SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 29, 1999
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GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-27338 13-3689915
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
417 Fifth Avenue, 10016
New York, NY (Zip code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (212) 726-6500
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Item 5. Other Events
On June 29, 1999, the Registrant and the lenders under its
existing $125 million credit facility amended the Credit Agreement, dated as of
September 11, 1998 (the "New Credit Agreement"), to increase the Registrant's
borrowing base by an additional $20 million until March 31, 2000, to remove
certain financial covenants under the New Credit Agreement and to require
guarantees from all of the Registrant's U.S. subsidiaries and a security
interest on all of the assets of the Registrant and such subsidiaries. Under the
New Credit Agreement, as amended, the borrowings bear interest at either the
bank's reference rate (which is generally equivalent to the published prime
rate) plus 2.5% or LIBOR plus 4% and the Registrant pays, on the unused portion
of the credit facility, a commitment fee of 0.50% per annum. The amended New
Credit Agreement also requires maintenance of certain EBITDA levels and limits
on capital expenditure amounts. To induce the lenders to amend the New Credit
Agreement, the Registrant paid the lenders an amendment fee of 1.75% on the
existing credit facility, as well as certain arrangement fees and annual agent
fees. As an additional inducement, the Registrant issued to the lenders warrants
to purchase, at an exercise price of $0.01 per share, an aggregate of 750,000
shares of the Registrant's common stock with varying vesting schedules for
exercisability. Of these, warrants to purchase 275,000 shares of common stock
are immediately exercisable and warrants to purchase the remaining 475,000
shares of common stock will become exercisable only upon the occurrence of
certain events.
As a further condition to the lenders' agreement to amend the
New Credit Facility, on June 29, 1999, the Registrant received commitments from
certain affiliates of General Atlantic Partners, LLC (together with its
affiliates, "General Atlantic") and certain members of the Cayre family
(together with General Atlantic, the "Junior Debtholders") to loan to the
Registrant an aggregate of $30.0 million (the "Junior Debt"). Certain members of
the Cayre family and affiliates of General Atlantic own, in the aggregate, a
significant percentage of the Registrant's common stock. The Junior Debt would
be made available to the Registrant on or before July 30, 1999. Of the $30.0
million which the Junior Debtholders are obligated to loan the Registrant, $20.0
million would be funded by General Atlantic and $10.0 million would be funded by
the Cayre family. The Junior Debt would be evidenced by promissory notes (the
"Notes") from the Registrant to the Junior Debtholders. The Registrant will use
the borrowings under the Notes to prepay a portion of the amount borrowed under
the New Credit Agreement, which may be reborrowed.
To induce General Atlantic to enter into the commitments, the
Registrant amended the terms of the Certificate of Designation designating its
Series A Convertible Preferred Stock (the "Preferred Stock") to provide that in
the event of a change of control, the holders of the Preferred Stock will
receive, before any payment or distribution is made on any other equity
securities of the Registrant, an amount equal to the liquidation preference set
forth in the Certificate of Designation plus all accrued and unpaid dividends
thereon to the date fixed for such change of control. Further, the Registrant
issued to General Atlantic warrants (the "Commitment Warrants") to purchase, at
an exercise price equal to $0.01 per share, an aggregate of
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500,000 shares (subject to anti-dilution adjustments) of the Registrant's common
stock. The Cayre family has granted to General Atlantic an option to purchase a
total of 1,333,333 shares of the Registrant's common stock owned by them. In
addition, the Registrant will amend the Registration Rights Agreement, dated
February 23, 1999, between the Registrant and General Atlantic, to extend those
registration rights to the shares of common stock issuable upon exercise of the
Commitment Warrants and any additional warrants issued to General Atlantic, as
described below.
The Notes will mature on July 30, 2000 (the "Maturity Date")
and will bear cumulative interest, compounding quarterly, at the rate of 9% per
year until January 1, 2000, on which date the rate will increase to 12% per
year. All accrued and unpaid interest will be due and payable in cash on the
earlier of (i) the Maturity Date and (ii) the first business day after the
credit facility has been repaid in full. In the event of a change in control of
the Registrant, the Registrant is required to prepay the aggregate unpaid
principal amount of the Notes plus all accrued and unpaid interest thereon.
After the amount borrowed under the New Credit Agreement has been repaid in
full, the Registrant may prepay the Notes in whole or in part. The Notes,
including all unpaid principal of and interest thereunder, will be subordinate
and junior in right of payment to all amounts owed under the New Credit
Agreement, as amended.
On July 29, 1999, the Junior Debtholders funded the Junior
Debt and the Registrant issued the Notes to the Junior Debtholders. Concurrently
with the issuance of the Notes, the Registrant issued to the Junior Debtholders
warrants to purchase, at an exercise price of $0.01 per share, an aggregate of
1,500,000 shares of the Registrant's common stock. The Cayre family assigned
their pro rata share of these warrants to General Atlantic.
Under certain circumstances, the Registrant may be obligated
to issue additional warrants to the Junior Debtholders.
Item 7. Exhibits
3.1 Amended Certificate of the Powers, Designations, Preferences and Rights
of the Series A Convertible Preferred Stock
10.1 Second Amendment, Waiver and Agreement, dated as of June 29, 1999, by
and among the Registrant, the Lenders thereto and First Union National
Bank, as Administrative Agent
10.2 Amended and Restated Security Agreement, dated as of June 29, 1999, by
and among the Registrant, certain of its subsidiaries and First Union
National Bank, as Administrative Agent
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10.3 Amended and Restated Pledge Agreement, dated as of June 29, 1999, by
the Registrant and certain of its subsidiaries in favor of First Union
National Bank, as Administrative Agent
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GT INTERACTIVE SOFTWARE CORP.
Date: August 5, 1999 By: /s/ THOMAS A. HEYMANN
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Name: Thomas A. Heymann
Title: Chairman of the Board of Directors
and Chief Executive Officer
GT INTERACTIVE SOFTWARE CORP.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the Delaware General Corporation Law
The undersigned, John Baker, President of GT INTERACTIVE SOFTWARE
CORP., a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that the
following resolution, amending the terms of the Series A Convertible Preferred
Stock of the Corporation was duly adopted by unanimous written consent of the
Board of Directors, on June 25, 1999 and approved on June 29, 1999 by action of
the holders of at least a majority of the outstanding shares of such Preferred
Stock.
WHEREAS, the Board of Directors is authorized, within the
limitations and restrictions stated in the Certificate of Incorporation of the
Corporation, to provide by resolution or resolutions for the issuance of shares
of Preferred Stock, par value $.01 per share, of the Corporation, in one or more
classes or series with such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions as shall
be stated and expressed in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated and
expressed in the Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of the State of Delaware; and
WHEREAS, the Board of Directors, pursuant to its authority as
aforesaid, created a series of 600,000 shares of Preferred Stock designated as
Series A Convertible Preferred Stock on February 8, 1999, and now desires, with
the consent of the holders of at least a majority of the outstanding shares of
such Preferred Stock, to amend the terms thereof.
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NOW, THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There shall be hereby created
and established a series of Preferred Stock designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock"). The authorized number of
shares of Series A Preferred Stock shall be 600,000. Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in Section 10
below.
2. Rank. The Series A Preferred Stock shall with respect to
distributions of assets and rights upon the occurrence of a Liquidation rank
senior to (i) all classes of common stock of the Corporation (including, without
limitation, the issued and outstanding shares of Common Stock, par value $.01
per share, of the Corporation (the "Common Stock")); and (ii) each other class
or series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series A Preferred Stock
(collectively with the Common Stock, the "Junior Stock").
3. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, cumulative
dividends at an annual rate equal to 8% of the Liquidation Preference only,
which shall accrue annually from the date of issuance thereof, whether or not
declared. All accrued and unpaid dividends shall, to the extent funds are
legally available therefor, be mandatorily paid immediately upon the earliest to
occur of (i) a Liquidation, (ii) an optional conversion of shares of Series A
Preferred Stock pursuant to Section 7(a) below, (iii) a mandatory conversion of
shares of Series A Preferred Stock pursuant to Section 7(b) below, (iv) the
redemption of all issued and outstanding shares of Series A Preferred Stock
pursuant to Section 5 below and (v) a Merger (the "Dividend Payment Date"). On
the Dividend Payment Date, all accrued dividends shall be paid (pro rated to
such Dividend Payment Date), (x) in the case of a Liquidation, a cash Merger or
a redemption pursuant to Section 5 below, in cash, and (y) in the case of a
conversion of shares of Series A Preferred Stock pursuant to Section 7(a) or (b)
below or a non-cash Merger, in shares of Common Stock. If dividends are to be
paid in shares of Common Stock pursuant to the preceding sentence, the value of
such shares shall be equal to (A) in the case of an optional conversion of
Series A Preferred Stock pursuant to Section 7(a) hereof, the Current Market
Price of the Common Stock on the date on which notice of such optional
conversion is delivered to the Corporation, (B) in the case of a mandatory
conversion of shares of Series A Preferred Stock pursuant to Section 7(b)
hereof, the Current Market Price of the Common Stock on the date on which notice
of such mandatory conversion is delivered to the holders of Series A Preferred
Stock and (c) in the case of a non-cash Merger, the Current Market Price of the
Common Stock on the date on which notice of such Merger is delivered to the
holders of Common Stock.
