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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- - - --- of 1934. For the quarterly period ended March 31, 1996
Transition report under Section 13 or 15(d) of the Securities Exchange Act
- - - --- of 1934. For the transition period from to
------------ --------------.
0-24596
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(Commission File Number)
STARPRESS, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
COLORADO 84-1097212
- - - ---------------------------- ------------------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
425 MARKET STREET, SAN FRANCISCO, CALIFORNIA 94105
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(Address of principal executive offices)
(415) 778-3100
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, no par value
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
---- ----
State the number of shares outstanding of each of the issuer's class of common
equity, as of the latest practicable date: COMMON STOCK, NO PAR VALUE,
33,188,096 SHARES AS OF MAY 8, 1996
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
StarPress, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
ASSETS March 31, 1996 June 30, 1995
---------------- ---------------
Current assets:
Cash $ 15,707 $ 1,919,102
Accounts receivable 1,999,298 295,323
Inventories 3,454 208,789
Prepaid expenses and other current assets 101,832 131,341
------------ ------------
Total current assets 2,120,291 2,554,555
Furniture and equipment, net 45,612 706,830
Product development costs, net 237,594 238,266
Intangible assets, net - 271,686
------------ ------------
Total assets $ 2,403,497 $ 3,771,337
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Notes Payable $ 750,000 $ 185,585
Due to Graphix Zone, Inc. 3,504,216 -
Accounts payable 923,169 996,131
Accrued liabilities 1,453,033 1,572,943
Accrued restructuring costs 761,785 -
Deferred revenue 455,000 77,270
------------ ------------
Total current liabilities 7,847,203 2,831,929
Stockholders' equity (deficit):
Preferred stock - -
Common stock 16,173,891 15,561,790
Accumulated deficit (21,617,597) (14,622,382)
------------ ------------
Total stockholders' equity (deficit) (5,443,706) 939,408
------------ ------------
Total liabilities and stockholders'
equity (deficit) $ 2,403,497 $ 3,771,337
============ ============
See accompanying notes.
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StarPress, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Nine Months Three Months
Ended March 31, Ended March 31,
------------------------ -----------------------
1996 1995 1996 1995
----------- ----------- ---------- -----------
Net revenues $ 3,927,296 $ 1,711,865 $1,951,895 $ 426,136
Cost of revenues 2,181,647 1,124,122 671,204 307,603
----------- ----------- ---------- -----------
Gross profit 1,745,649 587,743 1,280,691 118,533
Operating expenses:
Research and development 2,077,265 1,581,044 355,338 461,096
Sales and marketing 2,129,072 1,931,793 1,012,662 412,431
General and administrative 2,516,529 1,896,776 834,327 638,791
Restructuring charge 1,950,000 - - -
----------- ----------- ---------- -----------
Total operating expenses 8,672,866 5,409,613 2,202,327 1,512,318
----------- ----------- ---------- -----------
Operating loss (6,927,217) (4,821,870) (921,636) (1,393,785)
Interest expense (71,094) (302,110) (29,642) (250,666)
Other income
(expense) - net 3,096 13,467 (8,746) 2,074
----------- ----------- ---------- -----------
Net loss $(6,995,215) $(5,110,513) $ (960,024) $(1,642,377)
=========== =========== ========== ===========
Net loss per share $ (0.23) $ (0.56) $ (0.03) $ (0.18)
=========== =========== ========== ===========
Weighted average common
shares outstanding 30,901,411 9,198,076 31,768,146 9,227,200
=========== =========== ========== ===========
See accompanying notes.
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StarPress, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended March 31,
---------------------------
1996 1995
----------- -----------
OPERATING ACTIVITIES:
Net loss $(6,995,215) $(5,110,513)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 108,103 581,658
Amortization and write-off of intangible assets
and acquired prepaid royalties 708,776 586,444
Write-down of excess furniture and equipment 545,438 -
Amortization of discount on convertible debentures
and deferred financing costs 9,595 209,150
Incurrence of financing costs - (277,398)
Issuance of common stock and stock
options for services - 403,068
Compensation expense related to issuance of stock
and stock options 215,471 -
Changes in operating assets and liabilities:
Accounts receivable (1,695,103) (276,510)
Inventories 337,792 (51,329)
Prepaid expenses and other current assets 29,509 24,388
Accounts payable and accured liabilities (192,872) 147,720
Accrued restructuring costs 761,785 -
Deferred revenue 377,730 (45,000)
Accounts payable to related parties - 11,338
Accrued compensation and related expenses - (56,210)
----------- -----------
Net cash used in operating activities (5,788,991) (3,853,194)
INVESTING ACTIVITIES:
Purchase of furniture and equipment (29,605) (199,686)
Retirement of furniture and equipment 137,281 9,126
----------- -----------
Net cash used in investing activities 107,676 (190,560)
FINANCING ACTIVITIES:
Proceeds from bank loan 750,000 -
Proceeds from notes payable to related parties 400,000 222,000
Payments of notes payable to related parties (400,000) (222,000)
Proceeds from Graphix Zone, Inc. 3,504,216 243,000
Payments on debt (561,781) (243,000)
Proceeds from issuance of convertible debentures - 1,955,000
Cash proceeds from exercise of warrants and options 85,485 1,059,796
Release of restricted cash from escrow - 592,700
----------- -----------
Net cash provided by financing activities 3,777,920 3,607,496
----------- -----------
Net decrease in cash (1,903,395) (436,258)
Cash at beginning of the year 1,919,102 900,798
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Cash at end of the period $ 15,707 $ 464,540
=========== ===========
See accompanying notes.
