel for holders of Registrable Securities or any underwriting discounts
and commissions applicable to the Registrable Securities.
1.8 "SEC" means the Securities and Exchange Commission.
1.9 "Securities Act" means the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder, or any successor
act, all as the same shall be in effect at the time.
1.10 "Transfer" means any sale, bequest, exchange,
assignment or gift, the creation of any security interest or other encumbrance
and any other disposition of any kind, whether voluntary or involuntary,
affecting title to or possession of any of the Equity Securities.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder severally represents and warrants to Purchaser as follows:
2.1 Such Stockholder is acquiring the Equity Securities
for its own account and not on behalf of any other Person, and not with a view
to resale or distribution in whole or in part in a manner that would violate the
Securities Act.
2.2 Such Stockholder understands that the Equity
Securities have not been registered under the Securities Act and will be
"restricted securities" within the meaning of the regulations under the
Securities Act, and by reason of the foregoing the Equity Securities may not be
resold in the absence of an effective registration statement under, or
applicable exemption from, the Securities Act, and that a restrictive legend
will be affixed to the Equity Securities upon issuance to such Stockholder.
2.3 Such Stockholder has full knowledge of the operations
of MPGN, Purchaser, I-Magic and the transactions contemplated by the Merger
Documents. Each of the Stockholders has received and reviewed a copy of the
Merger Documents. Each of the Stockholders through its representatives has had
an opportunity to ask questions and receive
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<PAGE>
answers concerning Purchaser, I-Magic, MPGN and the transactions contemplated by
the Merger Documents and to obtain any additional information such Stockholder
has requested in order to verify the accuracy of the information contained in
the Merger Documents. Such Stockholder has relied solely on the representations
and warranties contained in the Merger Documents and its own knowledge about
Purchaser, I-Magic and MPGN in making its decision to acquire the Equity
Securities.
2.4 Except as set forth in Schedule 4.24 to the Merger
Agreement, such Stockholder has not employed any broker, finder, consultant,
intermediary or advisor in connection with the transactions contemplated by this
Agreement which would be entitled to a broker's, finder's or similar fee or
commission from Purchaser or such Stockholder in connection with the
transactions contemplated by the Merger Documents.
3. DISPOSITION OF REGISTRABLE SECURITIES.
3.1 POOLING OF INTERESTS ACCOUNTING. Each Stockholder
agrees that from and after the date of this Agreement, such Stockholder shall
not take any action, or knowingly fail to take any action, which action or
failure is reasonably likely to disqualify the transactions contemplated by the
Merger Agreement from pooling of interests accounting treatment by Purchaser,
and each Stockholder agrees to take all reasonable actions necessary to cause
the transactions contemplated by the Merger Agreement to qualify as a pooling of
interests. Notwithstanding any other provision of this SECTION 3.1, and without
limiting the foregoing, each Stockholder agrees that such Stockholder shall not
Transfer such Stockholder's interests in or reduce such Stockholder's risk
relative to any of the Equity Securities until Purchaser shall have published
financial results covering at least thirty (30) days of combined operations of
I-Magic and MPGN after consummation of the transactions contemplated by the
Merger Agreement. Each Stockholder acknowledges and agrees with Purchaser that
such Stockholder is not a party to any agreement or arrangement with any third
party regarding the transactions contemplated by the Merger Documents or the
subject matter thereof other than the Merger Documents and any other applicable
documents related to the transactions contemplated by the Merger Agreement.
3.2 RESTRICTIONS ON TRANSFER. In addition to the
restrictions set forth in SECTION 3.1 hereof, in no event shall any Stockholder
Transfer any Equity Securities or any other securities of Purchaser for a six
month period following the Effective Date, except for Transfers pursuant to an
effective registration statement in accordance with SECTION 4 of this Agreement
and in compliance with all applicable laws, including, without limitation, the
Securities Act.
3.3 TRANSFERS IN VIOLATION. Any Transfer of any Equity
Securities or other securities of Purchaser in violation of any provision of
this Agreement shall be void and of no effect and shall not be recognized by
Purchaser as transferring any interest in any of such securities. In the case of
any such violation, Purchaser shall have the right to issue an oral or written
order to the Purchaser's transfer agent (if any) not to transfer such
securities.
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<PAGE>
3.4 CERTIFICATES LEGENDED. Until the expiration of all
applicable transfer restrictions established by this Agreement, each certificate
representing any Equity Securities subject to any such restriction shall bear
the following legend conspicuously:
TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF [the
date of this agreement], BETWEEN PURCHASER AND THE ORIGINAL
HOLDER HEREOF. A COPY OF SAID AGREEMENT IS ON FILE IN THE
OFFICE OF PURCHASER, AND A COPY THEREOF WILL BE MAILED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST
THEREFOR.
