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PURCHASE AGREEMENT

by and among

SOUTHPEAK INTERACTIVE CORPORATION,
 
INTERMEZZO ESTABLISHMENT,
 
AND
 
PARAGON INVESTMENT FUND
 
March 31, 2010

 

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PURCHASE AGREEMENT

This Purchase Agreement (the “Agreement”) is made and entered into this 31st day
of March, 2010, by and among SouthPeak Interactive Corporation, a Delaware
corporation (“Buyer”), Intermezzo Establishment, a Liechtenstein corporation
(“Intermezzo”), and Paragon Investment Fund, an investment fund organized under
the laws of the Cayman Islands (“Paragon”).
 
WHEREAS, Intermezzo has assigned all of its right, title and interest in and to
the Publishing Agreement dated August 20, 2009 between Intermezzo and FireFly
Holdings Limited (“FireFly Agreement”) for the development of the electronic
game “Stronghold 3” (the “Game”) to IRP GmbH, a corporation organized under the
laws of Switzerland (the “Company”);
 
WHEREAS, Intermezzo and Paragon (collectively, the “Shareholders”) are the sole
shareholders of the Company;
 
WHEREAS, the Buyer desires to acquire all the outstanding shares of stock that
the Shareholders hold of the Company (the “Stock”), and the Shareholders desire
to sell the shares of Stock to Buyer for the consideration set forth below,
subject to the terms and conditions of this Agreement;
 
WHEREAS, Intermezzo holds a note (the “Note”) in the principal amount of EUR
4,385,371.43 of CDV Finance Schweiz, AG for which CDV Software Entertainment AG,
a corporation organized under the laws of Germany, has assumed the obligation to
pay; and
 
WHEREAS, Buyer desires to obtain by sale and assignment the right to repayment
of EUR 3,700,000 of the principal and interest due thereon under the Note.
 
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereby agree as follows:
 
ARTICLE I
DEFINITIONS AND INTERPRETATION
 
1.1         Definitions. For purposes of this Agreement, the following terms
have the respective meanings set forth below:
 
“Governmental Entity” means any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign.
 
“knowledge” means actual knowledge or awareness as to a specified fact or event
of a Person that is an individual or of an officer, director or managerial
personnel of a Person that is a corporation or of a Person in a similar capacity
of an entity other than a corporation.
 
“Legal Requirements” means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.

 

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“Lien” means any mortgage, pledge, security interest, encumbrance, lien,
restriction or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any affiliate of the
seller, or any agreement to give any security interest).
 
“Losses” shall include any loss, damage, injury, liability, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including any reasonable
legal fee, expert fee, accounting fee or advisory fee), charge, cost (including
any cost of investigation) or expense of any nature.
 
“Material Adverse Effect” means any change, event, violation, inaccuracy,
circumstance or effect, individually or when aggregated with other changes,
events, violations, inaccuracies, circumstances or effects, that is materially
adverse to the business, assets, revenues, financial condition, results of
operations or business prospects of an entity and its subsidiaries, taken as a
whole, except to the extent resulting from: (a) changes in general industry or
economic conditions, (b) adverse effects arising from the announcement or
consummation of the transactions contemplated hereby, or (c) changes to
generally accepted accounting principles that apply generally to the industry in
which the entity operates.
 
“Net Receipts” means all monies (expressed in U.S. Dollars) Buyer and its
subsidiaries actually receive from the sale, license or lease of the Game under
the FireFly Agreement net of a reasonable reserve for returns, less all Advance
Royalty and Royalty payments paid and payable under Sections 6.1 and 6.2 of the
FireFly Agreement and less, to the extent deducted under the FireFly Agreement
to determine net receipts thereunder, (i) all applicable duties, value-added
taxes and other similar taxes, (ii) direct manufacturing costs and other costs
of fulfillment, (iii) discounts, markdowns and allowances, (iv) marketing and PR
expenses and (v) localization expenses.
 
“Person” means any individual, corporation, partnership, firm, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, Governmental Entity or other entity.
 
“SEC” means the Securities and Exchange Commission.
 
“Tax” or “Taxes” refers to any and all federal, foreign, state, provincial,
local and foreign taxes, including, without limitation, gross receipts, income,
profits, sales, use, occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
assessments, governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts and any
obligations under any agreements or arrangements with any other Person with
respect to any such amounts and including any liability of a predecessor entity
for any such amounts.
 