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StarPress, Inc.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
Nine Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Total
----------------------- Accumulated Stockholders'
Shares Amount Deficit Equity (Deficit)
---------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Balance at July 1, 1994 9,143,200 $ 6,744,939 $ (3,705,985) $ 3,038,954
Issuance of common stock 84,000 131,000 - 131,000
Issuance of warrants - 1,059,796 - 1,059,796
Issuance of stock options
for consulting services - 472,850 - 472,850
less: deferred expenses - (200,782) - (200,782)
Net loss - - (5,110,513) (5,110,513)
---------- ----------- ------------ -----------
Balance at March 31, 1995 9,227,200 $ 8,207,803 $ (8,816,498) $ (608,695)
========== =========== ============ ===========
Balances at July 1, 1995 29,468,157 $15,561,790 $(14,622,382) $ 939,408
Issuance of common stock
for acquisition of assets 1,271,713 135,754 - 135,754
Conversion of convertible
debentures 170,000 195,180 - 195,180
Exercise of warrants 361,346 3,613 - 3,613
Exercise of stock options 1,671,414 81,872 - 81,872
Compensation expense related
to issuance of stock options - 195,682 - 195,682
Net loss - - (6,995,215) (6,995,215)
---------- ----------- ------------ -----------
Balances at March 31, 1996 32,942,630 $16,173,891 $(21,617,597) $(5,443,706)
========== =========== ============ ===========
</TABLE>
See accompanying notes.
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StarPress, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(Unaudited)
(1) At the Annual Meeting of Shareholders held on September 27, 1995, the
shareholders of the Company approved an amendment to the Company's Articles of
Incorporation to change the name of the Company to StarPress, Inc. from Great
Bear Technology Incorporated. The change was effective on October 13, 1995.
(2) These condensed consolidated financial statements should be read in
conjunction with the summary of significant accounting policies and notes to the
financial statements included in the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which the Company cosiders necessary for a fair
presentation of interim period results have been included. However, these
results are not necessarily indicative of results for a full year.
(3) Certain balances for the nine months ended March 31, 1995 have been
reclassified to conform to the 1996 presentation.
(4) On October 27, 1995, the Company entered into an agreement with Silicon
Valley Bank for a $750,000 loan that bears interest at the bank's prime rate
plus 150 basis points. The loan was due on February 24, 1996 and is secured by
all of the Company's assets excluding the Sony assets described below. The
Company also issued a warrant to Silicon Valley Bank to purchase 42,000 shares
of the Company's Common Stock at an exercise price of $1.25 per share. The
warrant expires on October 27, 2000. The Company received a waiver for all
defaults under the line of credit from lender through March 29, 1996. As of May
8, 1996 the line of credit has not been paid and is in default, and the Company
is currently negotiating a renewal and extension with Silicon Valley Bank.
(5) On November 1, 1995, the Company purchased from Sony Interactive
Entertainment, Inc. ("Sony") certain products and other assets which consisted
of: 14 products currently in distribution or production; related finished goods
inventory and royalty income; prepaid royalties; accounts receivable for those
products shipped by Sony after October 11, 1995; and furniture and equipment.
The purchase price for these assets consisted of 927,716 shares of the Company's
Common Stock (which were valued using the per share price determined by
independent appraisal in the Company's acquisition of StarPress Multimedia, Inc.
on June 23, 1995) and a promissory note for $561,781. The promissory note,
which was paid on February 2, 1996, bore interest at the prime rate as quoted by
Chemical Bank, and was secured by the assets acquired.
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The total purchase price of $677,746 was allocated as follows:
Prepaid royalty costs $256,310
Product development costs 180,107
Inventories 132,457
Furniture and equipment 100,000
Accounts receivable 8,872
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Total $677,746
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(6) As of January 3, 1996, the Company entered into an Agreement and Plan of
Reorganization with Graphix Zone, Inc., a California corporation, pursuant to
which each of the Company and Graphix Zone, Inc. will become wholly-owned
subsidiaries of Graphix Zone, Inc., a new Delaware corporation. The consummation
of the reorganization is subject to completion of numerous conditions, including
without limitation, effectiveness of a Form S-4 Registration Statement with the
Securities and Exchange Commission, obtaining a permit from the California
Department of Corporations and other blue sky authorities, securing approval of
the reorganization from the shareholders of both the Company and Graphix Zone,
Inc. and a limited number of shareholders exercising dissenting shareholder
status.
During the period from February 1, 1996 through May 8, 1996, the Company
received loans from Graphix Zone, Inc. aggregating $3,714,000 which were used
for working capital and payment of the Sony note described above (shown as Due
to Graphix Zone, Inc. on the Company's Balance Sheet). Of the total loans
outstanding, $2,765,600 are secured by a second priority security interest in
all of the Company's assets, bear interest at the applicable federal rate, and
are payable upon demand or in six months if no demand is made. The remainder
of the loans, $948,400, are unsecured.
(7) During the second quarter of fiscal year 1996, the Company adopted a
restructuring plan to enhance overall competitiveness, productivity and
efficiency through the reduction of overhead costs. The plan included the
elimination of all in-house software research and development activities and the
sales and marketing capabilities of the Company. The estimated cost of the
restructuring of $1,950,000 was recorded in the second quarter of fiscal 1996.
The charge principally reflects severance costs resulting from a reduction of a
significant portion of the Company's workforce, writedown and disposal of excess
furniture and equipment and office facilities, and write-offs of assembled
workforce and goodwill arising from the Company's acquisition of StarPress
Multimedia, Inc. in June 1995. The amount of accrued restructuring costs
outstanding at March 31, 1996, $761,785, represents unpaid severance costs and
outstanding lease payments on unused office facilities.
In accordance with the adopted plan of restructuring, and due to the
Company and Graphix Zone, Inc. centralizing operations at Graphix Zone's
facilities in Irvine, CA., the Company has reduced the number of its employees
from a total of 43 to a total of 10, has sold certain products currently under
development and certain fixed assets, and has sold Logatronix, Ltd. (Great Bear
- - - - Bulgaria), formerly a wholly-owned subsidiary based in Sofia, Bulgaria.
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(8) On April 2, 1996, the Company entered an agreement pursuant to which
PolarCap, LLC, owned and operated by Douglas D. Cole a director and past chief
executive officer of the Company, acquired 100% equity ownership of Great Bear -
Bulgaria and certain other assets of the Company. The purchase price consisted
of a $40,000 promissory note, a contingent payment in the event of the sale or
other transfer of any of the Great Bear - Bulgaria stock by PolarCap, LLC, a
contingent payment in the event of the collection of certain receivables
transfered to PolarCap, LLC in the acquisition, and the assumption by PolarCap,
LLC of certain Great Bear - Bulgaria liabilities.