4. REGISTRATION RIGHTS.
4.1 DEMAND REGISTRATION.
4.1.1 Subject to the provisions of SECTION 4.1.3,
for a two year period commencing at any time after July 21, 1999, if Purchaser
shall be requested in writing by any Stockholder to effect the registration
under the Securities Act of Equity Securities having a proposed aggregate
offering price (net of discounts and commissions) equal to or greater than
$1,250,000, then Purchaser shall promptly give written notice of such proposed
registration to the other Stockholder, and thereupon, Purchaser shall promptly
as practicable prepare and file a registration statement on Form S-3, if
available and if not available, on such other form which is available and
suitable for a secondary offering of securities under the Securities Act (the
"Resale Registration Statement") with regard to Equity Securities which
Purchaser has been requested to register for disposition in the request of a
Stockholder and in any response received from any Stockholder within 20 days
after the giving of written notice by Purchaser, to the end that the Equity
Securities may be publicly sold under the Securities Act thereafter, subject to
the provisions of this Agreement, and Purchaser will use reasonable efforts to
cause such registration to become effective; provided, that the Stockholders
shall furnish Purchaser with appropriate information in connection therewith as
Purchaser may request.
4.1.2 All Registration Expenses in connection with
such registration statement under this SECTION 4.1 shall be borne by Purchaser,
except that the Stockholders or other holders shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
Equity Securities sold by them.
4.1.3 The obligation of Purchaser pursuant to this
SECTION 4.1, shall be limited to one Resale Registration Statement and shall not
apply to any Equity Securities that at such time are eligible for immediate
resale under Rule 144 during any three month period. A Resale Registration
Statement will not be deemed to have been effected unless it has become
effective.
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<PAGE>
4.1.4 The provisions of this SECTION 4.1 shall be
subject to the condition that if:
4.1.4.1 prior to filing of the Resale
Registration Statement, Purchaser has fixed plans (as evidenced
by a resolution of the Board of Directors of Purchaser adopted
prior to the date Purchaser receives such request) to engage in,
or has become party to an agreement or letter of intent
contemplating, a public offering of Common Stock or Convertible
Securities for its own account through one or more underwriters
proposing to underwrite such offering on a firm commitment basis
(or, if such offering involves the issuance of rights to
stockholders of Purchaser, on a standby basis), then Purchaser
shall either: (a) include the Stockholders' Equity Securities,
subject to the provisions of SECTION 4.4 herein or (b) file a
Resale Registration Statement within one hundred and twenty (120)
days after the effectiveness (or such shorter period as the
managing underwriter of such offering may agree) or abandonment
of the registration statement relating to the offering; or
4.1.4.2 prior to filing of the Resale
Registration Statement, Purchaser has become party to an
agreement or letter of intent or filed materials with the SEC
contemplating a material business acquisition by Purchaser,
whether by way of merger, consolidation, acquisition of assets,
acquisition of securities or otherwise, and, if such proposed
acquisition were consummated, Purchaser would be required to
include in such registration statement financial statements
and/or other information concerning the business of any other
party to such proposed acquisition, then Purchaser may delay the
filing of the Resale Registration Statement to a date after such
business combination has become effective; or
4.1.4.3 prior to the filing of the Resale
Registration Statement, Purchaser has become party to an
agreement or letter of intent contemplating a merger or
consolidation of Purchaser into or with, or a sale or transfer of
all or substantially all of the business and assets of Purchaser
to, any other corporation or entity, then Purchaser may delay the
filing of the Resale Registration Statement to a date after the
transaction contemplated by such agreement or letter of intent
becomes effective or is abandoned.
4.2 PIGGY-BACK AND INCIDENTAL REGISTRATION.
4.2.1 Subject to the provisions of SECTIONS 4.2.4,
4.2.5 AND 4.4 hereof, for a two year period commencing at any time after the
Effective Date, if Purchaser proposes to register any Registrable Securities
under the Securities Act, whether or not for sale for its own account or for the
account of any security holder (other than securities to be issued pursuant to
an employee compensation program or securities issued in a merger, acquisition
or similar transaction) in a manner and on a form which would permit
registration of Equity
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<PAGE>
Securities for sale to the public under the Securities Act, it shall each such
time give written notice to the Stockholders of its intention to do so and, upon
the written request of any such Stockholder made within ten (10) business days
after the receipt of any such notice (which request shall specify the Equity
Securities intended to be disposed of by such Stockholder), Purchaser will use
its best efforts to effect the registration under the Securities Act of all
Equity Securities which Purchaser has been so requested to register by any
Stockholder, subject to limitations on such inclusion contained in contracts
existing prior to the date of this Agreement, to the extent requisite to permit
the disposition of the Equity Securities so to be registered; PROVIDED that if,
at any time after giving written notice of its intention to register any
Registrable Securities and prior to the effective date of the registration
statement filed in connection with such registration, Purchaser shall determine
for any reason not to register such Registrable Securities, Purchaser may, at
its election, give written notice of such determination to the Stockholders and,
thereupon, shall be relieved of its obligation to register any Equity Securities
in connection with such registration.