1.2         Other Defined Terms. For purposes of this Agreement, the following
terms have the respective meanings set forth in the section opposite each such
term:

 
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TERM
 
SECTION
Agreement
 
Preamble
Buyer
 
Preamble
Buyer Indemnified Party
 
Section 7.1
Buyer Shares
 
Section 2.2
Closing
 
Section 2.1
Closing Date
 
Section 3.1
Common Stock
 
Section 2.2
Company
 
Preamble
Deductible Amount
 
Section 7.4
Exchange Act
 
Section 4.5
FireFly
 
Section 4.6
FireFly License
 
Section 4.6
Fixed Payments
 
Section 2.2
Game
 
Section 2.2
Indemnified Party
 
Section 7.3
Net Receipts Payments
 
Section 2.2
PDF
 
Section 3.1
SEC Reports
 
Section 5.7
Shareholder Indemnified Party
 
Section 7.2
Stock
 
Recitals
Stronghold 3
 
Recitals
Survival Period
 
Section 7.5
Third Party Claim
 
Section 7.3

ARTICLE II
PURCHASE AND SALE OF THE STOCK
 
2.1         Purchase of the Stock from the Shareholders and Right to Repayment
of Part of Note from Intermezzo. Subject to and upon the terms and conditions of
this Agreement, at the closing of the transactions contemplated by this
Agreement (the “Closing”), the Shareholders shall sell, transfer, convey, assign
and deliver to the Buyer, and the Buyer, in part, upon reliance of the covenants
set forth in Section 6.5 of this Agreement, shall purchase, acquire and accept
from the Company, all of the Stock. Pursuant to the Sale and Assignment
Agreement attached hereto as Exhibit A (“Assignment Agreement”) which shall be
executed at the Closing, Buyer shall purchase from Intermezzo the principal and
interest amount of EUR 3,700,000 due under the Note plus the interest accrued
and unpaid thereon after March 31,2010 for the consideration set forth in the
Assignment Agreement.
 
2.2         Purchase Price. The purchase price (the “Purchase Price”) to be paid
to the Shareholders by the Buyer for the Stock shall be (a) Ten Million
(10,000,000) shares (“Buyer Shares”) of the Buyer’s common stock, par value
$.0001 per share (the “Common Stock”), (b) 10% of Net Receipts not to exceed
$1,000,000 (“Net Receipts Payments”) and (c) fixed payments totaling $1,200,000
at such times and in such amounts as set forth on Exhibit B, by wire transfer of
immediately available funds to the accounts of the Shareholders designated in
writing prior to the Closing (the “Fixed Payments”). The Buyer will account for
and make the Net Receipts Payments at the same time and in the same manner that
accountings for and payments of the Royalty payments are required and due under
the FireFly Agreement; provided, however, no obligation will exist on the part
of the Shareholders to render an invoice for such Net Receipts Payments. All
amounts and shares payable and issuable to the Shareholders shall be equally
divided between the Shareholders unless they indicate otherwise to Buyer.

 
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ARTICLE III
THE CLOSING
 
3.1         Closing. The Closing shall take place at the offices of Greenberg
Traurig, LLP, 1750 Tysons Boulevard, Suite 1200, McLean, Virginia 22102
contemporaneously with the execution and delivery of this Agreement (the
“Closing Date”). The documents to be delivered at the Closing (other than stock
certificates evidencing the Buyer Shares) may, at the election of the parties,
be exchanged by telecopier or electronic transmission in portable document
format (“PDF”) upon a written undertaking to provide original executed copies
within one business day following the Closing.
 
3.2         Sale. Shareholders, upon the terms and conditions of this Agreement,
hereby sell (verkaufen) and hereby transfer (treten ab) the Stock to the Buyer
under the condition precedent (unter der aufschiebenden Bedingung) of the
receipt of the Buyer Shares and the initial payment set forth in Section.
3.7(ii).
 
3.3         Acceptance. Buyer hereby accepts such sale and transfer of the
Stock.
 
3.4         Ancillary Rights. The sale and transfer of the Stock hereunder shall
include without limitation any and all ancillary rights (Nebenrechte) pertaining
to the Stock, including the rights to any undistributed profits
(Gewinnbezugsrechte).
 
3.5         Cooperation. The Parties shall reasonably cooperate with each other
with respect to all filings that the Parties are required to make or elect to
make in connection with the consummation of this Agreement.
 
3.6         Closing Deliveries by Paragon and Intermezzo. Paragon and Intermezzo
shall deliver to the Buyer at the Closing the following:
 
(i)         stock certificates representing the Stock duly endorsed in blank or
accompanied by stock powers duly executed by Paragon;
 
(ii)        certificates of the Secretary of the Company attesting to the
incumbency of the Company’s officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the organizational documents delivered
pursuant to Section 4.1;
 
(iii)       the original minute book of the Company to the extent one exists;
 
(iv)       the consent of FireFly Holdings Limited to the assignment of the
FireFly Agreement to the Company;

 
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(v)       a resignation, effective as of the Closing, of each officer and
director of the Company from each such position, executed by such person;
 
(vi)      the executed Assignment Agreement; and
 
(vii)     a cross receipt executed by the Shareholders for the portion of
Purchase Price being paid at the Closing and a cross receipt of Intermezzo for
the consideration it is receiving under the Assignment Agreement.
 