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(b) If the Corporation declares and pays on the Common Stock
an in-kind dividend or distribution of the assets, shares of common stock or
other securities of any Person in a spin-off of such Person, then the holders of
shares of Series A Preferred Stock shall be entitled to share in such dividend
or distribution on a pro rata basis, as if their shares of Series A Preferred
Stock (excluding any accrued and unpaid dividends) had been converted into
shares of Common Stock pursuant to Section 7(a) immediately prior to the record
date for determining the stockholders of the Corporation eligible to receive
such dividend or distribution.
4. Liquidation Preference.
(a) Upon the occurrence of a Liquidation or a Merger, the
holders of shares of Series A Preferred Stock shall be entitled to be paid for
each share of Series A Preferred Stock held thereby, out of the assets of the
Corporation legally available for distribution to its stockholders, an amount
equal to (i) $50.00 (the "Liquidation Preference") plus (ii) all accrued and
unpaid dividends thereon to the date fixed for such Liquidation or consummation
of such Merger, before any payment or distribution is made to any Junior Stock
less (iii) the fair market value of any assets or securities distributed
pursuant to Section 3(b), as determined on the date of any such Liquidation or
of the consummation of any such Merger by (A) in the case of any securities so
distributed that are publicly traded, the Market Price or (B) in all other
cases, a valuation conducted by a nationally recognized investment bank,
reasonably satisfactory to the Corporation and the holders of a majority of
Series A Preferred Stock. If the assets of the Corporation available for
distribution to the holders of Series A Preferred Stock and any stock which is
ranked pari passu with the Series A Preferred Stock ("Parity Stock") shall be
insufficient to permit payment in full to such holders of the sums which such
holders are entitled to receive in such case, then all of the assets available
for distribution to holders of the Series A Preferred Stock and any Parity Stock
shall be distributed among and paid to such holders ratably in proportion to the
amounts that would be payable to such holders if such assets were sufficient to
permit payment in full. All amounts paid upon the occurrence of a Liquidation or
Merger shall be paid in cash; provided, however, that upon the occurrence of a
Merger that is a non-cash Merger, the amounts paid to the holders of Series A
Preferred Stock shall be in the form of the consideration which the holders of
shares of Common Stock of the Corporation are entitled to receive in the Merger.
The fair market value of such non-cash Merger consideration shall be determined
on the same terms as such fair market value was determined for the holders of
Common Stock of the Corporation by the Board of Directors, in exercising its
fiduciary duties.
(b) After the holders of all shares of Series A Preferred
Stock shall have been paid in full the amounts to which they are entitled in
Section 4(a), the shares of Series A Preferred Stock shall not be entitled to
any further participation in any distribution of assets of the Corporation and
the remaining assets of the Corporation shall be distributed to the holders of
Junior Stock.
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(c) Written notice of a Liquidation stating a payment or
payments and the place where such payment or payments shall be payable, shall be
delivered in person, mailed by certified mail, return receipt requested, mailed
by overnight mail or sent by telecopier, not less than ten (10) days prior to
the earliest payment date stated therein, to the holders of record of the Series
A Preferred Stock, such notice to be addressed to each such holder at its
address as shown by the records of the Corporation.
(d) Upon the occurrence of a Major Sale, the holders of Series
A Preferred Stock shall be entitled to be paid out of the proceeds from such
Major Sale available for distribution to the holders of Series A Preferred Stock
(after the payment by the Corporation of all taxes required to be paid as a
result of such Major Sale, and after the payment of all amounts required to be
paid as a result of such Major Sale to creditors who rank senior to the holders
of Series A Preferred Stock) an amount equal to the amount which such holders of
Series A Preferred Stock are entitled to receive upon the occurrence of a
Liquidation or Merger pursuant to Section 4(a) hereof, subject to the provisions
of the remainder of this Section 4(d). In the event that such available proceeds
from a Major Sale are sufficient to meet such payment to all holders of Series A
Preferred Stock in full, then the Series A Preferred Stock shall not be entitled
to any further participation in any distribution of the assets of the
Corporation. In the event that such available proceeds from a Major Sale are
insufficient to meet such payment to all holders of Series A Preferred Stock in
full, then such proceeds shall be paid pro rata to the holders of Series A
Preferred Stock; provided, however, that after such partial payment, the
aggregate payments to which the holders of Series A Preferred Stock shall
continue to be entitled pursuant to Section 4(a) hereof upon a Liquidation or
Merger, shall be reduced, on a dollar for dollar basis, by all amounts paid to
such holders of Series A Preferred Stock pursuant to this Section 4(d).
5. Redemption.
(a) At any time after February 23, 2003, the Corporation shall
have the right, at its option, to redeem for cash, out of the funds legally
available therefor, all of the issued and outstanding shares of Series A
Preferred Stock on not less than fifteen (15) Business Days' written notice of
the date of redemption (the "Optional Redemption Date") at a price per share
(the "Optional Redemption Price") equal to (i) the Liquidation Preference plus
(ii) all accrued and unpaid dividends thereon, whether or not declared or
payable, less (iii) the fair market value of any assets or securities
distributed pursuant to Section 3(b), as determined on the Optional Redemption
Date by (A) in the case of any securities so distributed that are publicly
traded, the Market Price or (B) all other cases, a valuation conducted by a
nationally recognized investment bank, reasonably satisfactory to the Company
and the holders of
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a majority of Series A Preferred Stock, to the Optional Redemption Date, in
immediately available funds.
(b) Notwithstanding Section 5(a) above, at any time within 10
days after the delivery of such notice from the Corporation that it intends to
redeem the Series A Preferred Stock pursuant to Section 5(a) hereof, each holder
of shares of Series A Preferred Stock shall have the right, at its option, prior
to any such redemption to convert all of its shares of Series A Preferred Stock,
together with all accrued and unpaid dividends thereon, into shares of Common
Stock in accordance with the terms set forth in Sections 3 and 7(a) hereof.
(c) Written notice of any redemption of shares of Series A
Preferred Stock pursuant to Section 5(a) shall be delivered by the Corporation
in person, mailed by certified or registered mail, return receipt requested,
mailed by overnight mail or sent by telecopier, to the holders of record of the
Series A Preferred Stock, such notice to be addressed to each such holder at its
address as shown by the records of the Corporation. In order to facilitate the
redemption of shares of Series A Preferred Stock, the Board of Directors may fix
a record date for the determination of shares of Series A Preferred Stock to be
redeemed.
6. Voting Rights; Election of Directors.
(a) Subject to subsection (b) below, each outstanding share of
Series A Preferred Stock shall entitle the holder thereof to vote, in person or
by proxy, at a special or annual meeting of stockholders, on all matters
entitled to be voted on by holders of Common Stock voting together as a single
class with the Common Stock (and all other classes and series of stock of the
Corporation entitled to vote thereon with the Common Stock, if any). With
respect to any such vote, each share of Series A Preferred Stock shall entitle
the holder thereof to cast that number of votes per share as is equal to the
number of votes that such holder would be entitled to cast had such holder
converted its shares of Series A Preferred Stock (excluding any accrued and
unpaid dividends) into shares of Common Stock pursuant to Section 7(a) on the
record date for determining the stockholders of the Corporation eligible to vote
on any such matters.
(b) The holders of each share of Series A Preferred Stock
shall not be entitled to vote as a separate class on any matter, including any
Merger; provided, however, that notwithstanding the foregoing, the holders of
the Series A Preferred Stock shall be entitled to vote together as a separate
class with respect to (i) any amendment to the terms or conditions of the Series
A Preferred Stock set forth in the Certificate of Designations or (ii) any
issuance or proposed issuance by the Corporation of any Capital Stock of the
Corporation that would rank senior to the Series A Preferred Stock upon a
Liquidation.
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7. Conversion.
(a) Optional Conversion. Any holder of Series A Preferred
Stock shall have the right, at its option, at any time and from time to time, to
convert, subject to the terms and provisions of this Section 7, any or all of
such holder's shares of Series A Preferred Stock into such number of fully paid
and non-assessable shares of Common Stock as is equal to the product of the
number of shares of Preferred Stock being so converted multiplied by the
quotient of (i) the Liquidation Preference divided by (ii) the conversion price
of $5.00 per share, subject to adjustment as provided in Section 7(f) (such
price, the "Conversion Price"), then in effect. Such conversion shall be
exercised by the surrender of certificate(s) representing the shares of Series A
Preferred Stock to be converted to the Corporation at any time during usual
business hours at its principal place of business to be maintained by it (or
such other office or agency of the Corporation as the Corporation may designate
by notice in writing to the holders of Series A Preferred Stock), accompanied by
written notice that the holder elects to convert such shares of Series A
Preferred Stock and specifying the name or names (with address) in which a
certificate or certificates for shares of Common Stock are to be issued and (if
so required by the Corporation) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation duly executed by the
holder or its duly authorized legal representative and transfer tax stamps or
funds therefor, if required pursuant to Section 7(l). All certificates
representing shares of Series A Preferred Stock surrendered for conversion shall
be delivered to the Corporation for cancellation and canceled by it.
(b) Mandatory Conversion. If at any time after the date hereof
the Current Market Price of the Common Stock is greater than $15.00 per share
(as appropriately adjusted to reflect any event described in Section 7(f)(i),
(ii) or (iii)) the Corporation shall have the right, at its option, to cause the
mandatory conversion of all (but not less than all) of the issued and
outstanding shares of Series A Preferred Stock into shares of Common Stock in
accordance with Section 7(a) above, on not less than 10 days' written notice of
the date of such mandatory conversion. Not later than 60 days following a date
on which the Current Market Price of the Common Stock exceeds $15.00 per share
(as appropriately adjusted to reflect any event described in Section 7(f)(i),
(ii) or (iii)), written notice of such mandatory conversion of the shares of
Series A Preferred Stock shall be delivered by the Corporation in person, mailed
by certified or registered mail, return receipt requested, mailed by overnight
mail or sent by telecopier to the holders of record of all of the outstanding
shares of Series A Preferred Stock, with such notice to be addressed to each
such holder at its address as shown by the records of the Corporation. Such
mandatory conversion shall be effective upon the close of business on the date
of such mandatory conversion set forth in the written notice.