(9) On April 22, 1996, the Company entered an Asset Purchase Agreement with
Digital Media Theory, Inc. ("DMT"). The Company purchased from DMT certain
assets which consisted of: an internet computer database; equipment, contracts
and supplies; and rights, title and interest to intellectual property. The
purchase price for these assets consisted of 245,466 shares of the Company's
common stock valued at $137,952, and a promissory note for $23,099.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
This discussion and analysis of operations should be read in conjunction
with the financial statements and Management's Discussion and Analysis in the
Company's Form 10-KSB for the year ended June 30, 1995. The analysis is
provided pursuant to applicable Securities and Exchange Commission Regulations
and is not intended to serve as a basis for projections of future events.
OVERVIEW
StarPress, Inc. (the "Company"), formerly Great Bear Technology
Incorporated, is a software publisher and developer which has historically
concentrated its efforts in marketing and selling interactive multimedia
software products primarily emphasizing electronic publishing of education and
entertainment titles. As of May 8, 1996, the Company published forty-six
software products in the Windows and MAC platforms (CD-ROM and disks), and had
no products under development.
As of January 3, 1996, the Company entered into an Agreement and Plan of
Reorganization with Graphix Zone, Inc., a California corporation, pursuant to
which each of the Company and Graphix Zone, Inc. will become wholly-owned
subsidiaries of a new Delaware corporation, Graphix Zone, Inc. The consummation
of the reorganization is subject to completion of numerous conditions, including
without limitation, effectiveness of a Form S-4 Registration Statement with the
Securities and Exchange Commission, obtaining a permit from the California
Department of Corporations and other blue sky authorities, securing approval of
the reorganization from the shareholders of both the Company and Graphix Zone
and a limited number of shareholders exercising dissenting shareholder status.
During the quarter ended March 31, 1996 the Company began centralizing its
operations at Graphix Zone's facility in Irvine, CA.
During the period from February 1, 1996 through May 8, 1996, the Company
received loans from Graphix Zone, Inc. aggregating $3,716,000 which had been
used for working capital and payment of the Sony note described below. Of the
total loans outstanding on May 8, 1996, $2,765,600 are secured by a second
priority security interest in all of the Company's assets. These loans bear
interest at the applicable federal rate, and are payable upon demand or in six
months if no demand is made. The remainder of the loans, $948,400, are
unsecured. On March 31, 1996 the balance of the loans from Graphix Zone, Inc.
was $3,504,216.
During the second quarter of fiscal year 1996, the Company adopted a
restructuring plan to enhance overall competitiveness, productivity and
efficiency through the reduction of overhead costs. The plan included the
elimination of all in-house software research and development activities and the
sales and marketing department of the Company. Accordingly, the Company has
reduced the number of employees from 43 at December 30, 1995 to a total of 10,
has sold certain products which were under development and certain fixed assets,
and has sold Great Bear - Bulgaria, a formerly wholly-owned subsidiary based in
Sofia, Bulgaria providing low cost software development services. The estimated
cost of the restructuring of $1,950,000 was recorded in the second quarter of
fiscal 1996. The charge principally reflects severance costs resulting from the
reduction of the Company's workforce, writedown and disposal of excess
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furniture and equipment and office facilities, and write-offs of assembled
workforce and goodwill arising from the Company's acquisition of StarPress
Multimedia, Inc. in June 1995.
During the quarter ending March 31, 1996 and due to the restructuring plan
adopted, the Company made an arrangement with Graphix Zone, Inc. for Graphix
Zone to assist in the areas of sales, marketing and general administration. To
compensate Graphix Zone, Inc. for the use of its resources, the Company
reimbursed Graphix Zone $315,941 for sales and marketing, and $121,982 for
general administration.
On October 27, 1995, the Company entered into an agreement with Silicon
Valley Bank for a $750,000 loan that bears interest at the bank's prime rate
plus 150 basis points. The loan was due on February 24, 1996 and is secured by
all of the Company's assets excluding the Sony assets described below. The
Company also issued a warrant to Silicon Valley Bank to purchase 42,000 shares
of the Company's Common Stock at an exercise price of $1.25 per share. The
warrant expires on October 27, 2000. The Company received a waiver for all
defaults under the line of credit from lender through March 29, 1996. As of May
8, 1996 the line of credit has not been paid and is in default, and the Company
is currently negotiating a renewal and extension with Silicon Valley Bank.
On November 1, 1995, the Company purchased from Sony Interactive
Entertainment, Inc. ("Sony") certain products and other assets which consisted
of: 14 products currently in distribution or production; related finished goods
inventory and royalty income; prepaid royalties; accounts receivable for these
products shipped by Sony after October 11, 1995; and furniture and equipment.
The purchase price for these assets consisted of 927,716 shares of the Company's
Common Stock and a promissory note for $561,781. The promissory note, which was
paid on February 2, 1996, bore interest at the prime rate as quoted by Chemical
Bank and was secured by the assets acquired.
On March 13, 1996 the Company and Graphix Zone, Inc. signed a multi-year
distribution agreement with GT Interactive Software Corporation to exclusively
distribute the Company's and Graphix Zone's products. For the nine months ended
March 31, 1996, $965,000 of net revenues, 24% of the total nine months net
revenues, were from GT Interactive Software Corporation.
The Company has incurred significant losses and has substantial negative
cash flows from operations, and expects additional losses in this fiscal year.
At March 31, 1996, the Company had an accumulated deficit of $21,617,597.
Pending the reorganization of the Company with Graphix Zone as described above,
the Company plans to continue to finance its operations with a combination of
additional borrowings from Graphix Zone and others, revenues from product sales,
and proceeds from sales of excess furniture, equipment and other assets, as well
as negotiate extending the maturity of the Silicon Valley Bank loan.
RESULTS OF OPERATIONS
StarPress had a net loss of $6,995,000 for the nine months ended March 31,
1996, compared to a net loss of $5,111,000 for the similar period of 1995. The
1996 loss included a charge of $1,950,000 for the restructuring of the Company's
operations described above. The
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1995 loss included a $586,000 writedown of certain intangible assets as follows:
covenant not-to-compete of $221,000, product development costs of $140,000 and
goodwill of $225,000.