3.7         Closing Deliveries of the Buyer. The Buyer shall deliver to Paragon
and Intermezzo at the Closing the following:
 
(i)         the Buyer Shares (issued in accordance with Section 2.2);
 
(ii)        the initial $50,000 of the Fixed Payments;
 
(iii)       the initial $50,000 payment due Intermezzo under the Assignment
Agreement;
 
(iv)      certificates of the Secretary of the Buyer attesting to the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement; and
 
(v)       a cross receipt executed by the Buyer for the Stock.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INTERMEZZO AND PARAGON
 
Intermezzo and Paragon jointly and severally represent and warrant to the Buyer,
as set forth below in this Article IV.
 
4.1         Organization and Qualification. The Company is an unused shell
corporation, duly organized, validly existing and in good standing under the
laws of Switzerland and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Complete and correct copies of the charter of the
Company, as amended and currently in effect, have been heretofore delivered to
Buyer or Buyer’s counsel. The Company is not in violation of any of the
provisions of its charter or any other governing document.
 
4.2         Subsidiaries. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any other company,
corporation, limited liability company or other business entity.
 
4.3         Capitalization.
 
(a)         The Stock represents all of the outstanding capital stock or other
equity securities of the Company. The shares of Stock are validly issued, fully
paid and nonassessable. The shares of Stock are owned by Paragon free and clear
of any Liens and Paragon has all right to sell and transfer the shares of Stock
as contemplated by this Agreement and upon such sale and transfer, such Stock
shall be acquired by the Buyer as contemplated by Section 2.1 of this Agreement
free and clear of any Liens.

 
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(b)           There are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
Stock or similar equity security of the Company or obligating the Company to
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement.
 
(c)           All shares of Stock have been issued in compliance with all
applicable securities laws and other applicable laws and regulations.
 
(d)           There are no registration rights, and there is no voting trust,
proxy, rights plan, anti-takeover plan or other agreement or understanding to
which the Company is a party or by which the Company is bound with respect to
any equity security of any class of the Company.
 
(e)           No shares of Stock are subject to a repurchase option, risk of
forfeiture or other condition under any applicable agreement with the Company.
 
4.4         Authority Relative to this Agreement.
 
(a)           Each of Intermezzo and Paragon has all necessary power and
authority to execute and deliver this Agreement and to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
 
(b)           The execution and delivery of this Agreement and the consummation
by Intermezzo and Paragon of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on their part and no
corporate or organizational proceedings on the part of Intermezzo or Paragon are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby pursuant to the applicable law and the terms and conditions
of this Agreement.
 
(c)           This Agreement has been duly and validly executed and delivered by
Intermezzo and Paragon, and assuming the due authorization, execution and
delivery thereof by Buyer, constitutes the legal and binding obligations of
Intermezzo and Paragon, enforceable against each of them in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity.

 
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4.5         No Conflict; Required Filings and Consents.
 
(a)           The execution and delivery of this Agreement by each of Intermezzo
and Paragon does not, and the performance of this Agreement by such Persons
shall not, (i) conflict with or violate any of their respective charters or
other organizational documents, (ii) conflict with or violate any Legal
Requirements, (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
materially impair the Company’s rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company, or (iv) result in
the triggering, acceleration or increase of any payment to any Person, including
any “change in control” or similar provision, except, with respect to clauses
(ii), (iii) or (iv), for any such conflicts, violations, breaches, defaults,
triggers, accelerations, increases or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or its rights under the FireFly Agreement.
 
(b)           The execution, delivery and performance of this Agreement by each
of Intermezzo and Paragon does not require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity or
other third party (including, without limitation, lenders and lessors, except
(i) for applicable requirements, if any, of the Securities Act of 1933, amended
(the “Securities Act”), the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or applicable securities laws of any foreign country, and the
rules and regulations thereunder, and appropriate documents received from or
filed with the relevant authorities of other jurisdictions in which the Company
is licensed or qualified to do business, (ii) [SHARE REGISTRY IN
[SWITZERLAND]?], and (iii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or prevent consummation of the transactions
contemplated hereby or otherwise prevent the parties hereto from performing
their obligations under this Agreement.
 
4.6         Assets and Liabilities. The Company has no assets other than the
FireFly Agreement. The Company has no liabilities other than its obligations
arising after the Closing under the FireFly Agreement.
 
.  Intermezzo has made available to the Buyer a correct and complete copy of the
FireFly Agreement (as amended to date). The FireFly Agreement: (a) is in full
force and effect; (ii) is legal, valid, binding and enforceable against FireFly
Holdings Limited (“FireFly”); and (iii) will continue to be in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect prior to the Closing. No party is in breach or default, and no event
has occurred which with notice or lapse of time or both would constitute a
breach or default or permit termination, modification or acceleration, under the
FireFly Agreement. Intermezzo and the Company have duly exercised all of their
rights under the FireFly Agreement to assure that FireFly is performing its
obligations under the FireFly Agreement and Intermezzo and the Company have no
knowledge that FireFly has failed to perform in any material respect its
obligations under the FireFly Agreement.
 