(c) No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon the conversion of shares of Series A
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Preferred Stock pursuant to Section 7(a) or (b) hereof. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of shares of Series A Preferred Stock, the Corporation shall pay to
the holder of the shares of Series A Preferred Stock that were converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the Market Price of the Common Stock on the date of such conversion.
(d) As promptly as practicable after the surrender of
certificate(s) representing any shares of Series A Preferred Stock with respect
to which there has been an optional conversion pursuant to Section 7(a) or a
mandatory conversion pursuant to Section 7(b), the Corporation shall deliver to
the holder of such shares so surrendered certificate(s) representing the number
of fully paid and nonassessable shares of Common Stock into which such shares of
Series A Preferred Stock have been converted in accordance with the provisions
of this Section 7 and a check or cash in respect of any fractional share arising
upon conversion. At the time of the surrender of such certificate(s), the Person
in whose name any certificate(s) for shares of Common Stock shall be issuable
upon such conversion shall be deemed to be the holder of record of such shares
of Common Stock on such date, notwithstanding that the share register of the
Corporation shall then be closed or that the certificates representing such
Common Stock shall not then be actually delivered to such Person. In case any
certificate shall be surrendered for partial conversion pursuant to Section 7(a)
hereof, the Company shall issue and deliver to the holder of the certificate so
surrendered a new certificate or certificates in an aggregate share amount equal
to the unconverted portion of the surrendered certificate.
(e) When shares of Series A Preferred Stock are converted
pursuant to this Section 7, all dividends payable in accordance with Section 3
above on the shares of Series A Preferred Stock so converted shall be
immediately due and payable in accordance with Section 3 above and shall
accompany the shares of Common Stock issued upon such conversion.
(f) Anti-dilution Adjustments. The Conversion Price, and the
number and type of securities to be received upon conversion of the Series A
Preferred Stock, shall be subject to adjustment as follows:
(i) Dividend, Subdivision, Combination or
Reclassification of Common Stock. In the event that the Corporation shall at any
time or from time to time, prior to any optional or mandatory conversion of the
Series A Preferred Stock, (w) pay a dividend or make a distribution (other than
a dividend or distribution paid or made to holders of shares of Series A
Preferred Stock, or in which holders of such shares participate, in the manner
provided in Section 3) on the outstanding shares of Common Stock payable in
Capital Stock, (x) subdivide the outstanding shares of Common Stock into a
larger number of shares, (y) combine the outstanding shares of Common Stock into
a smaller number of shares or (z) issue any
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shares of its Capital Stock in a reclassification of the Common Stock (other
than any such event for which an adjustment is made pursuant to another clause
of this Section 7(f) or to which Section 4 is applicable), then, and in each
such case, the Conversion Price in effect immediately prior to such event shall
be adjusted (and any other appropriate actions shall be taken by the
Corporation) so that the holder of any share of Series A Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series A Preferred Stock been
converted immediately prior to the record date applicable to such event. An
adjustment made pursuant to this Section 7(f)(i) shall become effective
retroactively to the close of business on the day upon which such corporate
action becomes effective.
(ii) Certain Distributions. In case the Corporation
shall at any time or from time to time prior to conversion of the Series A
Preferred Stock, distribute to all holders of shares of Common Stock (including
any such distribution made in connection with a merger or consolidation in which
the Corporation is the resulting or surviving Person and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Corporation or
another Person, securities of the Corporation or another Person or other assets
(excluding dividends or distributions (including any spin-off) paid or made to
holders of shares of Series A Preferred Stock, or in which holders of such
shares participate, in the manner provided in Section 3, dividends declared in
the ordinary course of business and payable in cash dividends payable in shares
of Common Stock for which adjustment is made under another paragraph of this
Section 7(f) and distributions to which Section 4 is applicable) or rights or
warrants to subscribe for or purchase securities of the Corporation (excluding
those distributions in respect of which an adjustment in the Conversion Price is
made pursuant to another paragraph of this Section 7(f) and distributions to
which Section 4 is applicable), then, and in each such case, the Conversion
Price then in effect shall be adjusted (and any other appropriate actions shall
be taken by the Corporation) by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution less the then fair market value
(as determined in good faith by the Board of Directors) of the portion of the
cash, evidences of indebtedness, securities or other assets so distributed or of
such rights or warrants applicable to one share of Common Stock and (y) the
denominator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution; provided, however, that no
adjustment shall be made with respect to any distribution of rights or warrants
to subscribe for or purchase securities of the Corporation if the holder of
shares of Series A Preferred Stock would otherwise be entitled to receive such
rights or warrants upon conversion at any time of shares of Series A Preferred
Stock into Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a
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date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) Other Changes. In case the Corporation at any time
or from time to time, prior to the conversion of the Series A Preferred Stock,
shall take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Sections 7(f)(i) through (ii)
(but not including any action described in any such Section) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Conversion Price as a result of such action, then,
and in each such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors in good faith determines would be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
shares of Series A Preferred Stock).
(iv) De Minimis Adjustments. Notwithstanding anything
herein to the contrary, no adjustment in the Conversion Price shall be required
unless such adjustment would require a change of at least 1% in the Conversion
Price, provided, however, that any adjustments which by reason of this Section
7(f)(iv) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(g) Abandonment. If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Conversion Price shall be required by
reason of the taking of such record.
(h) Certificate as to Adjustments. Upon any increase or
decrease in the Conversion Price, the Corporation shall within a reasonable
period (not to exceed 20 days) following the consummation of any of the
foregoing transactions deliver to each registered holder of Series A Preferred
Stock a certificate, signed by (i) the President or a Vice President of the
Corporation and (ii) the Chief Financial Officer of the Corporation, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(i) INTENTIONALLY LEFT BLANK.
(j) Notices. In case at any time or from time to time:
(w) the Corporation shall declare a dividend (or any
other distribution) on its shares of Common Stock;
<PAGE>
10
(x) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(y) there shall be any reorganization or
reclassification of the Common Stock; or
(z) there shall occur a Merger or a Major Sale;
then the Corporation shall mail to each holder of shares of Series A Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least ten (10) days
prior to the applicable date hereinafter specified, a notice stating the date on
which a record is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution or granting of rights or warrants are to be determined, or the date
on which such reorganization, reclassification, Merger or sale is expected to
become effective and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for shares of
stock or other securities or property or cash deliverable upon such
reorganization, reclassification, Merger or sale.
(k) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available for issuance upon the conversion of the Series
A Preferred Stock, such number of its authorized but unissued shares of Common
Stock as will from time to time be sufficient to permit the conversion of all
outstanding shares of Series A Preferred Stock. Each June 30th and December
31st, the Corporation shall reserve additional shares of Common Stock reasonably
determined by the Corporation to be required to cover the conversion of all
dividends (which have accrued to such date) into shares of Common Stock in
accordance with Section 3 hereof. The Corporation shall take all action
necessary to increase the authorized number of shares of Common Stock if at any
time there shall be insufficient authorized but unissued shares of Common Stock
to permit such reservation or to permit the conversion of all outstanding shares
(and accrued dividends) of Series A Preferred Stock.
(l) No Conversion Tax or Charge. The issuance or delivery of
certificates for Common Stock upon the conversion of shares of Series A
Preferred Stock shall be made without charge to the converting holder of shares
of Series A Preferred Stock for such certificates or for any documentary stamp,
or similar issue or transfer tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock converted; provided, however, that the Corporation shall not be required
to pay any tax
<PAGE>
11
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Series A Preferred Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Corporation the amount of such tax or shall have established to the reasonable
satisfaction of the Corporation that such tax has been paid.
8. Business Day. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
9. Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock and
any and all rights, warrants or options exchangeable for or convertible into
such capital stock (but excluding any debt security whether or not it is
exchangeable for or convertible into such capital stock).
"Common Stock" shall have the meaning ascribed to it in Section 2
hereof.
"Conversion Price" shall have the meaning ascribed to it in Section
7(a) hereof.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Certificate of Designation.
"Current Market Price" per share shall mean, as of the date of
determination, the average of the daily Market Price under clause (a), (b) or
(c) of the definition thereof of the Common Stock during the immediately
preceding thirty (30) trading days ending on such date.
"Dividend Payment Date" shall have the meaning ascribed to it in
Section 3 hereof.
<PAGE>
12
"Junior Stock" shall have the meaning ascribed to it in Section 2
hereof.
"Liquidation" shall mean the voluntary or involuntary liquidation
under applicable bankruptcy or reorganization legislation, or the dissolution or
winding up of the Corporation.
"Liquidation Preference" shall have the meaning ascribed to it in
Section 4(a) hereof.
"Major Sale" shall mean a sale of the assets of the Corporation
representing all or substantially all of the Humongous business of the
Corporation.
"Market Price" shall mean, as of the date of determination, (a) the
closing price per share of Common Stock on such date published in The Wall
Street Journal or, if no such closing price on such date is published in The
Wall Street Journal, the average of the closing bid and asked prices on such
date, as officially reported on the principal national securities exchange
(including, without limitation, The Nasdaq Stock Market, Inc.) on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price of the Common
Stock on such date; or (c) if there shall have been no trading on such date or
if the Common Stock is not so designated, the average of the reported closing
bid and asked prices of the Common Stock on such date as shown by the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotations System and reported by any member firm of the New York Stock Exchange
selected by the Corporation.