4.2.2 A registration effected under this SECTION
4.2 shall relieve Purchaser of its obligation to effect a Resale Registration
Statement under SECTION 4.1, if the registration effected under this SECTION 4.2
includes Equity Securities.
4.2.3 Purchaser will pay all Registration Expenses
in connection with any registration of Equity Securities pursuant to this
SECTION 4.2, except that the Stockholders or other holders shall bear the fees
of their own counsel and any underwritten discounts or commissions applicable to
any of the Equity Securities sold by them.
4.2.4 The obligation of Purchaser pursuant to this
SECTION 4.2 shall be limited to two registration statements and shall not apply
to any Equity Securities that at such time are eligible for immediate resale
under Rule 144 during any three month period.
4.2.5 Purchaser shall not be obligated to notify
the Stockholders or include any of their Equity Securities pursuant to this
SECTION 4.2 in any registration statement contemplated by the Registration
Rights Agreement entered into between RGC International Investors LDC and
Purchaser.
4.3 REGISTRATION PROCEDURES. If and whenever Purchaser is
required by the provisions of SECTION 4.1 OR 4.2 to effect the registration of
Equity Securities under the Securities Act, Purchaser will, subject to the
provisions of SECTION 4.4:
4.3.1 prepare and file with the SEC a registration
statement with respect to such Equity Securities, and use reasonable efforts to
cause such registration statement to become and remain effective for such period
as may be reasonably necessary to effect the sale of such Equity Securities, not
to exceed the period expiring on the earlier of (i) the sale of all the Equity
Securities, or (ii) the date on which the Equity Securities become eligible for
resale under Rule 144 during any three month period;
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4.3.2 prepare and file with the SEC 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 as may be reasonably necessary to effect the sale of such Equity
Securities, not to exceed the period expiring on the earlier of (i) the sale of
all the Equity Securities, or (ii) the date on which the Equity Securities
become eligible for resale under Rule 144 during any three month period;
4.3.3 furnish to the Stockholders participating in
such registration, if any, such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
the Stockholders may reasonably request in order to facilitate the public
offering of the Equity Securities;
4.3.4 use reasonable efforts to register or qualify
the Equity Securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as the Stockholders, if any,
participating in such registration may reasonably request in writing within five
(5) days following the original filing of such registration statement, except
that Purchaser shall not for any purpose be required to qualify to do business
as a foreign corporation or execute a general consent to service of process in
any jurisdiction wherein it is not so qualified;
4.3.5 notify the Stockholders, if any,
participating in such registration after Purchaser shall receive notice thereof,
of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
4.3.6 for a period expiring on the earlier of (i)
the sale of all the Equity Securities, or (ii) the date on which the Equity
Securities become eligible for resale under Rule 144(k), prepare and file with
the SEC and notify the Stockholders, if any, participating in such registration
of the filing of such amendment or supplement to such registration statement or
prospectus as may be necessary 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 shall have 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 necessary
to make the statements therein, in the light of the circumstances in which they
were made, not misleading;
4.3.7 advise the Stockholders, if any,
participating in such registration after Purchaser shall receive notice thereof,
of the issuance of any stop order by the SEC suspending the effectiveness of
such registration statement and use reasonable efforts to obtain its withdrawal;
4.3.8 use reasonable efforts to list such
securities on each securities exchange on which the Common Stock are then
listed, if such securities are not already so listed and if such listing is then
permitted under the rules of such exchange.
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4.4 UNDERWRITTEN OFFERINGS IN CONNECTION WITH
"PIGGY-BACK" AND INCIDENTAL REGISTRATIONS. Subject to SECTION 4.2, if at any
time (i) Purchaser proposes to register any Registrable Securities under the
Securities Act for sale for its own account or for the account of any security
holder and such Registrable Securities are to be distributed by or through one
or more underwriters, and (ii) Purchaser agrees to include in such registration
among those to be distributed by such underwriters the Equity Securities
requested to be included by the Stockholders pursuant to the terms of SECTION
4.2 herein (subject to any contracts existing between Purchaser and other
security holders prior to the date of this Agreement limiting such inclusion),
then the holders of Equity Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between Purchaser and such
underwriters, such agreement to contain such representations and warranties by
Purchaser and the Stockholders, and such other terms and provisions as are
customarily contained in agreements of this type, including, without limitation,
indemnities and rights to contribution to the effect and to the extent provided
in SECTION 5. Purchaser may also require that the Equity Securities requested
for inclusion pursuant to this SECTION 4.4 be included in the offering on the
same financial terms as the securities otherwise being sold through the
underwriters. If in the good faith judgment of the managing underwriter of such
underwritten public offering, the inclusion of any or all of the Equity
Securities requested for inclusion pursuant to SECTION 4.2 together with any
other Registrable Securities which have similar piggyback registration rights
(such securities and the Registrable Securities being collectively referred to
as the "Requested Stock") would jeopardize the success of the offering, the
number of shares of Requested Stock otherwise to be included in the underwritten
public offering may be reduced pro rata (by number of shares of Common Stock (on
an as-converted basis, if applicable, solely for purposes of determining
participation rights)) among the holders thereof requesting such registration or
excluded in their entirety if so required by such managing underwriter.