4.7         Litigation. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Intermezzo and Paragon, threatened against,
Intermezzo, the Company or Paragon before any Governmental Entity, governmental
department or instrumentality, or any arbitrator. There are no claims, suits,
actions or proceedings pending or, to the knowledge of Intermezzo, the Company
or Paragon, threatened against Intermezzo, the Company or Paragon before any
Governmental Entity, governmental department or instrumentality, or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement.

 
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4.8         Intellectual Property. The Company’s rights under the FireFly
Agreement are not subject to any material proceeding or outstanding decree,
order, judgment, contract, license or stipulation restricting in any manner the
use, transfer or licensing thereof by the Company, or which may affect the
validity, use or enforceability of such rights.
 
4.9         Investment Intent.
 
(a)           The Shareholders are acquiring the Buyer Shares hereunder for
their own accounts for investment and not for distribution, assignment or resale
to others.
 
(b)           The Shareholders acknowledge that the issuance of the Buyer Shares
has not been registered under the Securities Act in reliance upon an exemption
therefrom for nonpublic offerings.
 
(c)           The Shareholders acknowledge that the Buyer Shares may not be sold
or otherwise transferred unless such sale or other transfer is registered under
the Securities Act or an exemption from registration is available.
 
(d)           Each of the Shareholders is an “accredited investor” as that term
is defined in Rule 501 of Regulation D promulgated under the Securities Act, and
has had access to such financial and other information and has been afforded the
opportunity to ask questions of the Buyer’s representatives and has received
answers thereto, as deemed necessary in connection with its decision to accept
the Buyer Shares hereunder.
 
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
 
The Buyer represent and warrant to Intermezzo and Paragon as set forth below in
this Article V.
 
5.1         Organization and Qualification. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being or currently planned by the Buyer to be conducted. The Buyer is not in
violation of any of the provisions of its certificate of incorporation and
bylaws.
 
5.2         Capitalization. The Buyer’s periodic reports on Form 10-Q and Form
10-K and current reports on Form 8-K filed with the SEC accurately reflect its
capitalization as of the dates indicated in such reports. The issued and
outstanding capital stock of the Buyer (a) has been duly and validly issued; (b)
is fully paid and nonassessable; and (c) was not issued in violation of any
preemptive rights or rights of first refusal or first offer.

 
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5.3         Valid Issuance of the Buyer Shares. The Buyer Shares issued to
Paragon hereunder have been duly authorized, validly issued, fully paid and are
non-assessable, free of restrictions on transfer other than restrictions on
transfer under applicable state and federal securities laws, are not subject to
any preemptive rights, rights of first refusal, tag-along rights, drag-along
rights or other similar rights, and have been issued in compliance with
applicable state and federal securities laws. Upon consummation of the
transactions contemplated by this Agreement, Paragon and Intermezzo will acquire
marketable title to the Buyer Shares free and clear of all Liens.
 
5.4         Authority Relative to this Agreement. The Buyer has full corporate
power and authority to: (a) execute, deliver and perform this Agreement, and
each ancillary document that the Buyer has executed or delivered or is to
execute or deliver pursuant to this Agreement, and (b) carry out the Buyer’s
obligations hereunder and thereunder and, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer, and no other corporate proceedings on the part of the Buyer are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Buyer and, assuming the due authorization, execution and delivery thereof by the
other parties hereto, constitutes the legal and binding obligation of the Buyer,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity.
 
5.5         No Conflict; Required Filings and Consents.
 
(a)           The execution and delivery of this Agreement by the Buyer do not,
and the performance of this Agreement by the Buyer shall not (i) conflict with
or violate the Buyer’s certificate or incorporation or bylaws, (ii) conflict
with or violate any Legal Requirements or any rule or regulation of the
Over-the-Counter bulletin board, (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Buyer’s rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Buyer pursuant to,
any contracts to which the Buyer is a party or by or to which any of the
properties or assets of the Buyer may be bound, subject or affected, or (iv)
result in the triggering, acceleration or increase of any payment to any Person
pursuant to any contracts to which the Buyer is a party or by or to which any of
the properties or assets of the Buyer may be bound, subject or affected,
including any “change in control” or similar provision thereof, except, with
respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggers, accelerations, increases or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Buyer.
 
(b)           The execution and delivery of this Agreement by the Buyer do not,
and the performance of its respective obligations hereunder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
and the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which the Buyer is qualified to
do business, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Buyer, or prevent consummation of the transaction
contemplated hereby or otherwise prevent the parties hereto from performing
their obligations under this Agreement.

 
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5.6         Reporting Company Status. The Buyer is subject to the reporting
requirements of the Exchange Act and the Buyer has taken no action designed to,
or which to its knowledge is likely to, have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Buyer
received any notification that the SEC is contemplating terminating such
registration. The Common Stock is traded on the Over-the-Counter bulletin board
and the Buyer has not received any notice regarding, and to the Buyer’s
knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such trading.
 