Net revenues for the nine months ended March 31, 1996 were $3,927,000
compared to $1,712,000 for the similar period of 1995. Net revenues from
product sales were $3,486,000 and $1,587,000 for the nine months ended March 31,
1996 and 1995, respectively. The increase in net revenues from product sales
for the nine month period ended March 31, 1996 compared to the same period in
1995 was due to the additional sales generated by the acquired Sony products
described above. The remaining net revenues of $441,000 in 1996 and $125,000 in
1995 resulted from development projects and hardware and software sales in
Bulgaria. Twenty-four percent (24%) of the total nine months net revenues was
from one customer, GT Interactive Software Corporation.
Cost of revenues for the nine months ended March 31, 1996 was $2,182,000 or
56% of net revenues compared to $1,124,000 or 66% of net revenues for the
similar period of 1995. The decrease in cost of revenues as a percentage of
revenues for 1996 when compared to 1995 was due to the selling of products that
carried low royalty costs and low product costs. Cost of revenues for fiscal
1996 included prepaid royalties acquired from Sony of $256,000. The Company's
policy is to expense prepaid royalties as they are incurred due to the lack of
available evidence that such advances can be realized from future earned
royalties. Cost of revenues for 1995 included a $140,000 write-off of
capitalized product development costs as a result of developing new software
engines.
Operating expenses increased $3,263,000 from the $5,410,000 reported in the
nine months ended March 31, 1995 to $8,673,000 for the same nine months of
fiscal 1995. Included in the $8,673,000 of operating expenses for the nine
months ended March 31, 1996 is a charge for restructuring the Company's
operations of $1,950,000.
Research and development expenses increased $496,000 from the $1,581,000
reported in the nine months ended March 31, 1995 to $2,077,000 for the same
period of fiscal 1996 and resulted from increases in the number of products
being developed and increased staffing that occured during the first two
quarters of the fiscal year. These costs which were partially offset by a
decrease in royalties costs on products under development. The increased
staffing arose from the addition of iTravel employees who recently completed the
development of two travel products. iTravel was acquired as part of the
Company's acquisition of StarPress Multimedia in June 1995. During the last
month of the quarter ending March 31, 1996, all of the research and development
employees in San Francisco and all the employees of iTravel were laid off as
part of the adopted restructuring plan in anticipation of the planned
reorganization with Graphix Zone, Inc. During April of 1996 all of the
employees and assets of Great Bear - Bulgaria were sold to a related party. All
of the research and development activities will be conducted at Graphix Zone,
Inc. as part of the current reorganization plan to combine the two companies.
Sales and marketing expenses increased $197,000 from the $1,932,000
reported in the nine months ended March 31, 1995 to $2,129,000 for the same nine
months of 1996. Increases in personnel costs, commissions to sales
representatives, and marketing development funds associated with the GT
Interactive distribution agreement were partially offset by decreases in
expenses for trade shows, consultants and public relations firms and the absence
of amortization
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and write-offs of covenants not-to-compete in the current year. During the
quarter ended March 31, 1996 all of the marketing employees were laid off as
part of the adopted restructuring plan. Marketing for the Company's products
will be provided by Graphix Zone, Inc. and in return Graphix Zone will charge
back the Company a percentage of its total marketing costs. The percentage used
will be the ratio of total sales of both Graphix Zone and StarPress to StarPress
product sales. For the quarter ended March 31, 1996 the Graphix Zone charge back
for marketing was $315,941.
General and administrative expenses increased $620,000 from the $1,897,000
reported in the nine months ended March 31, 1995 to $2,517,000 for the similar
period of 1996 due to increases in staffing and related salaries and benefits
due to the StarPress Multimedia acquisition, legal and accounting fees due to
the reorganization plan with Graphix Zone, Inc., and increased allowance for
doubtful accounts due to increased sales. Expenses incurred in the 1995 period,
but not in 1996, included $145,000 for a financial consultant and a $225,000
write-off of goodwill arising from the acquisition of MicroBase, Inc. due to the
diminishment of its net realizable value. During the quarter ended March 31,
1996 all but four administrative employees were laid off as part of the adopted
restructuring plan. A majority of the general and administrative activities for
the Company will be provided by Graphix Zone, Inc. and in return Graphix Zone
will charge back the Company its allocated share of expenses based upon an
estimated use of personnel and resources. For the quarter ended March 31, 1996
the Graphix Zone charge back for general and administrative assistance was
$121,982.
Interest expense for the nine months ended March 31, 1996 was $71,000
compared to $302,000 for the similar period of 1995. The higher interest
expense in fiscal 1995 was due to the conversion of the Company's convertible
subordinated debentures during the 1995 fiscal period.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash of $16,000 and a working capital
deficit of $5,727,000.
On October 27, 1995, the Company entered into an agreement with Silicon
Valley Bank for a $750,000 loan that bears interest at the bank's prime rate
plus 150 basis points. The loan was due on February 24, 1996 and is secured by
all of the Company's assets excluding the assets acquired from Sony described
above. The proceeds were used for working capital and to repay
stockholders/officer loans of $150,000 received between October 12 and November
2, 1995. The Company received a waiver for all defaults under the line of credit
from lender through March 29, 1996. As of May 8, 1996 the line of credit has
not been paid and is in default, and the Company is currently negotiating a
renewal and extension with Silicon Valley Bank. Unless the renewal and
extension is obtained from Silicon Valley Bank, the bank retains the right to
foreclose on the Company's assets.
During the period from February 1 through May 8 , 1996, the Company
received loans from Graphix Zone, Inc. aggregating $3,716,000 which were used
for working capital and payment of the Sony note described above. As described
above, a significant portion of these loans are secured by a second priority
security interest in all of the Company's assets. All of the loans bear interest
at the applicable federal rate, and are payable upon demand or in six months if
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no demand is made. The Company also received a $250,000 loan from a
stockholder/director on December 4, 1995, which it repaid on February 2, 1996,
from proceeds received from Graphix Zone.