"Merger" shall mean a recapitalization, reorganization, merger,
sale (including, without limitation, a sale of all or substantially all of the
assets of the Corporation) or other business combination transaction after the
consummation of which the stockholders of the Corporation prior to such
transaction do not own at least a majority of the voting power of the surviving
Person or the transferee of the assets of the Corporation, as the case may be.
"Optional Redemption Date" shall have the meaning ascribed to it
in Section 5(a) hereof.
"Optional Redemption Price" shall have the meaning ascribed to it
in Section 5(a) hereof.
"Parity Stock" shall have the meaning ascribed to it in Section
4(a) hereof.
<PAGE>
13
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Series A Preferred Stock" shall have the meaning ascribed to it
in Section 1 hereof.
<PAGE>
14
IN WITNESS WHEREOF, the undersigned has executed and subscribed
this certificate this 1st day of July 1999.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ John T. Baker IV
----------------------------
John T. Baker IV
President
SECOND AMENDMENT, WAIVER AND AGREEMENT
THIS SECOND AMENDMENT, WAIVER AND AGREEMENT (this "Amendment") is
made and entered into as of this 29th day of June, 1999, by and among GT
Interactive Software Corp., a Delaware corporation, as Borrower, the Lenders
identified on the signature pages hereto, and First Union National Bank, as
Administrative Agent for the Lenders.
Statement of Purpose
Pursuant to the terms of the Credit Agreement dated as of September
11, 1998 (as heretofore amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the lenders parties thereto
(the "Lenders") and the Administrative Agent, the Lenders agreed to make certain
Extensions of Credit to the Borrower as more particularly described therein.
Capitalized terms used herein and not otherwise defined shall have their
respective meanings set forth in the Credit Agreement.
The Borrower has requested that the Lenders agree to amend and waive
certain provisions of the Credit Agreement as set forth more fully below.
Subject to the terms and conditions hereof, the Lenders are willing
to agree to such requested amendments and waiver.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
1.1 Amendments to Section 1.1 (Definitions). Section 1.1 of the
Credit Agreement is hereby amended by (a) deleting in their entirety the
definitions of the following terms: "Applicable Margin", "Borrowing Base",
"EBIT", "Investment Account", "Leverage Ratio", "Material Subsidiary",
"Obligations", "Pledge Agreement", "Security Agreement", "Subordinated Debt",
"Tangible Net Worth" and "UCC" and (b) adding the following new defined terms in
their proper alphabetical order:
"Acceptable Agreement" means a fully executed definitive
agreement with respect to a sale or recapitalization of, or a merger
transaction involving, the Borrower and its Subsidiaries pursuant to
which the Obligations will be repaid in full at the closing of such
sale, recapitalization or merger.
"Borrowing Base" means as of any date of determination, an
amount equal to the sum of (a) fifty percent (50%) of the aggregate
actual invoice amount of Eligible Accounts, plus (b) the lesser of (i)
twenty-five percent (25%) of the aggregate cost of Eligible Inventory
and (ii) $30,000,000, plus (c) during the period from the Second
<PAGE>
2
Amendment Effective Date through and including March 31, 2000,
$20,000,000; provided that the percentages set forth in clauses (a) and
(b) above may be adjusted, and the Borrowing Base otherwise amended,
supplemented or otherwise modified, in a manner satisfactory to the
Borrower and the Administrative Agent (with the consent of all
Lenders).
"Business Plan" means the three (3) year business plan
prepared by the Borrower and delivered to the Administrative Agent and
the Lenders on or about June 22, 1999, as such Business Plan is
modified within thirty (30) days after the Second Amendment Effective
Date solely to provide a monthly statement of income and cash flows for
each fiscal month to occur after the Second Amendment Effective Date
during Fiscal Year 2000.
"Capital Expenditures" means for any period, all amounts which
would, in accordance with GAAP, be set forth as capital expenditures
(exclusive of any amount attributable to capitalized interest) on the
consolidated statement of cash flows or other similar statement of the
Borrower and its Consolidated Subsidiaries for such period.
"Concentration Account" means the account to be established by
the Borrower and maintained at the office of the Administrative Agent
at 301 South College Street, Charlotte, North Carolina, that shall be
used for the daily concentration of funds received by the Borrower or
any of its Subsidiaries (a) from the domestic operation of their
respective businesses or (b) in the United States from the foreign
operation of their respective businesses.
"Obligations" means the Borrower's obligations under the Loan
Documents in respect of the unpaid principal of and interest on the
Notes (including, without limitation, interest accruing at the then
applicable rate provided herein after the maturity of the Loans and
interest accruing at the then applicable rate provided herein after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and all other obligations and
liabilities of the Borrower to the Administrative Agent, the Issuing
Lender and the Lenders in respect of the Loans, the Notes, the Letters
of Credit, the L/C Obligations, any Hedging Agreements permitted or
required hereunder, the Concentration Account or any cash management
arrangements with any Lender, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, the Notes, the other Loan Documents, the Letters of Credit,
the L/C Obligations, any Hedging Agreements permitted or required
hereunder, or any other document made, delivered or given in connection
herewith or therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent, the Issuing Lender or the
Lenders that are required to be paid by the Borrower pursuant to the
terms of this Agreement or any other Loan Document).
<PAGE>
3
"Pledge Agreement" means the Amended and Restated Pledge
Agreement, dated as of June 29, 1999, executed by the Borrower and the
Guarantors named therein in favor of the Administrative Agent, for the
ratable benefit of the Lenders and the Administrative Agent, as
amended, modified or supplemented from time to time.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 29, 1999, executed by the Borrower and the
Lenders, as amended, modified or supplemented from time to time.
"Second Amendment" means the Second Amendment, Waiver and
Agreement, dated as of June 29, 1999, to this Agreement.
"Second Amendment Effective Date" means the Effective Date
under and as defined in the Second Amendment.
"Security Agreement" means the Amended and Restated Security
Agreement, dated as of June 29, 1999, executed by the Borrower and the
Guarantors in favor of the Administrative Agent, for the ratable
benefit of the Lenders and the Administrative Agent, as amended,
modified or supplemented from time to time.
"Shareholder Subordinated Debt" means the $30,000,000 of
unsecured Subordinated Debt to be provided to the Borrower by certain
shareholders of the Borrower on or before July 30, 1999 in accordance
with, and subject to all of the terms and conditions contained in, the
Shareholder Subordinated Debt Commitment Letter and the Shareholder
Subordinated Debt Notes.
"Shareholder Subordinated Debt Commitment Letter" means the
fully executed commitment letter dated the Second Amendment Effective
Date and attached as Exhibit A to the Second Amendment which, together
with the Shareholder Subordinated Debt Notes, sets forth the terms and
conditions on which certain shareholders of the Borrower have
unconditionally agreed to provide the Shareholder Subordinated Debt to
the Borrower on or before July 30, 1999 unless, on or before July 29,
1999, the Obligations have been indefeasibly paid in full in cash (or
cash collateralized in the case of L/C Obligations) and the Aggregate
Commitment terminated.
"Shareholder Subordinated Debt Notes" means the promissory
notes, each in the form attached as Exhibit A to the Shareholder
Subordinated Debt Commitment Letter, executed by the Borrower
evidencing the Borrower's obligations in respect of the Shareholder
Subordinated Debt and setting forth the terms of the subordination of
the Shareholder Subordinated Debt to the Obligations.
"Subordinated Debt" means the collective reference to Debt on
Schedule 6.1(t) hereof designated as Subordinated Debt, the Shareholder
Subordinated Debt and any other Debt of the Borrower or any Subsidiary
subordinated in right and time of payment to the
<PAGE>
4
Obligations and containing such other terms and conditions, all as
reasonably satisfactory to the Required Lenders.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York, as amended, modified or supplemented from time to
time.
"Warrant Agreement" means the Warrant Agreement, dated as of
June 29, 1999, executed by the Borrower and the Lenders, as amended,
modified or supplemented from time to time.
"Warrants" means the warrants to be issued on the Second
Amendment Effective Date by the Borrower to the Lenders pursuant to the
Warrant Agreement, together with the warrant certificates evidencing
such warrants.
1.2 Amendment to Section 2.3 (Repayment of Loans). Section 2.3
of the Credit Agreement is hereby amended by adding new paragraphs (e) and (f)
at the end of said Section as follows:
"(e) Concentration Account. The outstanding principal amount
of the Loans shall be prepaid on each Business Day on or after July 30,
1999 to the extent that funds on deposit in the Concentration Account
on such Business Day exceed $1,000,000. Amounts prepaid pursuant to
this paragraph (e) may be reborrowed.
(f) Shareholder Subordinated Debt. On or before July 30, 1999,
the Borrower shall apply the $30,000,000 of proceeds of the Shareholder
Subordinated Debt to the repayment of the outstanding Loans.
Notwithstanding Section 2.5(b)(i), amounts prepaid pursuant to this
Section 2.3(f) may be reborrowed.".
1.3 Amendment to Section 2.5 (Permanent Reduction of Aggregate
Commitment). Section 2.5(b) is hereby amended by adding the following phrase at
the end of clause (i) contained in said Section: "or any issuance of any class
of capital stock of the Borrower or any Subsidiary (other than (A) in connection
with the exercise of employee stock options or the sale to employees of such
capital stock pursuant to their employment arrangements, (B) the issuance of
capital stock by a Subsidiary to the Borrower to the extent permitted by Section
10.4 and (C) up to $30,000,000 of Net Cash Proceeds from any other such issuance
of capital stock)".