4.5 PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of each registration statement registering
Equity Securities under the Securities Act, Purchaser will give the holders of
such Equity Securities so registered and their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the SEC, and each amendment thereof or supplement thereto, and will
give each of them such reasonable access to its books and records and such
opportunities to discuss the business of Purchaser with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary, in the opinion of counsel to Purchaser, to
conduct a reasonable investigation within the meaning of the Securities Act.
Each holder of such Equity Securities shall furnish to Purchaser such
information regarding such Stockholder and the distribution proposed by such
Stockholder as Purchaser may request and as shall be required in connection with
any registration referred to in this SECTION 4.
4.6 HOLDBACK AGREEMENT. Each Stockholder agrees that if
requested in writing by the managing underwriter(s) of any underwritten public
offering of Purchaser's securities, such Stockholder shall not effect any sale
or distribution of any securities of Purchaser, including a private sale or a
sale pursuant to Rule 144 or 144A (or any similar
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<PAGE>
provision then in force) under the Securities Act, during the 30-day period
prior to, and during the 180-day period (or such other period as may be
requested by the managing underwriter of such underwritten offering) beginning
on the effective date of such registration statement, except as part of such
underwritten offering or as otherwise permitted by the managing underwriters.
5. INDEMNIFICATION AND CONTRIBUTION.
5.1 INDEMNIFICATION.
5.1.1 Purchaser will indemnify and hold harmless
each Stockholder whose Equity Securities are included in a registration
statement pursuant to the provisions of SECTION 4 hereof, from and against, any
and all loss, damage, liability, cost and expense, including reasonable
attorney's fees and expenses, to which such Stockholder may become subject under
the Securities Act or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are caused by 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, in
light of the circumstances in which they were made, not misleading; PROVIDED,
HOWEVER, that Purchaser will not be liable in any such case to the extent that
any such loss, damage, liability, cost or expenses arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in reliance upon information furnished by or on behalf of such
Stockholder for use in the preparation thereof.
5.1.2 Each Stockholder whose Equity Securities are
included in a registration pursuant to the provisions of SECTION 5 hereof will
indemnify and hold harmless Purchaser, its directors and officers, any
controlling Person and any underwriter from and against, and will reimburse
Purchaser, its directors and officers, any controlling Person and any
underwriter with respect to, any and all loss, damage, liability, cost or
expense to which Purchaser or any controlling Person and/or any underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by 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, in light of the circumstances in which they were made,
not misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
information furnished by or on behalf of such Stockholder for use in the
preparation thereof.
5.1.3 Promptly after receipt by an indemnified
party pursuant to the provisions of SECTION 5.1.1 OR 5.1.2 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 SECTION 5.1.1
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OR 5.1.2, promptly notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party unless such failure to
give notice shall materially prejudice the indemnifying party in the defense of
such claim. 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 satisfactory to such indemnified party,
PROVIDED, HOWEVER, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select one
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties at the expense of the indemnifying party unless in
the reasonable judgment of the indemnified parties a conflict of interest may
exist among such indemnified parties, in which event the indemnified parties
shall be obligated to pay the fees and expenses of such additional counsel. An
indemnified party may retain its own counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the indemnified party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party. 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 said SECTION
5.1.1 OR 5.1.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
5.2 CONTRIBUTION.
5.2.1 If the indemnification provided for in
SECTION 5.1.3 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages or liabilities referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative fault of such indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, such
statement or omission has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include, subject to
the limitations set forth in SECTION 5.1.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
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<PAGE>
5.2.2 The parties hereto agree that it would not be
just and equitable if contribution pursuant to this SECTION 5.2.2 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in SECTION
5.2.1. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
5.2.3 If indemnification is available under SECTION
5.1.3 the indemnifying parties shall indemnify each indemnified party to the
full extent provided in SECTIONS 5.1.1 AND 5.1.2 without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this SECTION 5.2.3.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in Delaware.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of Purchaser, each Stockholder and their
respective successors and assigns.
6.3 NOTICES. Any notice or other communication under this
Agreement shall be considered given and received when (i) delivered personally
in writing, (ii) received by registered mail, return receipt requested or (iii)
sent by facsimile, with a copy confirmed by registered mail, return receipt
requested, by the parties at the following addresses and telecopier numbers (or
at such other addresses and telecopier numbers as a party may specify by notice
to the others):
If to Purchaser:
Interactive Magic, Inc.