Pending the reorganization of the Company with Graphix Zone as described
above, the Company plans to continue to finance its operations with a
combination of additional borrowings from Graphix Zone and others, revenues from
product sales, and proceeds from sales of various assets such as excess
furniture and equipment, as well as negotiate extending the maturity of the
Silicon Valley Bank loan. The Company's ability to continue as a going concern
is dependent upon it successfully obtaining additional borrowings from Graphix
Zone or others. In the event that the reorganization of the Company with
Graphix Zone is not consummated, the Company will require additional financing
through private borrowings or equity financings.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
On October 27, 1995, the Company entered into an agreement with
Silicon Valley Bank for a $750,000 loan that bears interest at the bank's prime
rate plus 150 basis points. The loan was due on February 24, 1996 and is
secured by all of the Company's assets excluding the assets acquired from Sony
described above. The Company received a waiver for all defaults under the line
of credit from lender through March 29, 1996. As of May 8, 1996 the line of
credit has not been paid and is in default, and the Company is currently
negotiating a renewal and extension with Silicon Valley Bank. Unless the
renewal and extension is obtained from Silicon Valley Bank, the bank retains the
right to foreclose on the Company's assets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.32..................Distribution Agreement dated March 31, 1996, by and
among the Company, Graphix Zone, Inc. and GT
Interactive Software Corp., a Delaware corporation.
(b) Reports on Form 8-K
A report on Form 8-K, dated January 3, 1996, was filed on January 18, 1996
to report under Item 5. Other Events that the Company entered into an Agreement
and Plan of Reorganization with Graphix Zone, Inc., a California corporation,
pursuant to which each of the Company and Graphix Zone, Inc. will become wholly-
owned subsidiaries of a newly formed Delaware holding company.
13
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
StarPress, Inc.
(Registrant)
Date: May 13, 1996 /s/ John C. Lukrich
------------------------------------
John C. Lukrich
Vice President and Chief Financial Officer
14
<PAGE>
EXHIBIT 10.32
[GT INTERACTIVE SOFTWARE]
March 13, 1996
Mr. Norm Block
Chief Financial Officer
Graphix Zone, Inc.
42 Corporate Park
Suite 200
Irvine CA 92714
Dear Norm:
Thank you for your interest in GT Interactive Software Corp. ("GT").
This letter sets forth the terms and conditions of the agreement by which GT
shall manufacture, package and distribute computer programs published, vended
or created either by Graphix Zone, Inc. a California corporation ("Graphix
California") or StarPress, Inc. a Colorado corporation ("StarPress")
(together, "Graphix"). Pursuant to an Agreement and Plan of Reorganization
between StarPress, and Graphix California, dated January 3, 1996 (the
"Reorganization Plan"), it is contemplated that both entities shall become
wholly owned subsidiaries of Graphix Zone, Inc., a Delaware corporation ("New
GZ").
1. Vendors: StarPress, Inc.
425 Market Street
5th Floor
San Francisco, 94105
Tel: 415-778-3100
Fax: 415-495-5407
Graphix Zone, Inc.
38 Corporate Park
Suite 100
Irvine CA 92714
Tel: 714-833-3838
Fax: 714-833-3990
2. Key Contacts: Harry Rubin (GT)
Norman Block (Graphix)
3. Definitions:
a. "Contractual Quarter" means a quarterly division of the
1
<PAGE>
periods between anniversaries of the full execution of this agreement (the
"Effective Date").
b. "Graphix Distributor Price" means the deemed Graphix wholesale price
of the Software Packages of a Title as agreed between the parties.
c. "GT Net Cost" means the price paid by GT for a Software Package,
calculated, as applicable, as either (i) the Graphix Distributor Price less
the Marketing Development Fund or (ii) the stated percentage of the Graphix
Distributor Price, as set forth below and in Exhibit A.
d. "Marketing Development Fund" or "MDF" means the net dollar amount
credited to GT on a per Software Package basis for costs associated with the
marketing and merchandising of each Title.
e. "Mass Merchant Outlet" means large national or multi-regional chain
stores, warehouse clubs and resellers that carry a wide variety of goods,
including non-consumer software and non-electronic goods. By way of example
only, they include Wal-Mart, Caldor, Target, Sears, J.C. Penney, Kmart,
Hills, Sam's Clubs, Toys R Us, Kaybee Toys, Office Depot, Staples, Beamscope
and Price-Costco. Specifically excluded from this definition are consumer
electronic stores and traditional computer hardware and software specialty
retailers.
f. "Software Package" means a Title on floppy disk, CD-ROM or
future-developed formats, along with any applicable manuals and packaging.
g. "Title" means a computer program for which Graphix shall have the
right to grant to GT its rights of manufacture, packaging and distribution
under the terms of this agreement.
4. Grant of Rights: GT is granted all rights in the Territory to manufacture
and package and to contract for the manufacture and packaging (together,
"Manufacture") and to distribute Software Packages of the Titles in the
channels of distribution set forth below. Except as otherwise set forth in
this agreement, GT's rights so granted shall be exclusive during the term of
this agreement except that, for distribution to Office Depot, Staples and
Beamscope, those rights shall be non-exclusive.
5. Term:
a. The term of this agreement shall commence effective on the Effective
Date and continue for five (5) years or until any earlier termination of this
agreement. At the option of GT, exercisable during that term, GT shall have
the right to renew the term of this agreement for an additional five (5) year
term under the same terms
2
<PAGE>
and conditions. The initial term and any renewal shall be referred to below
as the "Term."
b. GT's rights under this agreement with respect to each Title shall
continue for the greater of the duration of the Term or a minimum
exploitation period of one (1) year. In addition, GT shall have the right to
sell-off all remaining Software Packages of any Title following the
expiration of its rights with respect to that Title, whether due to the
expiration or termination of the Term, expiration of the minimum exploitation
period, or otherwise.
c. This agreement shall remain in effect unless terminated by either
party as provided below.
d. In the event a party is given notice that it is in material breach of
this agreement, it shall have thirty (30) days from receipt to cure its breach
in all material respects. On the failure to cure, the non-breaching party
may terminate this agreement. However, either party may, at its option,
immediately terminate this agreement if (i) a receiver is appointed for the
other party or its property, (ii) the other party becomes insolvent or unable
to pay its debts as they mature, or makes an assignment for the benefit of
its creditors, (iii) the other party seeks relief or if proceedings are
commenced against the other party or on its behalf under any bankruptcy,
insolvency or debtor's relief law, and those proceedings have not been
vacated or set aside within sixty (60) days from the date of their
commencement, or (iv) if the other party is liquidated or dissolved.