1.4 Amendment to Section 2.6 (Termination of Credit Facility).
Section 2.6 of the Credit Agreement is hereby amended by deleting the reference
to "September 11, 2001" contained in said Section and by substituting therefor a
reference to "June 30, 2000".
1.5 Amendment to Section 3.1 (L/C Commitment). Section 3.1 of
the Credit Agreement is hereby amended by deleting the reference to "North
Carolina" contained in said Section and by substituting therefor a reference to
"New York".
<PAGE>
5
1.6 Amendment to Section 3.3 (Commissions and Other Charges).
Section 3.3(a) of the Credit Agreement is hereby amended by deleting the
reference to "the Applicable Margin" contained in such Section and by
substituting therefor a reference to "4%".
1.7 Amendment to Section 4.1 (Interest). (a) Section 4.1(a) of
the Credit Agreement is hereby amended by (i) deleting the phrase "(A) the Base
Rate plus for the period commencing 4/1/99 and continuing through and including
12/31/99 a margin of 0.500%" in the first sentence of said Section and by
substituting therefor the phrase "(A) the Base Rate plus 2.5%" and (ii) deleting
the phrase "LIBOR Rate plus the Applicable Margin as set forth in Section
4.1(c)" contained in clauses (i)(B) and (ii) of said Section and by substituting
therefor the phrase "LIBOR Rate plus 4%".
(b) Section 4.1(c) of the Credit Agreement is hereby amended
by deleting said Section in its entirety and by substituting therefor the
following:
"(c) Intentionally Omitted.".
1.8 Amendment to Section 4.3 (Fees). Section 4.3(a) of the
Credit Agreement is hereby amended by deleting said Section in its entirety and
by substituting therefor the following:
"(a) Commitment Fee. The Borrower shall pay to the
Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee at a rate of .50% per annum on the average daily unused
portion of the Aggregate Commitment. The commitment fee shall be
payable in arrears on the last Business Day of each calendar quarter
during the term of this Agreement and on the Revolving Credit
Termination Date. Such commitment fee shall be distributed by the
Administrative Agent to the Lenders pro rata in accordance with the
Lenders' respective Commitment Percentages.".
1.9 Amendment to Section 7.1 (Financial Statements and
Projections). Section 7.1 of the Credit Agreement is hereby amended by adding
new paragraphs (e) and (f) at the end of said Section as follows:
"(e) Monthly Financial Statements. As soon as practicable and
in any event within (i) thirty (30) days after the end of each fiscal
month of the Borrower (and within 45 days after the end of the third,
sixth, ninth and twelfth such fiscal month), (A) an unaudited
Consolidated balance sheet of the Borrower and its Subsidiaries as of
the close of such fiscal month and unaudited Consolidated statements of
income, retained earnings and cash flows for the fiscal month then
ended, all in reasonable detail setting forth in comparative form the
corresponding figures for such fiscal month set forth in the Business
Plan, prepared by the Borrower in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of
accounting principles and practices during the period, and certified by
a Responsible Officer to present fairly in all material respects the
financial condition of the Borrower and its Subsidiaries as of their
respective dates and the results of operations of
<PAGE>
6
the Borrower and its Subsidiaries for the respective periods then
ended, subject to normal year end adjustments and (B) commencing July
30, 1999, a written report certified by a Responsible Officer setting
forth the current status of the Borrower's efforts, and an update of
developments since the date of delivery of the most recent such report,
to consummate a transaction pursuant to an Acceptable Agreement and
(ii) thirty (30) days after the end of each fiscal month of the
Borrower, other reports and financial and operational information
pursuant to a monthly monitoring package to be agreed upon by the
Borrower and the Administrative Agent.
(f) Weekly Cash Flow. On each Wednesday, commencing on July
14, 1999, a forecast of the consolidated receipts and disbursements for
the Borrower and its Subsidiaries (and separately for their U.K. and
Australian operations) for the period of eight consecutive calendar
weeks beginning in the week in which the applicable Wednesday occurs,
together with a comparison of the actual receipts and disbursements for
the immediately preceding week to the most recently forecasted receipts
and disbursements for the week in which such Wednesday occurs, together
with a certificate of a Responsible Officer that the proceeds of the
Extensions of Credit have been used solely for expenditures of the type
and in the approximate amounts set forth in the Business Plan.".
1.10 Amendment to Section 7.2 (Financial Statements and
Projections). Section 7.2(b) of the Credit Agreement is hereby amended by adding
the following phrase immediately before the period at the end of said Section:
", together with an updated accounts aging report and an updated schedule of
inventory, each in form and substance reasonably acceptable to the
Administrative Agent".
1.11 Amendment to Section 8.12 (Additional Subsidiaries;
Collateral). (a) Section 8.12(b) of the Credit Agreement is hereby amended by
deleting said Section in its entirety and by substituting therefor the
following:
"(b) Intentionally Omitted.".
(b) Section 8.12(c) of the Credit Agreement is hereby amended
by deleting each reference to "Material Subsidiary" contained in said Section
and by substituting therefor a reference to "Domestic Subsidiary".
1.12 Amendment to Article VIII (Affirmative Covenants).
Article VIII of the Credit Agreement is hereby amended by adding the following
new Section 8.16 at the end of said Article:
"SECTION 8.16 Pursuit of Transaction. Each of the Borrower and
its Subsidiaries shall use its reasonable best efforts to pursue and
consummate a transaction pursuant to an Acceptable Agreement and, in
connection therewith, the Borrower shall provide such information and
attend such meetings (and cause Bear, Stearns and Co. Inc. to
participate
<PAGE>
7
in such meetings) as reasonably requested by the Administrative Agent
or the Lenders to review and discuss such efforts.".
1.13 Amendment to Article IX (Financial Covenants). Article IX
of the Credit Agreement is hereby amended by deleting said Article in its
entirety and by substituting therefor the following:
"ARTICLE IX
Financial Covenants
Until all of the Obligations have been paid and
satisfied in full and the Commitments terminated, unless consent has
been obtained in the manner set forth in Section 13.11 hereof, the
Borrower and its Subsidiaries on a Consolidated basis will not:
SECTION 9.1 EBITDA: Permit EBITDA for any period from April 1,
1999 through the dates set forth below to be less than the
corresponding amount set forth below for such period:
Period Amount
------ ------
June 30, 1999 $ 0
September 30, 1999 $10,200,000
October 31, 1999 $14,300,000
December 31,1999 $33,900,000
March 31, 2000 $44,200,000
In the case of the period ending on October 31, 1999, as soon as
practicable and in any event no later than November 30, 1999, the
Borrower will furnish to the Administrative Agent (with sufficient
copies for each Lender) a certificate of a Responsible Officer
certifying as to the Borrowers' compliance with this Section 9.1 for
such period.
SECTION 9.2 Capital Expenditures: Permit Capital Expenditures
for any fiscal quarter of the Borrower set forth below to be more than
the corresponding amount (the "Base Amount") set forth below for such
fiscal quarter:
Period Amount
------ ------
April 1, 1999 through June 30, 1999 $ 5,600,000
July 1, 1999 through September 30, 1999 $ 4,200,000
October 1, 1999 through December 31,1999 $ 4,300,000
January 1, 2000 through March 31, 2000 $ 4,500,000
April 1, 2000 through June 30, 2000 $ 4,700,000
<PAGE>
8
provided, however, that for any fiscal quarter of the Borrower, the
Base Amount for such fiscal quarter may be increased by carrying over
any portion of the Base Amount not spent in the immediately preceding
fiscal quarter (but not in any fiscal quarter prior thereto).".
1.14 Amendment to Section 10.4 (Limitations on Loans,
Advances, Investments and Acquisitions). (a) Sections 10.4(c) and (h) of the
Credit Agreement are hereby amended by deleting of said Sections in their
entirety and by substituting therefor the following:
"(c) Intentionally Omitted."; and
"(h) Intentionally Omitted.".
(b) Section 10.4(g) of the Credit Agreement is hereby amended
by adding the following phrase immediately before the semi-colon at the end of
said Section: ", provided that any such investment shall not exceed $500,000 and
the aggregate amount of all such investments shall not exceed $2,000,000".
1.15 Amendment to Section 10.5 (Limitations on Mergers and
Liquidation). Section 10.5(c) of the Credit Agreement is hereby amended by
adding the following phrase immediately before the semi-colon at the end of said
Section: "prior to giving effect to the Second Amendment".
1.16 Amendment to Section 10.6 (Limitations on Sale of
Assets). Section 10.6(f) the Credit Agreement is hereby amended by deleting said
Section in its entirety and by substituting therefor the following:
"(f) Intentionally Omitted.".
1.17 Amendment to Article X (Negative Covenants). Article X of
the Credit Agreement is hereby amended by adding the following new Sections
10.12 and 10.13 at the end of said Article:
"SECTION 10.12 Cash Management. Fail to maintain on and after
July 30, 1999 a system of cash management that concentrates in the
Concentration Account on a daily basis all available funds (a) from the
domestic operations of the Borrower and its Subsidiaries and (b)
received by the Borrower and its Subsidiaries in the United States from
the foreign operations of the Borrower and its Subsidiaries .
SECTION 10.13 Acceptable Agreement. Fail to deliver a fully
executed Acceptable Agreement to the Administrative Agent on or before
December 31, 1999.".