215 Southport Drive, Suite 100
Morrisville, North Carolina 27560
Attention: President
Facsimile No.: (919) 461-0722
with a copy to:
Bachner Tally Polevoy & Misher LLP
380 Madison Avenue
New York, NY 10017
Attention: Jill M. Cohen, Esq.
Facsimile No.: (212) 682-5729
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If to the Stockholders:
(At the addresses listed on Schedule A)
with a copy to:
Branden Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
Facsimile No.: (801) 355-7126
6.4 WAIVER. Purchaser shall have the right to waive any
of its rights or any obligations owing to it hereunder without the consent of
the other parties to this Agreement.
6.5 TITLES AND SUBTITLES. The titles of the Articles and
Sections of this Agreement are for convenience of reference only and are not to
be considered in construing this Agreement.
6.6 COUNTERPARTS; FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Agreement may be executed by facsimile, which
shall be deemed an original.
6.7 FURTHER ASSURANCES. Each of Purchaser and the
Stockholders agree to take such actions and execute such documents as is
necessary to carry out the intents and purposes of this Agreement and the
transactions contemplated hereby.
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<PAGE>
6.8 COMPLETE AGREEMENT; MODIFICATION AND TERMINATION.
This Agreement contains a complete statement of all the arrangements among the
parties with respect to its subject matter, supersedes all existing agreements
among them concerning that subject matter and cannot be changed or terminated
except in writing signed by all of the parties.
INTERACTIVE MAGIC, INC.
By: /s/ Michael Oliver
------------------------------
Name: Michael Oliver
Title: Chief Financial Officer
STOCKHOLDERS:
MULTIPLAYER GAMES NETWORK, INC.
By: /s/ James Hettinger
------------------------------
Name: James Hettinger
Title: Chief Executive Officer
TANTALUS, INC.
By: /s/ James Hettinger
------------------------------
Name: James Hettinger
Title: President
/s/ Donn A. Clendenon
------------------------------
Donn A. Clendenon
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SCHEDULE A
Name and Address Number of Equity Securities
Multiplayer Games Network, Inc. 262,500 shares of
Common Stock
Tantalus, Inc. 262,500 shares of
Common Stock
Donn A. Clendenon 30,000 shares of
Common Stock
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Exhibit 10.35
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of February12, 1999 (the "Effective Date")
by and between Interactive Magic, Inc., a North Carolina corporation
("Purchaser"), and Andrew G. Burch, IFM Venture Group and James P. Bailey
(collectively, the "Holders").
WHEREAS, in connection with an Agreement and Plan of Merger,
dated as of January 25, 1999, among MPG-Net, Inc., a Delaware corporation
("MPGN""), Purchaser, iMagicOnline Corporation ("I-Magic"), Jim Hettinger,
Multiplayer Games Network, Inc., Tantalus, Inc. and Donn A. Clendenon (the
"Merger Agreement"), the Holders are acquiring on the date hereof, shares of
Common Stock of Purchaser, par value $.10 per share (the "Common Stock") set
forth opposite their names on Schedule A (the "Equity Securities");
The Holders and Purchaser wish to establish certain rights and
obligations with respect to the Holders' Equity Securities.
It is therefore agreed as follows:
1. DEFINITIONS. In this Agreement, the following terms shall
have the meaning specified, unless the context otherwise requires:
1.1 "Affiliate" of an entity means any person or
entity who or which, directly or indirectly, controls, is under common control
with or is controlled by that entity. For the purposes of this definition,
"control," as used with respect to any entity, shall mean the beneficial
ownership, directly or indirectly, of a majority of the voting securities of
that entity.
1.2 "Convertible Securities" means any evidence of
indebtedness, debt securities, shares of stock (other than Common Stock) or
other securities directly or indirectly convertible into or exchangeable for
Common Stock, including options and warrants.
1.3 "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder, or
any successor act, all as the same shall be in effect at the time.
1.4 "Merger Documents" means the Merger Agreement and
all exhibits thereto.
1.5 "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
1.6 "Registrable Securities" means the Equity
Securities, Common Stock or Common Stock issued or issuable upon exercise or
conversion of Convertible Securities.
<PAGE>
1.7 "Registration Expenses" means all expenses
incident to Purchaser's performance of or compliance with SECTION 4, including,
without limitation, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws (including reasonable fees and
disbursement of counsel in connection with blue sky qualifications of the
Registrable Securities), rating agency fees, all printing expenses, messenger
and delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing of the securities, the fees and disbursements of counsel for Purchaser
and of its independent public accountants, including the expenses of any special
audits required by or incident to such performance and compliance, but excluding
any fees and expenses of counsel for Holders of Registrable Securities or any
underwriting discounts and commissions applicable to the Registrable Securities.
1.8 "SEC" means the Securities and Exchange
Commission.
1.9 "Securities Act" means the Securities Act of
1933, as amended and the rules and regulations promulgated thereunder, or any
successor act, all as the same shall be in effect at the time.
2. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS. Each Holder
severally represents and warrants to Purchaser as follows:
2.1 Such Holder is acquiring the Equity Securities
for his or its own account and not on behalf of any other Person, and not with a
view to resale or distribution in whole or in part in a manner that would
violate the Securities Act.
2.2 Such Holder understands that the Equity
Securities have not been registered under the Securities Act and will be
"restricted securities" within the meaning of the regulations under the
Securities Act, and by reason of the foregoing the Equity Securities may not be
resold in the absence of an effective registration statement under, or
applicable exemption from, the Securities Act, and that a restrictive legend
will be affixed to the Equity Securities upon issuance to such Holder.
2.3 Such Holder has full knowledge of the operations
of MPGN, Purchaser, I-Magic and the transactions contemplated by the Merger
Documents. Each of the Holders has received and reviewed a copy of the Merger
Documents. Each of the Holders through its representatives has had an
opportunity to ask questions and receive answers concerning Purchaser, I-Magic,
MPGN and the transactions contemplated by the Merger Documents and to obtain any
additional information such Holder has requested in order to verify the accuracy
of the information contained in the Merger Documents. Such Holder has relied
solely on the representations and warranties contained in the Merger Documents
and its own knowledge about Purchaser, I-Magic and MPGN in making its decision
to acquire the Equity Securities.
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<PAGE>
3. CERTIFICATES LEGENDED. Until the expiration of all
applicable transfer restrictions established by this Agreement, each certificate
representing any Equity Securities subject to any such restriction shall bear
the following legend conspicuously:
TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF [the
date of this agreement], BETWEEN PURCHASER AND THE ORIGINAL
HOLDER HEREOF. A COPY OF SAID AGREEMENT IS ON FILE IN THE
OFFICE OF PURCHASER, AND A COPY THEREOF WILL BE MAILED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST
THEREFOR.
4. REGISTRATION RIGHTS.
4.1 PIGGY-BACK AND INCIDENTAL REGISTRATION.
4.1.1 Subject to the provisions of SECTIONS
4.1.3, 4.1.4 AND 4.3 hereof, for a two year period commencing at any time after
the Effective Date, if Purchaser proposes to register any Registrable Securities
under the Securities Act, whether or not for sale for its own account or for the
account of any security holder (other than securities to be issued pursuant to
an employee compensation program or securities issued in a merger, acquisition
or similar transaction) in a manner and on a form which would permit
registration of Equity Securities for sale to the public under the Securities
Act, it shall each such time give written notice to the Holders of its intention
to do so and, upon the written request of any such Holder made within ten (10)
business days after the receipt of any such notice (which request shall specify
the Equity Securities intended to be disposed of by such Holder), Purchaser will
use its best efforts to effect the registration under the Securities Act of all
Equity Securities which Purchaser has been so requested to register by any
Holder, subject to limitations on such inclusion contained in contracts existing
prior to the date of this Agreement, to the extent requisite to permit the
disposition of the Equity Securities so to be registered; PROVIDED that if, at
any time after giving written notice of its intention to register any
Registrable Securities and prior to the effective date of the registration
statement filed in connection with such registration, Purchaser shall determine
for any reason not to register such Registrable Securities, Purchaser may, at
its election, give written notice of such determination to the Holders and,
thereupon, shall be relieved of its obligation to register any Equity Securities
in connection with such registration.
4.1.2 Purchaser will pay all Registration
Expenses in connection with any registration of Equity Securities pursuant to
this SECTION 4.1, except that the Holders or other holders shall bear the fees
of their own counsel and any underwritten discounts or commissions applicable to
any of the Equity Securities sold by them.
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<PAGE>
4.1.3 The obligation of Purchaser pursuant
to this SECTION 4.1 shall be limited to two registration statements and shall
not apply to any Equity Securities that at such time are eligible for immediate
resale under Rule 144 during any three month period.
4.1.4 Purchaser shall not be obligated to
notify the Holders or include any of their Equity Securities pursuant to this
SECTION 4.1 in any registration statement contemplated by the Registration
Rights Agreement entered into between RGC International Investors LDC and
Purchaser.