6. Channels of Distribution: GT shall have the exclusive right to distribute
the Titles to Mass-Merchant Outlets in the Territory.
7. Territory: The "Territory" means the United States (and its territories,
military facilities and possessions), Canada and Mexico.
8. Titles, Advances, Minimums and Payment:
a. Except as set forth in Subsection 8(h), GT shall buy a minimum of
five million dollars ($5,000,000) worth of Software Packages (the "Minimum
Order"), in the amounts calculated and payable as set forth below. All
payments of the Minimum Order shall be conditioned upon the full performance
by Graphix of its obligations under this agreement, including, without
limitation, furnishing Titles accepted by GT as provided in Subsection 8(d)
and the corporate-organization condition set forth in Subsection 8(h). Those
payments shall be made in installments of five hundred thousand dollars
($500,000) each (the "Quarterly Minimum") during each Contractual Quarter,
but GT shall have the right to credit all payments of the "Initial Payment"
(as defined below) against any Quarterly Minimum payments otherwise due and
owing.
3
<PAGE>
b. With the execution of this agreement, GT hereby places an initial
order for Software Packages, payable out of the total Minimum Order. The
initial order shall total one million two hundred fifty thousand dollars
($1,250,000) (the "Initial Payment") worth of Software Packages of the Titles
at their GT Net Cost, as set forth in Exhibit A (the "Initial Titles"), which
is attached to this agreement and made a part of it. The unit quantities and
total purchase amounts per Initial Title stated in Exhibit A are illustrative
only; GT may order Software Packages of each Initial Title in quantities it
deems fit, as long as it shall pay the Initial Payment with respect to all
Software Packages so ordered. GT will pay one hundred fifty thousand dollars
($150,000) of the Initial Payment upon receipt and verification of
technically acceptable gold master disks (the "Masters") and all artwork for
the Initial Titles, which shall be delivered within five (5) business days
following the Effective Date. GT will pay to Graphix the Initial Payment
balance of one million one hundred thousand dollars ($1,100,000) within ninety
(90) days thereafter.
c. GT shall pay the applicable price for all future purchases of
Software Packages under this agreement, (i) net sixty (60) days of their
receipt by GT if Manufactured by Graphix or its contracting third parties or
(ii) net sixty (60) days after their shipment by GT if Manufactured by GT or
third parties contracted by GT. The Software Packages of any Titles not
Manufactured by GT or its contractors shall be delivered FOB GT's New Jersey
warehouse. Graphix shall use all reasonable efforts to ship orders to GT
within five (5) days of a GT purchase order.
d. Immediately following the Execution Date, Graphix shall provide GT
with two lists of Titles (the "Later Titles") drawn from all other Titles of
substantial commercial potential published and available for quantity
shipment or manufacture by, from or through Graphix. Those lists shall be
updated regularly as new Titles become available, but no fewer than three (3)
Later Titles shall be added during each Calendar Quarter, as accepted for
inclusion by the following procedure: One list shall be the "A List" and the
other list shall be the "B List." The designation of a Later Title for
inclusion on the A List or B List and the designation of its GT Net Cost shall
be by mutual consent; however, GT shall have no obligation to accept for
inclusion on either list any Title which it determines does not have
substantial commercial potential in the granted channels of distribution,
with the understanding that GT'S acceptance of qualifying Titles shall not be
unreasonably withheld. During each semi-annual period during the Term of this
agreement, commencing on first (1st) and third (3rd) Contractual Quarters of
each annual period of the Term, at least one-half (1/2) of the minimum of the
six (6) accepted Later Titles shall have been added to the A List. Later
Titles on the A List shall be purchased at a GT Net Cost of sixty-five
percent (65%) off the Graphix Distributor Price. Later Titles on the B List
shall be purchased at a GT Net Cost of seventy-five percent (75%) off
the Graphix Distributor
4
<PAGE>
Price. For Later Titles only, the applicable Graphix Distributor Price of
each shall equal fifty percent (50%) of its suggested retail price as
established by Graphix from time to time; the Graphix Distributor Price of
each Initial Title is set forth in Exhibit A.
e. Should GT order more than its Quarterly Minimum of Software Packages
during any Contractual Quarterly, the amount of that order in excess of the
Quarterly Minimum, including, without limitation, the Initial Payment, shall
be credit toward the Quarterly Minimum with respect to the succeeding
Contractual Quarters during the Term. In the event that Graphix shall fail to
provide GT with the minimum number of accepted Later Titles during any
Contractual Quarterly under Subsection (d), or the minimum accepted number of
A List Titles during any semi-annual period under Subsection (d), the
Quarterly Minimum with respect to that Contractual Quarter, or both Quarterly
Minimums with respect to that semi-annual period, as the case may be, shall
be waived. Any payment of any affected Quarterly Minimum shall be credited to
later purchases, at the election of GT by notice.
f. GT shall Manufacture the Software Packages of the Initial Titles and
shall have the option, exercisable in its discretion, to Manufacture Software
Packages of Later Titles, all at a cost to Graphix of two dollars ($2.00) per
unit, adjusted for inflation at the rate of five percent (5%) annually (the
"Manufacturing Cost"); however, for Later Titles only, the Manufacturing Cots
for Titles Manufactured in jewel cases, and without larger exterior packaging
shall be one dollar ($1.00) per unit, adjusted for inflation as provided in
this sentence. Graphix shall supply to GT all master disks, artwork and other
materials in its possession reasonably useful or necessary for the
Manufacture of the Titles. Graphix shall provide GT with any necessary
technical assistance to facilitate the Manufacturing process. At the option of
GT, all Manufacturing Costs may be credited by it against any sums which it
shall owe to Graphix under this agreement; Manufacturing Cots not so credited
shall be paid by Graphix within sixty (60) days following receipt of a GT
statement for them. Manufacturing Costs shall be otherwise independent of all
other cost considerations and cost calculations pursuant to the terms of this
agreement, including MDF.