1.18 Amendment to Section 11.1 (Events of Default). (a)
Section 11.1(b) of the Credit Agreement is hereby amended by deleting the
reference to "five (5) Business Days" contained in said Section and by
substituting therefor a reference to "three (3) Business Days".
<PAGE>
9
(b) Section 11.1 of the Credit Agreement is hereby amended by
adding a new paragraph (o) at the end of said Section as follows:
"(o) Shareholder Subordinated Debt. Unless all of the Lenders
otherwise consent, (i) the Loans shall not have been reduced by
$30,000,000 on July 30, 1999 with the proceeds of the Shareholder
Subordinated Debt as required by Section 2.3(f), (ii) any material term
or provision of any Shareholder Subordinated Debt Note, or any material
term of the Shareholder Subordinated Debt, is amended, restated,
supplemented (including without limitation, as a result of the
execution of any documents with respect thereto that are not acceptable
to the Lenders), waived or otherwise modified or (iii) the Borrower or
any Subsidiary makes any direct or indirect cash payment on account of
the principal of, interest on or fees with respect to, the Shareholder
Subordinated Debt, or redeems or acquires (including without
limitation, by way of depositing with any trustee or other Person any
money, securities or other property for the purpose of paying any
thereof), or grants any collateral security for or guaranty of, the
Shareholder Subordinated Debt.".
1.19 Amendment to Section 13.4 (Governing Law). Section 13.4
of the Credit Agreement is hereby amended by deleting said Section in its
entirety and by substituting therefor the following:
"SECTION 13.4 Governing Law. This Agreement and the other Loan
Documents and the rights and obligations of the parties hereunder and
under the other Loan Documents shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.".
1.20 Amendment to Section 13.5 (Consent to Jurisdiction).
Section 13.5 of the Credit Agreement is hereby amended by deleting said Section
in its entirety and by substituting therefor the following:
"SECTION 13.5 Submission to Jurisdiction; Waivers. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other
Loan Documents to which it is a party, or for recognition and
enforcement of any judgement in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State
of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may
be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead
or claim the same;
<PAGE>
10
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrower at its address
set forth in Section 13.1 or at such other address of which
the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by
Applicable Law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
Applicable Law, any right it may have to claim or recover in
any legal action or proceeding referred to in this Section
13.5 any special, exemplary, punitive or consequential
damages.".
1.21 Amendment to Section 13.6 (Binding Arbitration; Waiver of
Jury Trial). Section 13.6 of the Credit Agreement is hereby amended by deleting
said Section in its entirety and by substituting therefor the following:
"SECTION 13.6 Waiver of Jury Trial. EACH OF THE ADMINISTRATIVE
AGENT, THE LENDERS AND THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.".
1.22 Amendment to Section 13.10 (Successors and Assigns;
Participations) and Definition of Eligible Assignee. (a) Section 13.10(b) of the
Credit Agreement is hereby amended by deleting the phrase "the consent of the
Borrower (so long as no Default or Event of Default has occurred and is
continuing) and the consent of the Administrative Agent, which consents"
contained in said Section and by substituting therefor the phrase "the consent
of the Administrative Agent, which consent".
(b) The definition of Eligible Assignee contained in Section
1.1 of the Credit Agreement is hereby amended by deleting the phrase "by the
Borrower and" in clause (f) of said definition.
SECTION 2. WAIVER.
2.1 Waiver of Section 10.6 (Limitations on Sale of Assets).
The Lenders hereby waive application of Section 10.6 of the Credit Agreement
solely to the extent necessary to permit the Borrower to consummate the proposed
sale of all of the common stock of One Zero Media, Inc., a Wholly-Owned
Subsidiary of the Borrower, provided that the foregoing waiver is conditioned
upon (a) within one Business Day after the receipt of the Net Cash Proceeds of
such sale, the Borrower shall apply an amount equal to such Net Cash Proceeds to
prepay the Loans
<PAGE>
11
and (b) no Default or Event of Default shall then have occurred and be
continuing or would result from consummation of such sale. The Lenders hereby
waive the requirement set forth in Section 2.5(b)(ii) that the Aggregate
Commitment shall be permanently reduced by an amount equal to the Net Cash
Proceeds received by the Borrower in connection with the sale of One Zero Media,
Inc., provided that the $2,000,000 basket contained in clause (ii) of Section
2.5(b) shall be deemed fully utilized as a result of the receipt of such Net
Cash Proceeds.
SECTION 3. MISCELLANEOUS.
3.1 Representations and Warranties; No Default. (a) After
giving effect to this Amendment, the Borrower hereby represents and warrants
that all representations and warranties contained in the Credit Agreement and
the other Loan Documents are true and correct on and as of the Effective Date
(unless stated to relate to a specific earlier date, in which case, such
representations and warranties shall be true and correct as of such earlier
date) and that no Default or Event of Default shall have occurred and be
continuing or would result from the execution and delivery of this Amendment.
(b The Borrower hereby further represents and warrants that
each Domestic Subsidiary has duly executed and delivered the Security Agreement,
the Guaranty Agreement and, to the extent named as a party therein, the Pledge
Agreement.
(c) The Borrower hereby further represents and warrants that
it is truly and justly indebted to the Administrative Agent and the Lenders in
respect of the Obligations, without defense, counterclaim or offset of any kind.
3.2 Payment of Fees and Expenses. (a) The Borrower shall pay
to the Administrative Agent, for the account of the Lenders, an amendment fee
equal to $2,187,500 (the "Amendment Fee"), which shall be fully earned on the
Effective Date and payable as follows: (i) $1,093,750 on the Effective Date and
(ii) $1,093,750 on the earlier of (A) July 30, 1999 and (B) the date on which
the Obligations are repaid in full. Payment of the Amendment Fee shall be in
addition to any and all other fees and expenses required to be paid from time to
time by the Borrower to the Administrative Agent and/or the Lenders pursuant to
this Amendment, the Credit Agreement or the other Loan Documents.
(b) The Borrower hereby agrees to pay all reasonable costs,
fees and expenses of the Administrative Agent and each Lender, including the
fees and expenses of financial advisors retained by the Administrative Agent and
counsel retained by the Administrative Agent and each Lender, in each case
incurred in connection with the transactions contemplated by this Amendment.
3.3 Conditions to Effectiveness of this Amendment. This
Amendment shall become effective on the date (the "Effective Date") on which the
Administrative Agent shall have received the following:
<PAGE>
12
(a) counterparts of this Amendment duly executed by the
Borrower and the Lenders;
(b) duly executed copies of the Security Agreement, the Pledge
Agreement, the Guaranty Agreement, the Registration Rights Agreement and the
Warrant Agreement;
(c) for the account of each Lender based upon such Lender's
Commitment Percentage thereof, (i) $1,093,750 of the Amendment Fee and (ii) the
$781,250 balance of the amendment fee payable pursuant to the First Waiver and
Agreement, dated as of April 8, 1999, under the Credit Agreement;
(d) payment in full of all fees and other amounts due and
payable pursuant to the Credit Agreement and this Amendment, including
reimbursement or payment of all reasonable fees and expenses of financial
advisors retained by the Administrative Agent and counsel retained by the
Administrative Agent and each Lender that, in each case, has been invoiced to
the Borrower;
(e) the fully executed Shareholder Subordinated Debt
Commitment Letter, attached as Exhibit A hereto;
(f) for the account of each Lender based upon such Lender's
Commitment Percentage thereof, Warrants to acquire 750,000 shares of the common
stock of the Borrower in accordance with the terms of the Warrant Agreement; and
(g) evidence reasonably satisfactory to the Administrative
Agent as to compliance by the Borrower with Section 7.1(b) of the Credit
Agreement with respect to the Borrower's Fiscal Year ended March 31, 1999.
3.4 Continuing Effect; No Other Amendments or Waivers. Except
as expressly amended pursuant to this Amendment, the Credit Agreement is and
shall continue to be in full force and effect in accordance with its terms, and
this Amendment shall not constitute the Lenders' consent or indicate their
willingness to consent to any other amendment, modification or waiver of the
Credit Agreement or the other Loan Documents, including without limitation, any
amendment, modification or waiver of any Section amended or waived pursuant to
this Amendment for any other date or time period or in connection with any other
transaction.
3.5 Counterparts. This Amendment may be executed by the
parties hereto on one or more counterparts, and all of such counterparts shall
be deemed to constitute one and the same instrument. This Amendment may be
delivered by facsimile transmission of the relevant signature pages hereof.
3.6 Governing Law. This Amendment shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE>
13
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ WALTER PARKS
-----------------------------
Name: Walter Parks
Title: Vice President and Chief Financial
Officer
FIRST UNION NATIONAL BANK, as
Administrative Agent and Lender
By: /s/ JULIA BOUHUYS
-----------------------------
Name: Julia Bouhuys
Title: Senior Vice President
EUROPEAN AMERICAN BANK
By: /s/ KRISTEN BURKE
-----------------------------
Name: Kristen Burke
Title: Vice President
FLEET BANK, N.A.
By: /s/ ANDREW J. MAIDMAN
-----------------------------
Name: Andrew J. Maidman
Title: Vice President
<PAGE>
14
NATIONAL BANK OF CANADA
By: /s/ KAREN A. GREXA
----------------------
Name: Karen A. Grexa
Title: Vice President
By: /s/ TIMOTHY J. SMITH
----------------------
Name: Timothy J. Smith
Title: Vice President and Manager
NATIONSBANK, N.A.