4.2 REGISTRATION PROCEDURES. If and whenever
Purchaser is required by the provisions of SECTION 4.1 to effect the
registration of Equity Securities under the Securities Act, Purchaser will,
subject to the provisions of SECTION 4.3:
4.2.1 prepare and file with the SEC a
registration statement with respect to such Equity Securities, and use
reasonable efforts to cause such registration statement to become and remain
effective for such period as may be reasonably necessary to effect the sale of
such Equity Securities, not to exceed the period expiring on the earlier of (i)
the sale of all the Equity Securities, or (ii) the date on which the Equity
Securities become eligible for resale under Rule 144 during any three month
period;
4.2.2 prepare and file with the SEC 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 as may be reasonably necessary to effect the sale of
such Equity Securities, not to exceed the period expiring on the earlier of (i)
the sale of all the Equity Securities, or (ii) the date on which the Equity
Securities become eligible for resale under Rule 144 during any three month
period;
4.2.3 furnish to the Holders participating
in such registration, if any, such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as the Holders may reasonably request in order to facilitate the
public offering of the Equity Securities;
4.2.4 use reasonable efforts to register or
qualify the Equity Securities covered by such registration statement under such
state securities or blue sky laws of such jurisdictions as the Holders, if any,
participating in such registration may reasonably request in writing within five
(5) days following the original filing of such registration statement, except
that Purchaser shall not for any purpose be required to qualify to do business
as a foreign corporation or execute a general consent to service of process in
any jurisdiction wherein it is not so qualified;
4.2.5 notify the Holders, if any,
participating in such registration after Purchaser shall receive notice thereof,
of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
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<PAGE>
4.2.6 for a period expiring on the earlier
of (i) the sale of all the Equity Securities, or (ii) the date on which the
Equity Securities become eligible for resale under Rule 144(k), prepare and file
with the SEC and notify the Holders, if any, participating in such registration
of the filing of such amendment or supplement to such registration statement or
prospectus as may be necessary 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 shall have 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 necessary
to make the statements therein, in the light of the circumstances in which they
were made, not misleading;
4.2.7 advise the Holders, if any,
participating in such registration after Purchaser shall receive notice thereof,
of the issuance of any stop order by the SEC suspending the effectiveness of
such registration statement and use reasonable efforts to obtain its withdrawal;
4.2.8 use reasonable efforts to list such
securities on each securities exchange on which the Common Stock are then
listed, if such securities are not already so listed and if such listing is then
permitted under the rules of such exchange.
4.3 UNDERWRITTEN OFFERINGS IN CONNECTION WITH
"PIGGY-BACK" AND INCIDENTAL REGISTRATIONS. Subject to SECTION 4.1, if at any
time (i) Purchaser proposes to register any Registrable Securities under the
Securities Act for sale for its own account or for the account of any security
holder and such Registrable Securities are to be distributed by or through one
or more underwriters, and (ii) Purchaser agrees to include in such registration
among those to be distributed by such underwriters the Equity Securities
requested to be included by the Holders pursuant to the terms of SECTION 4.1
herein (subject to any contracts existing between Purchaser and other security
holders prior to the date of this Agreement limiting such inclusion), then the
holders of Equity Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between Purchaser and such underwriters,
such agreement to contain such representations and warranties by Purchaser and
the Holders, and such other terms and provisions as are customarily contained in
agreements of this type, including, without limitation, indemnities and rights
to contribution to the effect and to the extent provided in SECTION 5. Purchaser
may also require that the Equity Securities requested for inclusion pursuant to
this SECTION 4.3 be included in the offering on the same financial terms as the
securities otherwise being sold through the underwriters. If in the good faith
judgment of the managing underwriter of such underwritten public offering, the
inclusion of any or all of the Equity Securities requested for inclusion
pursuant to SECTION 4.1 together with any other Registrable Securities which
have similar piggyback registration rights (such securities and the Registrable
Securities being collectively referred to as the "Requested Stock") would
jeopardize the success of the offering, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced pro
rata (by number of shares of Common Stock (on an as-converted basis, if
applicable, solely for purposes of determining participation rights)) among the
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<PAGE>
holders thereof requesting such registration or excluded in their entirety if so
required by such managing underwriter.
4.4 PREPARATION; REASONABLE INVESTIGATION. In
connection with the preparation and filing of each registration statement
registering Equity Securities under the Securities Act, Purchaser will give the
Holders of such Equity Securities so registered and their underwriters, if any,
and their respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and records and such
opportunities to discuss the business of Purchaser with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary, in the opinion of counsel to Purchaser, to
conduct a reasonable investigation within the meaning of the Securities Act.
Each Holder of such Equity Securities shall furnish to Purchaser such
information regarding such Holder and the distribution proposed by such Holder
as Purchaser may request and as shall be required in connection with any
registration referred to in this SECTION 4.
4.5 HOLDBACK AGREEMENT. Each Holder agrees that if
requested in writing by the managing underwriter(s) of any underwritten public
offering of Purchaser's securities, such Holder shall not effect any sale or
distribution of any securities of Purchaser, including a private sale or a sale
pursuant to Rule 144 or 144A (or any similar provision then in force) under the
Securities Act, during the 30-day period prior to, and during the 180-day period
(or such other period as may be requested by the managing underwriter of such
underwritten offering) beginning on the effective date of such registration
statement, except as part of such underwritten offering or as otherwise
permitted by the managing underwriters.