g. If Graphix shall desire that Software Packages of any Title
distributed by it be offered to a Mass Merchant Outlet in the United States
and Canada which is not carrying that TItle (a "Retailer"), it shall so
inform GT in writing. GT shall then have one hundred twenty (120) days to
arrange for distribution of that Title to that Retailer; if GT shall not have
done so, Graphix may directly or by third-parties sell Software Packages of
that Title to that Retailer unless and until GT shall have established itself
as a distributor to that Retailer, at which time Graphix shall immediately
terminate all direct and third-party sales to that
5
<PAGE>
Retailer. Each Software Package so distributed directly by Graphix or by
third parties may be bought by Graphix from GT at prices determined as
provided in Subsection 1(f). Graphix shall not perform any act or omission
detrimental to GT's relationships with its retail accounts in connection with
Graphix's exercise of its rights under this subsection, nor shall it permit
any third-party distributor to do so. GT shall provide Graphix with written
notice immediately upon GT having decided to establish itself as a
distributor to any Retailer, and in any event no less than twenty (20) days
prior to the effectiveness of Graphix's obligation to terminate direct and
third-party sales, if known to GT.
h. As an express exception to the foregoing, if StarPress, Inc. and
Graphix Zone, Inc. shall not have become wholly owned subsidiaries of New GZ
as contemplated by the Reorganization Plan by the date for payment of the
first Quarterly Minimum amount in excess of the Initial Payment credit, GT's
obligations with respect to the Minimum Order shall be automatically
canceled; without limitation, Subsections 8(a) and (e) shall thereupon be
deemed deleted from this agreement, which shall, in all respects unrelated to
the Minimum Order, remain enforceable in accordance with its terms.
i. GT shall have the right to issue compilation Software Packages
containing a Title collected with other Titles or other computer programs
("Compilation") if Graphix shall, at any time during the Term:
(i) market the Title as a materially discounted or "second-line"
product; or
(ii) so compile the affected Title. However, GT shall not have the
right to compile a Title already compiled by Graphix if (a) the Total
Graphix wholesale price of the Compilation is discounted by less than
twenty-five percent (25%) of the sum of the Graphix wholesale prices for
each computer program included in the Compilation, including the affected
Title; or (b) Graphix has compiled the affected Title in a Compilation
containing only one other computer program which has a higher Graphix
wholesale price and the combined price is not less than the original
release price of the higher priced title, and the affected Title is not
compiled with any other computer program.
In the event that Graphix shall not have taken any action as stated in
Clauses (i) or (ii) above, GT may only so compile any Title with the consent
of Graphix, which shall not be unreasonably withheld. For the sale of a
compilation Software Package containing any Title, GT shall pay a royalty per
Title of ten percent (10%) of the GT wholesale price for that compilation
Software Package, prorated by the number of computer programs it shall
contain. For the avoidance of doubt, that royalty shall apply to each Title
included
6
<PAGE>
in such compilation Software Package.
9. Shelf Price: Retailers have the discretion to set the street price for
Software Packages distributed under this agreement.
10. Promotional copies: GT shall have the right to distribute a reasonable
number of promotional copies without compensation.
11. Artwork: All Software Package, promotional and CD-ROM artwork shall be
provided by Graphix on SyQuest disk at no charge to GT.
12. Intellectual-Property Rights: The Software Packages shall contain
appropriate notices evidencing ownership of applicable intellectual-property
rights of Graphix in forms reasonably acceptable to Graphix. If any Software
Package contains intellectual property of GT, including, without limitation,
any of its trademarks, it shall contain appropriate notices evidencing
ownership of applicable intellectual-property rights of GT in forms
reasonably acceptable to GT. During the Term, in connection with GT's
advertisement, promotion and distribution of Software Packages, GT is
licensed by Graphix, on a royalty-free, non-exclusive basis, to use the
trademarks Graphix uses for Software Packages. GT shall provide Graphix with
a copy of the intellectual-property notices that will appear on all packaging
and artwork for Graphix's approval, which shall not be unreasonably withheld.
The failure of Graphix to approve or comment in writing on any intellectual
property notice within five (5) days of its receipt shall be deemed its
acceptance.
13. Advertising: Advertising and promotion shall be the responsibility of GT.
To the extent that Graphix has any advertising or promotional materials for
the Titles, it shall provide them to GT at no charge.
14. Confidentiality: During the term of this agreement, each party will have
access to, and may become acquainted with, certain confidential information
relating to merchandising, Manufacturing, distribution and financial
arrangements with the other party. Both parties agree that they shall not,
until the later of the expiration of the term of this agreement or until such
time as the information is made public either directly or indirectly, by the
party originally responsible for disclosing the information to the other
party, make known to any person, firm or corporation other than a party to
this agreement, any of the foregoing information. These obligations shall not
apply to any information which is required to be disclosed in the context of
an administrative, regulatory or judicial process or review.
15. Product Technical Support: End-user product technical support will be
provided by Graphix.
16. Assignment: Either party may assign its rights or delegate its
7
<PAGE>
duties under this agreement on written consent from the other party.
17. Notices: Notice shall be given to the receiving party at its address set
forth above or at any other address as may be designated in a notice given in
the manner prescribed in this section. All notices shall be in writing and
sent by registered or certified mail with return receipt requested, by secure
courier (such as FedEx) or personally delivered to the party's Key Contact
named in Section 2 or his successor designated by notice. Copies of notices
may be sent simultaneously by fax for information purposes only.