By: /s/ Jay T. Wampler
----------------------
Name: Jay T. Wampler
Title: Managing Director
THE BANK OF NOVA SCOTIA
By: /s/ S.E. LOCKHART
----------------------
Name: S.E. Lockhart
Title: Senior Relationship Manager
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (as amended,
restated, supplemented or otherwise modified, this "Agreement"), dated as of
June 29, 1999, by and among GT Interactive Software Corp. (the "Borrower") and
certain of its subsidiaries identified on the signature pages attached hereto
(together with the Borrower and each additional subsidiary who becomes a party
hereto pursuant to a Joinder Agreement, the "Grantors", each individually, a
"Grantor"), and First Union National Bank, a national banking association, as
administrative agent (the "Administrative Agent"), for the ratable benefit of
the Administrative Agent and the financial institutions who are or may from time
to time become parties to the Credit Agreement referred to below (the
"Lenders").
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, dated as of
September 11, 1998 (as amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the Lenders and the
Administrative Agent, the Lenders agreed to make certain Extensions of Credit to
the Borrower as more particularly described therein.
In connection with the execution and delivery of the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent a Security Agreement, dated as of September 11, 1998 (as heretofore
amended, restated, supplemented or otherwise modified, the "Existing Security
Agreement"), pursuant to which the Borrower granted to the Administrative Agent,
for the ratable benefit of the Lenders, the Collateral to secure the Obligations
(as such terms are defined in the Existing Security Agreement).
The Borrower, the Lenders and the Administrative Agent have
agreed to execute a Second Amendment, Waiver and Agreement, dated as of June 29,
1999 (the "Second Amendment"), under the Credit Agreement to, among other
things, amend certain provisions thereof.
In connection with the transactions contemplated by the Second
Amendment and as a condition precedent thereto, the Administrative Agent and the
Lenders have requested that the Existing Security Agreement be amended and
restated, and that each Grantor execute and deliver this Agreement to the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, and each of the Grantors has agreed to do so pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
to induce the Administrative Agent and the Lenders to enter into the Second
Amendment, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, as follows:
<PAGE>
2
SECTION 1. Definitions
(a) Terms defined in the Credit Agreement and not otherwise
defined herein, when used in this Agreement including its preamble and recitals,
shall have the respective meanings provided for in the Credit Agreement, and the
following terms which are defined in the UCC are used herein as so defined:
Chattel Paper, Documents, Equipment, Instruments and Investment Property. The
following additional terms, when used in this Agreement, shall have the
following meanings:
"Account Debtor" means any Person who is or may become
obligated to any Grantor under, with respect to, or on account of, an
Account.
"Accounts" means collectively, all rights to payment for goods
sold or leased or for services rendered or to be rendered, whether or
not earned by performance, and all sums of money or other proceeds due
or becoming due thereon, including, without limitation, "Accounts" as
defined in the UCC, whether secured or unsecured, now existing or
hereafter created, now or hereafter owned or acquired by any Grantor or
in which any Grantor now or hereafter has or acquires any right or
interest.
"Accounts Aging Report" means an aged trial balance of all
Accounts existing as of a specified date, in a form reasonably
satisfactory to the Administrative Agent, specifying the names,
addresses, face value and dates of invoices of each Account Debtor
obligated on any Accounts so listed.
"Collateral" shall have the meaning given such term in Section
2(a).
"Collateral Account" means any cash collateral account
established by any of the Grantors with the Administrative Agent, in
the name and under the exclusive dominion and control of the
Administrative Agent, pursuant to Section 6 .
"Contracts" means all contracts and agreements listed on
Schedule 1, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (a) all
rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of any Grantor to
damages arising thereunder and (c) all rights of any Grantor to perform
and to exercise all remedies thereunder, in each case, to the extent
the grant by such Grantor of a security interest pursuant to this
Agreement in its right, title and interest in such contract or
agreement is not prohibited thereby.
"Copyright License" means any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed on Schedule 2) granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.
<PAGE>
3
"Copyrights" means (a) all copyrights of any Grantor arising
under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished (including, without limitation, those listed
on Schedule 2) all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
all registrations, recordings and applications in the United States
Copyright Office and (b) the right to obtain all renewals thereof.
"Deposit Accounts" means all "Deposit Accounts" (as defined in
the UCC) established by any Grantor, including, without limitation, the
deposit accounts listed on Schedule 3 hereto and any other deposit
accounts established by any Grantor after the date hereof.
"Financing Statements" means the Uniform Commercial Code Form
UCC-1 Financing Statements (or, with respect to any Foreign Subsidiary,
any filing required by the applicable foreign jurisdiction) executed by
the Grantors with respect to the Collateral and to be filed in the
jurisdictions set forth in the Perfection Certificate.
"General Intangibles" means all "General Intangibles" (as
defined in the UCC) of any Grantor, including, without limitation, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights
of such Grantor to damages arising thereunder and (iii) all rights of
such Grantor to perform and to exercise all remedies thereunder, in
each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture is not prohibited by
such contract, agreement, instrument or indenture without the consent
of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall
not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Account or any money or other amounts
due or to become due under any such contract, agreement, instrument or
indenture.
"Intellectual Property" means all rights, priorities and
privileges of any Grantor relating to intellectual property, whether
arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses,
<PAGE>
4
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"Inventory" means all "Inventory" (as defined in the UCC) of
any Grantor wherever located, including, without limitation, all goods
manufactured or acquired for sale or lease and all raw materials,
work-in-process and finished goods, and all supplies and goods, used or
consumed in the operation of the business of any Grantor, whether now
or hereafter owned or acquired by any Grantor or in which such Grantor
now or hereafter has or acquires any right or interest.
"Obligations" means the Grantors' obligations under the Loan
Documents in respect of the unpaid principal of and interest on the
Notes (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans, the Letters of Credit or the L/C Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to any
Grantor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and all other obligations and
liabilities of the Grantors to the Administrative Agent, the Issuing
Lender and the Lenders in respect of the Loans, the Notes, the Letters
of Credit, the L/C Obligations, any Hedging Agreements permitted or
required under the Credit Agreement, the Concentration Account or any
cash management arrangements with any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, the Letters of Credit, the L/C
Obligations, any Hedging Agreements permitted or required under the
Credit Agreement, this Agreement, the other Loan Documents or any other
document made, delivered or given in connection herewith or therewith,
in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Administrative Agent, the Issuing Lender or the Lenders that are
required to be paid by any Grantor pursuant to the terms of the Credit
Agreement, this Agreement or any other Loan Document).
"Patent License" means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by a
Patent (including, without limitation, any of the foregoing referred to
on Schedule 2).
"Patents" means (i) all of any Grantor's letters patent of the
United States, any other country or any political subdivision thereof,
all reissues and extensions thereof and all goodwill associated
therewith (including, without limitation, any of the foregoing referred
to on Schedule 2), (ii) all of any Grantor's applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, including, without
limitation, any of the foregoing referred to on Schedule 2 and (iii)
all rights to obtain any reissues or extensions of the foregoing.
<PAGE>
5
"Permitted Liens" means all Liens respecting the Collateral
permitted pursuant to Section 10.3 of the Credit Agreement.
"Perfection Certificate" means a certificate substantially in
the form of Exhibit A attached hereto, setting forth the corporate or
other names, chief executive office or principal place of business in
each state and other current locations of each Grantor and such other
information as the Administrative Agent deems reasonably necessary for
the perfection of the security interests granted hereunder, completed
and supplemented with the schedules and attachments contemplated
thereby to the reasonable satisfaction of the Administrative Agent, and
certified by the Chief Executive Officer, President, any Executive Vice
President, Chief Financial Officer or Treasurer of each Grantor so
authorized to act.
"Proceeds" means all "Proceeds" (as defined in the UCC) of any
Grantor and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property of any Grantor,
collections thereon or distributions or payments with respect thereto.
"Schedule of Inventory" means a schedule of Inventory based
upon each Grantor's most recent physical inventory and its perpetual
inventory records, in a form reasonably satisfactory to the
Administrative Agent.
"Security Interests" means the security interests granted
hereby to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders, in respect of the Collateral.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark (including, without limitation, any thereof referred to on
Schedule 2).
"Trademarks" means (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos, and other source or business identifiers
of any Grantor, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, and all common-law
rights related thereto (including, without limitation, any of the
foregoing referred to on Schedule 2) and (ii) the right to obtain all
renewals thereof.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York; provided that, if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of
the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New
<PAGE>
6
York, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection.
(b) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. The Security Interests
(a) With respect to each Grantor, all of such Grantor's
estate, right, title and interest in and to all of the following property,
whether now or hereafter owned or acquired by such Grantor or in which such
Grantor now has or hereafter acquires any estate, right, title or interest, and
wherever located, along with any other property of such Grantor which may from
time to time secure the Obligations pursuant to the terms of this Agreement, is
collectively referred to as the "Collateral":
(i) all Accounts;
(ii) all Chattel Paper;
(iii) the Collateral Account, all cash deposited therein
from time to time, the investments made pursuant to Section 6 and other monies
and property of any kind of any Grantor in the possession or under the control
of the Administrative Agent or any Lender;
(iv) all Contracts;
(v) all Deposit Accounts;
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Intellectual Property;
(xi) all Inventory;
(xii) all Investment Property;
(xiii) all other property not otherwise described above;
<PAGE>
7
(xiv) all books and records pertaining to any of the
foregoing; and
(xv) all products and Proceeds of all or any of the
foregoing.