5.7         Exchange Act Filings; Financial Statements. Buyer has filed all
reports, forms or other information required to be filed by it under the
Securities Act and the Exchange Act (the foregoing materials being collectively
referred to herein as the “SEC Reports”), except as otherwise disclosed in any
EC Reports. Except as otherwise disclosed in any SEC Reports, as of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Buyer included in the SEC Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of Buyer and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
 
5.8         Private Placement. No registration under the Securities Act is
required for the offer and sale of the Buyer Shares by the Buyer to Paragon as
contemplated hereby.

ARTICLE VI
ADDITIONAL AGREEMENTS
 
6.1         Confidential Information. Except in connection with any dispute
between the parties and subject to any obligation to comply with (i) any
applicable law, (ii) any rule or regulation of any Governmental Entity or
securities exchange, or (iii) any subpoena or other legal process to make
information available to the persons entitled thereto, whether or not the
transactions contemplated herein shall be concluded, all information obtained by
any party about any other, and all of the terms and conditions of this
Agreement, shall be kept in confidence by each party, and each party shall cause
its stockholders, directors, officers, managers, employees, agents and attorneys
to hold such information confidential. Such confidentiality shall be maintained
to the same degree as such party maintains its own confidential information and
shall be maintained until such time, if any, as any such data or information
either is, or becomes, published or a matter of public knowledge; provided,
however, that the foregoing shall not apply to any information obtained by a
party through its own independent investigations of the other party or received
by a party from a source not known by such party to be bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the other party, nor to any information
obtained by a party which is generally known to others engaged in the trade or
business of such party. In the event a party to this Agreement becomes legally
compelled to disclose any such information, it shall promptly provide the others
with written notice of such requirement so that the other parties to this
Agreement may seek a protective order or other remedy. If this Agreement shall
be terminated for any reason, the parties shall return or cause to be returned
to the others all written data, information, files, records and copies of
documents, worksheets and other materials obtained by such parties in connection
with this Agreement.

 
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6.2         Public Disclosure. Unless otherwise permitted by this Agreement, the
Buyer, Paragon and Intermezzo shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior written approval of the other (which
approval shall not be unreasonably withheld), except as may be required by law,
in which case the party proposing to issue such press release or make such
public statement or disclosure shall use its commercially reasonable efforts to
consult with the other party before issuing such press release or making such
public statement or disclosure.
 
6.3         Piggyback Registration. The Buyer shall use its reasonable best
efforts to provide to Paragon and Intermezzo piggyback registration rights as to
Buyer Shares in any registration statement the Buyer files in which it is
registering any shares of Common Stock other than on a Form S-4 or Form S-8 or
any successor forms thereto. As a condition to such registration right, each
Stockholder, or any affiliate thereof, shall agree to be bound by the provisions
of any registration rights agreement pursuant to which other shares are being
registered and, absent any such agreement, to such standard limitations and
obligations to which registration rights are generally subject, including, but
not limited to, the obligation to participate in any underwriting and the right
to have any underwriter limit the number of shares being registered by a
stockholder, or any affiliate thereof. In no event, however, shall the Buyer
have the obligation to register any Buyer Shares if such shares can be sold in
accordance with Rule 144 promulgated under the Securities Act.
 
6.4         Timely Filing of SEC Reports. The Buyer will use its best efforts to
file its SEC Reports with the SEC until the one year anniversary of the Closing.
 
6.5         Best Efforts of Intermezzo and Paragon. Intermezzo and Paragon
agree, for each of themselves and their affiliates, to use its best efforts to:
 
(a)           identify potential equity or debt financing opportunities for the
Buyer over the eighteen months following the Closing;

 
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(b)         cause any fund which Intermezzo, Paragon or any affiliate thereof
forms to finance the development of electronic games to consider financing games
for the benefit of Buyer and its affiliates; and
 
(c)         assign to Buyer at Buyer’s request any videogame distribution or
videogame development contracts, and intellectual property rights related to
videogames obtained from CDV Software Entertainment, AG and its affiliates that
revert to Intermezzo, Paragon or any of their affiliates in satisfaction of the
exercise of their rights; provided that any such assignment shall be subject to
(i) Buyer’s repayment of any production or royalty advances directly funded by
Intermezzo or an affiliate thereof, and (ii) assumption by Buyer or any of its
affiliates of any future financial obligations arising under any such videogame
distribution or videogame development contract.
 
6.6         Tax Obligations.
 
(a)         Intermezzo and Paragon, on or after the Closing Date, shall pay any
and all Taxes due or imposed in connection with the transfer of the FireFly
Agreement to the Company or the transactions contemplated in this Agreement, at
such time as such Taxes become due and payable, and shall remain exclusively
liable for (i) any Taxes with respect to the FireFly Agreement or the Company to
the extent such Taxes accrued prior to the Closing Date or arose out of acts
occurring or conditions existing prior to the Closing Date; (ii) any Taxes of
the Company arising before the Closing Date.
 