18. Warrants: As of March 13, 1996, Graphix California will have issued and
delivered to GT warrants ("Warrants") to purchase eight hundred thousand
(800,000) shares ("Warrant Shares") of Graphix California common stock
("Common Stock"). As set forth in the form of warrant agreement (the "Warrant
Agreement") attached as Exhibit C and made a part of this agreement, the
Warrants have an exercise price of the lesser of (i) five dollars and twelve
and one half cents ($5.125) per share, and (ii) the "Alternate Price." In
addition, Graphix California has granted to GT registration rights covering
the Warrants and the Warrant Shares, which rights are set forth in the
registration rights agreement (the "Registration Rights Agreement") attached
as Exhibit D and made a party of this agreement and New GZ has agreed to
cooperate in effecting such registration rights. The Warrants have been duly
authorized by all necessary corporate action and the Warrant Certificate
evidencing the Warrant is a validly and legally binding agreement of Graphix,
enforceable against Graphix California in accordance with its terms. The
issuance of the Warrants does not violate any agreement or understanding to
which StarPress or Graphix California is a party, including the
Reorganization Plan. As of the date hereof, there are five million one
hundred eighty-five thousand seven hundred and forty-five (5,185,745) shares
of Common Stock issued and outstanding and eight hundred ninety thousand five
hundred ninety-six (890,596) shares of Common Stock reserved for issuance
upon the exercise of Warrants, options and convertible securities. As of the
date of this agreement, there are thirty one million, six hundred and twenty
five thousand, eight hundred and eight-eight (31,625,888) shares of StarPress
common stock issued and outstanding and nine million, nine hundred forty
eight thousand, three hundred and seventy-three (9,948,373) shares of
StarPress common stock reserved for issuance upon exercise of warrants,
options and convertible securities. Following the mergers contemplated by the
Reorganization Plan, New GZ will have ten million one hundred three thousand
one hundred sixty-one (10,103,161) shares of common stock issued and
outstanding and two million three hundred forty-nine six hundred twenty-four
(2,349,624) shares of common stock reserved for issuance upon exercise of
warrants, options and convertible securities, including the Warrants to be
reserved by Graphix California pursuant to the
8
<PAGE>
Warrant Agreement.
19. Representations and Warranties of Graphix: Each of Graphix California and
StarPress represents and warrants (a) that it is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which it
was incorporated, (b) that it has the full right, power, legal capacity and
authority to enter into this agreement and to carry out its terms, (c) that
it owns or has obtained all intellectual-property rights and all related
rights to the Titles, (d) that nothing contained in the Titles, Software
Packages or any materials relating to them originating with Graphix or
furnished by it shall infringe upon the rights of any third-party, (e) that
it has the unencumbered right to license GT as a Manufacturer and
distributor, (f) that the prices at which GT shall purchase Software Packages
shall be the lowest then available to any distributor of Graphix Titles
during the Term; (g) that the Warrant Agreement, the Registration Rights
Agreement and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action on the
part of Graphix California (and New GZ, as applicable), and (h) that upon
issuance pursuant to the Warrant Agreement, the Warrant Shares will be fully
paid and non-accessible shares of Common Stock. Graphix hereby indemnifies
and holds GT harmless from and against any liability arising out of any
breach or alleged breach by it of the terms of this agreement, its
representations or warranties. Graphix further agrees to defend, indemnify
and hold harmless GT from any loss, damage or liability for any claimed
infringement of any patent, copyright, trademark, trade secrets, or other
claims asserted by any third party arising out of GT's Manufacture or
distribution of any Software Packages under the terms of this Agreement.
20. Representations and Warranties of GT: GT represents and warrants (a) that
it is duly incorporated, validly existing and in good standing under the laws
of the jurisdiction in which it was incorporated, (b) that it has the full
right, power, legal capacity and authority to enter into this agreement and
to carry out its terms, and (c) that it is acquiring the Warrants, and any
shares issuable under them, for investment and not with a view to their
distribution, and will transfer the Warrants and the Common Stock only in
compliance with the Securities Act of 1933. GT hereby indemnifies and holds
Graphix harmless from and against any liability arising out of any breach or
alleged breach by it of the terms of this agreement, its representations or
warranties.
21. Miscellaneous:
a. Graphix California and StarPress shall be jointly and severally
liable for the performance of all Graphix obligations under this agreement.
b. This agreement will be governed by and construed in
9
<PAGE>
accordance with the internal laws of the state of New York applicable to
agreements entered into, and to be performed entirely within New York,
without reference to conflict of laws principles. The forum for the
resolution of disputes concerning this agreement shall be the courts of the
state of New York, County of New York, including federal courts located there.
c. This agreement shall not be construed to create a joint venture,
partnership, franchise or the relationship of principal and agent between the
parties, nor to impose upon either party any obligations for any losses,
debts or other obligations incurred by the other party except as expressly
set forth in it.
d. No waiver of any default or breach of this agreement by either party
shall be deemed a continuing waiver or a waiver of any other breach or
default.
e. If any provision contained in this agreement shall be held by any
court of competent jurisdiction to be illegal, void or unenforceable, that
provision shall be of no force or effect while that infirmity shall exist.
The infirmity shall have no effect upon the binding force or effectiveness of
any of the other provisions.
f. This agreement sets forth the entire agreement between the parties
with respect to its subject matter and supersedes any prior oral or written
agreements between the parties. This agreement may not be changed, modified,
amended or supplemented, except in writing signed by the parties. Each of the
parties acknowledges and agrees that the other has not made any
representations, warranties or agreements of any kind, except as may be
expressly set forth in this agreement.
g. The section headings used in this agreement are for convenience only
and shall have no legal effect. Sections 5, 8, 12, 14, 15, 18, 19, 20 and 21
shall survive th expiration of the term or earlier termination of this
agreement. GT may contract with others as it deems necessary for its
performance under this agreement. "Sale" is a term of art for the lawful
licensure of software to end users; nothing contained in this agreement shall
be deemed to imply that any intellectual-property rights of Graphix in its
Titles shall be transferred to end users or GT. Where appropriate in context,
the use of the singular shall include the plural, the conjunctive shall
include the disjunctive, ANY shall include ALL, and vice versa.
10
<PAGE>
By your countersignature below, you agree to the foregoing.
Sincerely,
GT Interactive Software Corp.
By: /s/ Harry Rubin
----------------------------------------
Harry Rubin
Executive Vice President
Execution Date:
----------------------------
Accepted and agreed:
Graphix Zone, Inc.
By: /s/ C.R. Cortright
----------------------------------------
Name: C. Cortright
Title: President
Execution Date: 3/13/96
----------------------------
StarPress, Inc.
By: /s/ R.S. Posner
----------------------------------------
Name: R.S. Posner
Title: Chairman
Execution Date: 3/20/96
----------------------------
11
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