5. INDEMNIFICATION AND CONTRIBUTION.
5.1 INDEMNIFICATION.
5.1.1 Purchaser will indemnify and hold
harmless each Holder whose Equity Securities are included in a registration
statement pursuant to the provisions of SECTION 4 hereof, from and against, any
and all loss, damage, liability, cost and expense, including reasonable
attorney's fees and expenses, to which such Holder may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by 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, in
light of the circumstances in which they were made, not misleading; PROVIDED,
HOWEVER, that Purchaser will not be liable in any such case to the extent that
any such loss, damage, liability, cost or expenses arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in reliance upon information furnished by or on behalf of such
Holder for use in the preparation thereof.
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5.1.2 Each Holder whose Equity Securities
are included in a registration pursuant to the provisions of SECTION 5 hereof
will indemnify and hold harmless Purchaser, its directors and officers, any
controlling Person and any underwriter from and against, and will reimburse
Purchaser, its directors and officers, any controlling Person and any
underwriter with respect to, any and all loss, damage, liability, cost or
expense to which Purchaser or any controlling Person and/or any underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by 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, in light of the circumstances in which they were made,
not misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
information furnished by or on behalf of such Holder for use in the preparation
thereof.
5.1.3 Promptly after receipt by an
indemnified party pursuant to the provisions of SECTION 5.1.1 OR 5.1.2 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 SECTION 5.1.1
OR 5.1.2, promptly notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party unless such failure to
give notice shall materially prejudice the indemnifying party in the defense of
such claim. 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 satisfactory to such indemnified party,
PROVIDED, HOWEVER, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select one
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties at the expense of the indemnifying party unless in
the reasonable judgment of the indemnified parties a conflict of interest may
exist among such indemnified parties, in which event the indemnified parties
shall be obligated to pay the fees and expenses of such additional counsel. An
indemnified party may retain its own counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the indemnified party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party. 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 said SECTION
5.1.1 OR
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5.1.2 for any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation.
5.2 CONTRIBUTION.
5.2.1 If the indemnification provided for in
SECTION 5.1.3 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages or liabilities referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative fault of such indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, such
statement or omission has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include, subject to
the limitations set forth in SECTION 5.1.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
5.2.2 The parties hereto agree that it would
not be just and equitable if contribution pursuant to this SECTION 5.2.2 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in SECTION
5.2.1. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
5.2.3 If indemnification is available under
SECTION 5.1.3 the indemnifying parties shall indemnify each indemnified party to
the full extent provided in SECTIONS 5.1.1 AND 5.1.2 without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this SECTION 5.2.3.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed in Delaware.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of Purchaser, each Holder and their
respective successors and assigns.
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6.3 NOTICES. Any notice or other communication under
this Agreement shall be considered given and received when (i) delivered
personally in writing, (ii) received by registered mail, return receipt
requested or (iii) sent by facsimile, with a copy confirmed by registered mail,
return receipt requested, by the parties at the following addresses and
telecopier numbers (or at such other addresses and telecopier numbers as a party
may specify by notice to the others):
If to Purchaser:
Interactive Magic, Inc.
215 Southport Drive, Suite 100
Morrisville, North Carolina 27560
Attention: President
Facsimile No.: (919) 461-0722
with a copy to:
Bachner Tally Polevoy & Misher LLP
380 Madison Avenue
New York, NY 10017
Attention: Jill M. Cohen, Esq.
Facsimile No.: (212) 682-5729
If to the Holders:
(At the addresses listed on Schedule A)
with a copy to:
6.4 WAIVER. Purchaser shall have the right to waive
any of its rights or any obligations owing to it hereunder without the consent
of the other parties to this Agreement.
6.5 TITLES AND SUBTITLES. The titles of the Articles
and Sections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
6.6 COUNTERPARTS; FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Agreement may be executed by facsimile, which
shall be deemed an original.
6.7 FURTHER ASSURANCES. Each of Purchaser and the
Holders agree to take such actions and execute such documents as is necessary to
carry out the intents and purposes of this Agreement and the transactions
contemplated hereby.
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6.8 COMPLETE AGREEMENT; MODIFICATION AND TERMINATION.
This Agreement contains a complete statement of all the arrangements among the
parties with respect to its subject matter, supersedes all existing agreements
among them concerning that subject matter and cannot be changed or terminated
except in writing signed by all of the parties.
INTERACTIVE MAGIC, INC.
By: /s/ Michael Oliver
----------------------------
Name: Michael Oliver
Title: Chief Financial Officer
HOLDERS:
IFM VENTURE GROUP
By: /s/ Craig Ostrander
----------------------------
Name: Craig Ostrander
Title: Partner
By: /s/ James P. Bailey
----------------------------
James P. Bailey
/s/ Andrew G. Burch
----------------------------
Andrew G. Burch
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SCHEDULE A
Name and Address Number of Equity Securities
- ---------------- ---------------------------
IFM Venture Group 18,000 shares of
Common Stock
James Bailey 9,000 shares of
Common Stock
Andrew F. Burch 18,000 shares of
Common Stock
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