(b)         The Buyer shall remain exclusively liable for (i) any Taxes with
respect to the FireFly License or the Company to the extent such Taxes accrue
after the Closing Date or arise out of acts occurring or conditions existing
after the Closing Date; (ii) any Taxes of Buyer arising before or after the
Closing Date; or (iii) any Taxes of the Buyer arising out of or with respect to
the operation of the Company after the Closing Date.
 
6.7         Notice and Rights Upon Default. If Buyer shall fail to pay or cause
IRP to pay any Milestone payments due FireFly (as defined in the FireFly
Agreement) within 75 days of its due date, or any Royalty (as defined in the
FireFly Agreement) payment within 20 days of its due date, Buyer shall provide
notice thereof to Intermezzo. Intermezzo shall then have the right to make such
payments on behalf of Buyer and IRP. If Intermezzo makes any such payment and is
not reimbursed by the time such payment was otherwise due (after regard for cure
periods under the FireFly Agreement), upon notice by Intermezzo, Buyer shall
either assign the FireFly Agreement to Intermezzo or its designee, after consent
to such assignment is obtained from FireFly, or transfer the stock of IRP to
Intermezzo or its designee. In addition, if Buyer shall fail to make any Net
Receipts Payment, Fixed Payment or any payment due under the Assignment
Agreement within 60 days when due, then upon notice from Intermezzo, the same
rights shall exist in favor of Intermezzo as existed for failures to pay under
the FireFly Agreement. In no event shall Intermezzo have any rights resulting
from the failure to make any payment under the FireFly Agreement if a bona fide
dispute exists as to the obligation to make any such payment.
 
6.8         Further Assurances. Each of the parties to this Agreement shall use
its commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby,
including under the Assignment Agreement.

 
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ARTICLE VII
INDEMNIFICATION
 
7.1         Indemnification of Buyer. The Buyer and each of its officers,
directors, employees, stockholders and agents (each, a “Buyer Indemnified
Party”) shall be entitled to be indemnified by Intermezzo and Paragon against
any and all Losses suffered or incurred by such Buyer Indemnified Party, arising
from, relating to or otherwise in connection with:
 
(a)          any breach of any representation or warranty of Intermezzo or
Paragon contained in this Agreement or the Assignment Agreement as modified by
the exceptions thereto and other disclosures included in any other agreement or
instrument furnished to the Buyer pursuant to this Agreement;
 
(b)          any breach or failure to perform any covenant or agreement of
Intermezzo or Paragon contained in this Agreement or any other agreement or
instrument furnished to the Buyer pursuant to this Agreement; or
 
(c)          any legal, accounting, or advisory expenses of Intermezzo and
Paragon incurred in connection with the transaction contemplated by this
Agreement.
 
7.2         Indemnification of Paragon and Intermezzo. The Buyer shall
indemnify, defend and hold harmless Intermezzo and Paragon and their respective
officers, directors, employees, stockholders and agents (each, a “Shareholder
Indemnified Party”) from and against any and all Losses suffered or incurred by
such Shareholder Indemnified Party, arising from, relating to or otherwise in
connection with:
 
(a)          any breach of any representation or warranty of the Buyer contained
in this Agreement as modified by the exceptions thereto and other disclosures
included in any other agreement or instrument furnished to Intermezzo or Paragon
pursuant to this Agreement;
 
(b)          any breach or failure to perform any covenant or agreement of the
Buyer contained in this Agreement or any other agreement or instrument furnished
to Intermezzo or Paragon pursuant to this Agreement; or
 
(c)          any legal, accounting, or advisory expenses of the Buyer incurred
in connection with the transaction contemplated by this Agreement.

 
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7.3         Indemnification Claims.
 
(a)           In order for a Buyer Indemnified Party or a Shareholder
Indemnified Party, as applicable (an “Indemnified Party”), to be entitled to any
indemnification provided for under Section 7.1 or Section 7.2 in respect of,
arising out of or involving a claim by a third party (“Third Party Claim”), such
Indemnified Party, must notify the indemnifying party (the “Indemnifying Party”)
in writing of the Third Party Claim within 30 days after receipt by such
Indemnified Party of notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
under Section 7.1 or Section 7.2 except to the extent the Indemnifying Party has
been actually prejudiced as a result of such failure. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within 10 days after
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the Third
Party Claim. The Indemnifying Party shall have the right to assume and conduct
and control the defense of such Third Party Claim and the Indemnified Party
shall have the right to observe and receive information regarding the defense of
such claim. The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party (such consent not to be unreasonably delayed, withheld
or conditioned), settle, compromise or offer to settle or compromise any such
claim or demand on a basis which would result in the imposition of a consent
order, injunction or decree that does not include an unconditional release of
the Indemnified Party for any liability arising out of such claim or demand or
any related claim or demand.
 
(b)           In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement other than in respect of,
arising out of or involving a Third Party Claim, such Indemnified Party shall
deliver notice of such claim with reasonable promptness after discovery of any
such claim to the Indemnifying Party; provided, however, that failure to give
such notification shall not affect the indemnification provided under Section
7.1 or Section 7.2 except to the extent the Indemnifying Party has been actually
prejudiced as a result of such failure. If the Indemnifying Party does not
notify the Indemnified Party within 30 days following its receipt of such notice
that the Indemnifying Party disputes its liability to the Indemnified Party,
such claim specified by the Indemnified Party in such notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 7.1 or
Section 7.2 and the Indemnifying Party shall pay the amount of the Losses stated
in such notice to the Indemnified Party in the manner set forth in Section 7.4
or, in the case of any notice in which the Losses (or any portion thereof) are
estimated, on such later date when the amount of such Losses (or such portion
thereof) becomes finally determined.
 
7.4         Limitations.
 
(a)           Except as otherwise provided in Section 7.8, Buyer shall be
required to make any indemnification payment pursuant to Section 7.2(a) for any
breach of the representations and warranties made by Buyer until such time as
the total amount of all indemnifiable Losses (including Losses arising from such
breach and all other indemnifiable Losses arising from any other breaches of any
representations or warranties) that have been suffered or incurred by all of the
Paragon Indemnified Parties collectively exceeds $50,000 (the “Deductible
Amount”). In such event, if the total amount of such indemnifiable Losses
exceeds the Deductible Amount, the Paragon Indemnified Parties shall be
entitled, in accordance with the provisions in this Article VII, to be
indemnified against and compensated and reimbursed for all indemnifiable Losses
in excess of the Deductible Amount. Except as otherwise provided in Section 7.7,
in no event shall the aggregate liability of the Buyer pursuant to Sections
7.2(a), (b) or (c) exceed an amount equal to $5,000,000 (the “Cap Amount”).
Buyer shall have the right to reacquire Buyer Shares from the Shareholders, if
any of such shares are then held, in satisfaction of an indemnification claim
with each share being deemed to have the same value per share as of the end of
the Closing Date.

 
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(b)          Except as otherwise provided in Section 7.8, Paragon and Intermezzo
shall not be required to make any indemnification payment pursuant to Section
7.1(a) for any breach of the representations and warranties made by either of
them until such time as the total amount of all indemnifiable Losses (including
Losses arising from such breach and all other indemnifiable Losses arising from
any other breaches of any representations or warranties) that have been suffered
or incurred by all of the Buyer Indemnified Parties collectively exceeds the
Deductible Amount. In such event, if the total amount of such indemnifiable
Losses exceeds the Deductible Amount, the Buyer Indemnified Parties shall be
entitled, in accordance with the provisions in this Article VII, to be
indemnified against and compensated and reimbursed for all indemnifiable Losses
in excess of the Deductible Amount. Except as otherwise provided in Section 7.7,
in no event shall the aggregate liability of each of Paragon and Intermezzo
pursuant to Section 7.1(a), (b) or (c) exceed the Cap. Paragon and Intermezzo
shall have the right to satisfy any indemnification claim by tendering to the
Buyer Indemnified Parties Buyer Shares which shall be deemed to have a value of
the closing price of such shares on the Closing Date. In no event will Paragon
and Intermezzo have any liability to pay an indemnification claim that exceeds
the value of the Buyer Shares and all payments they have received under this
Agreement and the Assignment Agreement, it being understood that Buyer shall
have the right to exercise its set-off right for any further amounts under
Section 7.6 hereof.
 
7.5         Termination of Indemnification. The representations and warranties
in this Agreement shall survive the Closing until the second anniversary of the
Closing Date; provided, however, that the representations and warranties
contained in Sections 4.1, 4.3, 4.4, 5.3, and 5.4, shall survive until the
expiration of the applicable statutes of limitations (collectively, the
“Survival Period”). Any claim made by a party hereunder shall be preserved
despite the subsequent expiration of the Survival Period and any claim made
prior to the expiration of the Survival Period shall survive until final
resolution thereof. Except as set forth in the immediately preceding sentence,
no claim for indemnification under this Article VII shall be brought after the
end of the Survival Period.
 
7.6         Right to Set-Off. The Buyer or any of its affiliates may, at their
discretion, satisfy the unpaid portion of any of indemnification obligations due
them by, to the extent permitted by law, setting-off against any amounts due and
owing from the Buyer or any of its affiliates to Paragon and Intermezzo
including, without limitation, any Net Receipts Payments or Fixed Payments due
under this Agreement or payments due under the Assignment Agreement.
Notwithstanding the foregoing, in the event that there exists a reasonable and
good faith dispute as to whether (i) either of the Shareholders has an
indemnification obligation hereunder or (ii) the Buyer or any Buyer Indemnified
Party may enforce its right to set-off under this Section 7.6, then, in each
case, the Buyer shall be entitled to place any amounts due and owing to the
Shareholders hereunder into a third-party escrow account until such dispute has
been fully and finally resolved.
 
7.7         Adjustment to Purchase Price. All indemnification payments paid
pursuant to this Article VII shall, to the maximum extent permitted by law, be
treated as an adjustment to the Purchase Price or the purchase of the interest
in the Note.

 
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7.8         Exclusivity. The right of Paragon, Intermezzo and the Buyer to
assert indemnification claims and receive indemnification payments pursuant to
this Article VII shall be the sole and exclusive right and remedy exercisable by
such party with respect to any breach by the other party hereto of any covenant,
representation or warranty or otherwise under this Agreement or relating to the
transactions contemplated hereby; provided, however, that the remedies of each
such party for fraud in the inducement or criminal acts (as determined by a
final judgment of a court of competent jurisdiction) by another party shall not
be subject to any limitation pursuant to this Agreement.
 
7.9         Determination of Losses.
 
(a)          Losses payable to an Indemnified Party shall be reduced by any
insurance proceeds received by such Indemnified Party on account of such matter.
The parties hereto shall seek full recovery under all insurance policies
covering any indemnifiable matter in the ordinary course of business and to the
same extent as they would if such claim were not subject to right of
indemnification hereunder. No indemnifying party shall be required to make any
payment under this Article VII unless and until all claims for insurance have
been exhausted and all payments under applicable insurance policies have been
paid. Notwithstanding the foregoing, if an insurance recovery is made by an
Indemnified Party with respect to any indemnification payment for which an
indemnification payment has been made, such Indemnified Party shall promptly pay
to the indemnifying party the amount of the insurance recovery, but not more
than the amount of such indemnification payment.
 
(b)          All indemnification payments payable hereunder shall be reduced by
the net amount of any tax benefits inuring to the benefit of the Indemnified
Party as a result of the Losses for which the Indemnified Party is seeking
indemnification, offset by tax benefits lost due to such payment.
 
ARTICLE VIII
GENERAL PROVISIONS
 
8.1         Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
 
(a)           if to the Buyer to:
 
SouthPeak Interactive Corporation
2900 Polo Parkway
Midlothian, Virginia 23113
Attn: Terry Phillips
 
with a copy (which shall not constitute notice) to:
 
Greenberg Traurig, LLP
1750 Tysons Boulevard

 
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Suite 1200
McLean, Virginia 22102
Attn: Mark Wishner, Esq.
 
(b)          if to Paragon and Intermezzo:
 
Intermezzo Establishment
Landstrasse 114
9495 Triefen, Liechtenstein
Attn: Paul Bauer
 
with a copy (which shall not constitute notice) to:
 
Holme, Roberts & Owen, LLP
Rosental 4
D-80331 Munich
Germany
Attn: Jens Roehrborn
 
8.2         Counterparts. This Agreement may be executed in one or more
counterparts, including by facsimile and/or PDF, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
 
8.3         Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
(b) are not intended to confer upon any other person any rights or remedies
hereunder, and (c) shall not be assigned. No representations, warranties,
inducements, promises or agreements, oral or written, by or among the parties
not contained herein shall be of any force of effect.
 
8.4         Severability. If any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.

 
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8.5         Remedies Cumulative; Specific Performance.
 
(a)          Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
 
(b)          It is accordingly agreed that the parties hereto shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions of this Agreement in any court
of the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
 
8.6         Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under applicable principles of conflicts of law.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or Federal court located Chesterfield, County, Virginia in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the Commonwealth of Virginia for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
 
8.7         Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document. References herein to “Dollars” or “$” shall refer to U.S. dollars and
all payments and all calculations of amount hereunder shall be made in U.S.
dollars.
 
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IN WITNESS WHEREOF, this Stock Purchase Agreement has been duly executed by the
parties as of and on the date first above written.

BUYER:
 
SOUTHPEAK INTERACTIVE CORPORATION
       
By:
/s/ Terry Phillips
 
Name:
Terry Phillips
 
Title:
Chairman
     
PARAGON INVESTMENT FUND
       
By:
/s/ [ILLEGIBLE]
 
Name:
[ILLEGIBLE]  
Title:
Director      
INTERMEZZO ESTABLISHMENT
       
By:
/s/ [ILLEGIBLE]
 
Name:
[ILLEGIBLE]  
Title
Director

 
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EXHIBIT A
 
Sale and Assignment Agreement

 

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EXHIBIT B
 
FireFly Consent Letter

 
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EXHIBIT B
 
Fixed Payments Schedule

Fixed Payments Date
 
Amount
         
Closing Date
  $ 50,000  
May 15, 2010
  $ 100,000  
June 15, 2010
  $ 100,000  
July 15, 2010
  $ 150,000  
August 15, 2010
  $ 150,000  
September 15, 2010
  $ 250,000  
October 15, 2010
  $ 200,000  
November 15, 2010
  $ 200,000            
Total
  $ 1,200,000  

 

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