(b) The Borrower hereby confirms and reaffirms its grant of a
security interest in the Collateral (as defined in the Existing Security
Agreement) pursuant to the Existing Security Agreement. In order to secure the
payment when due whether at the stated maturity, by acceleration or otherwise of
the Obligations, each Grantor (including the Borrower) hereby grants to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, a security interest in the Collateral.
(c) The Security Interests are granted as security only and
shall not subject the Administrative Agent or any Lender to, or transfer to the
Administrative Agent or any Lender, or in any way affect or modify, any
obligation or liability of any Grantor with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 3. Representations and Warranties. Each Grantor
represents and warrants to the Administrative Agent and each Lender as follows:
(a) Such Grantor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the Security Interests in the Collateral owned by it pursuant to, this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Security Interests in
the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of such Grantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) Such Grantor is the sole owner of, and has valid and legal
title to, all of the Collateral owned by it, free and clear of any Liens, other
than Permitted Liens.
(d) Other than financing statements or other similar or
equivalent documents or instruments with respect to Permitted Liens, no
financing statement, mortgage, security agreement or similar or equivalent
document or instrument covering all or any part of the Collateral is on file or
of record in any jurisdiction. No Collateral is in the possession of any Person
(other than the Grantors) asserting any claim thereto or security interest
therein, except that the Administrative Agent or its designee may have
possession of Collateral as contemplated hereby and a bailee, warehouseman,
agent or processor may have possession of the Collateral as contemplated by, and
so long as such Grantor has complied with, Section 4(c)(iii) and Section
4(c)(iv).
<PAGE>
8
(e) All of the information set forth in the Perfection
Certificate relating to such Grantor is true and correct in all material
respects as of the date hereof.
(f) Such Grantor has, contemporaneously herewith, delivered to
the Administrative Agent possession of all originals of all negotiable
Instruments constituting Collateral currently owned or held by such Grantor, if
any (duly endorsed in blank, if requested by the Administrative Agent).
(g) With respect to any Inventory of such Grantor: (i) all
such Inventory is, and shall be at all times, located at places of business of
such Grantor listed in the Perfection Certificate or as to which such Grantor
has complied with the provisions of Section 4(a)(i), except Inventory in transit
from one such location to another such location; (ii) no Inventory is, nor shall
at any time or times be, subject to any Lien whatsoever, except for Permitted
Liens; (iii) no Inventory in aggregate value exceeding $1,000,000 at any time
is, nor shall at any time or times be, kept, stored or maintained with a bailee,
warehouseman, carrier or similar party (other than a carrier delivering
Inventory to a purchaser in the ordinary course of such Grantor's business)
unless the Administrative Agent shall have received prior written notice of such
storage and the such Grantor has complied with the provisions of Section
4(c)(iii); and (iv) no Inventory in aggregate value exceeding $1,000,000 at any
time is, nor shall at any time or times be, kept, stored or maintained with a
consignee unless the Administrative Agent shall have received prior written
notice of such consignment and such Grantor has complied with the provisions of
Section 4(c)(iii).
(h) The Financing Statements relating to such Grantor are in
appropriate form and when filed in the offices specified in the Perfection
Certificate, the Security Interests will constitute valid and perfected security
interests in all of the Collateral (to the extent that a security interest
therein may be perfected by filing pursuant to the UCC) in favor of the
Administrative Agent, for the benefit of the Lenders, prior to all other Liens
and rights of others therein, other than with respect to Permitted Liens.
(i) On the date hereof, such Grantor's jurisdiction of
organization and the location of such Grantor's chief executive office or sole
place of business are specified in the Perfection Certificate.
(j) With respect to any Account of such Grantor: (i) no amount
payable to such Grantor under or in connection with such Account is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent; (ii) none of the obligors on any Account is a Governmental
Authority; and (iii) the amounts represented by such Grantor to the Lenders from
time to time in reports delivered to the Administrative Agent by such Grantor as
owing to such Grantor in respect of the Accounts will at such times be accurate.
(k) With respect to any Contract to which such Grantor is a
party: (i) no consent of any party (other than such Grantor) is required, or
purports to be required, in connection with the execution, delivery and
performance of this Agreement; (ii) each Contract is in full force and
<PAGE>
9
effect and constitutes a valid and legally enforceable obligation of such
Grantor and, to the best of such Grantor's knowledge, the other parties thereto,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing; (iii) no consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery or performance of any of the Contracts by such Grantor other
than those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Contract to any material
adverse limitation, either specific or general in nature; (iv) neither such
Grantor nor, to such Grantor's knowledge (without independent investigation),
any of the other parties to the Contracts is in default in the performance or
observance of any of the material terms thereof; (v) the right, title and
interest of such Grantor in, to and under the Contracts are not subject to any
defenses, offsets, counterclaims or claims; (vi) if a copy of any such Contract
is requested by the Administrative Agent, such Contract as delivered to the
Administrative Agent shall be a complete and correct copy of such Contract,
including all amendments, supplements and other modifications thereto; (vii) to
the best of such Grantor's knowledge, no amount payable to such Grantor under or
in connection with any Contract is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent; and (viii) none of the
parties to any Contract is a Governmental Authority.
(l) With respect to any Intellectual Property of such Grantor:
(i) to the best of such Grantor's knowledge, on the date hereof, all material
Intellectual Property is valid, subsisting, unexpired and enforceable, has not
been abandoned and does not infringe the intellectual property rights of any
other Person; (ii) except as set forth on Schedule 2, on the date hereof, none
of the material Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor; (iii) no holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any material Intellectual Property in any respect that
could reasonably be expected to have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property; and (iv) except as set
forth in Schedule 6.1(u) to the Credit Agreement, no action or proceeding is
pending, or, to the best of such Grantor's knowledge, threatened, on the date
hereof (A) seeking to limit, cancel or question the validity of any material
Intellectual Property or such Grantor's ownership interest therein or (B) which,
if adversely determined, would have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property.
<PAGE>
10
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor will change the location of its chief executive
office or principal place of business in any state unless such Grantor
shall have given the Administrative Agent thirty (30) days prior
written notice thereof, executed and delivered to the Administrative
Agent all financing statements and financing statement amendments which
the Administrative Agent may request in connection therewith and, if
reasonably requested by the Administrative Agent, delivered an opinion
of counsel with respect thereto in accordance with Section 4(a)(v).
(ii) No Grantor shall change the locations where it keeps or
holds any Collateral or any records relating thereto from the
applicable location described in the Perfection Certificate unless such
Grantor shall have given the Administrative Agent thirty (30) days
prior written notice of such change of location, executed and delivered
to the Administrative Agent all financing statements and financing
statement amendments which the Administrative Agent may request in
connection therewith and, if reasonably requested by the Administrative
Agent, delivered an opinion of counsel with respect thereto in
accordance with Section 4(a)(v); provided, however, that any Grantor
may keep Inventory or Equipment at, or in transit to, any location
described in the Perfection Certificate. No Grantor shall in any event
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be
perfected.
(iii) No Grantor will change its name, identity or corporate
or other structure in any manner unless it shall have given the
Administrative Agent thirty (30) days prior written notice thereof,
executed and delivered to the Administrative Agent all financing
statements and financing statement amendments which the Administrative
Agent may request in connection therewith, and, if reasonably requested
by the Administrative Agent, delivered an opinion of counsel with
respect thereto in accordance with Section 4(a)(v).
(iv) Each Grantor will maintain the Administrative Agents
Security Interests in the Collateral owned by it as perfected Liens
with priority over all other Liens other than Permitted Liens. Each
Grantor will, from time to time, at its expense, execute, deliver, file
and record any statement, assignment, instrument, document, agreement
or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under
the UCC) that from time to time may be necessary, or that the
Administrative Agent may reasonably request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect,
confirm or validate the Security Interests or to enable the
Administrative Agent to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral. Prior to
the irrevocable payment in full of the Obligations, to the extent
required by the immediately preceding
<PAGE>
11
sentence, each Grantor hereby authorizes the Administrative Agent, upon
the failure of any Grantor to so do within ten (10) Business Days after
receipt of notice in writing from the Administrative Agent, to execute
and file financing statements, financing statement amendments,
continuation statements and any other agreements, instruments,
documents and papers reasonably necessary to perfect the Administrative
Agents security interest in such Grantor's Collateral without such
Grantor's signature appearing thereon. Each Grantor agrees that, except
as otherwise required by law, a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. Each Grantor shall pay the
reasonable costs of, or incidental to, any recording or filing of the
Financing Statements and any other financing statements, financing
statement amendments, continuation statements and any other agreements,
instruments, documents and papers reasonably necessary to perfect the
Administrative Agents security interests in such Grantor's Collateral.
(v) Each Grantor will, promptly upon request, provide to the
Administrative Agent all information and evidence the Administrative
Agent may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Administrative Agent to enforce
the provisions of this Agreement.
(vi) Prior to each date on which any Grantor proposes to take
any action contemplated by Section 4(a)(i) or Section 4(a)(ii), if
reasonably requested by the Administrative Agent, such Grantor shall,
at its cost and expense, cause to be delivered to the Administrative
Agent (with a copy for each Lender) an opinion of counsel, satisfactory
to the Administrative Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers from such Grantor have
been filed in each filing office necessary or desirable for such
purposes and that all filing fees and taxes, if any, payable in
connection with such filings have been paid in full.
(vii) After the occurrence and during the continuance of an
Event of Default, from time to time upon request by the Administrative
Agent, each Grantor shall, at its cost and expense, cause to be
delivered to the Administrative Agent (with a copy for each Lender) an
opinion or opinions of counsel, reasonably satisfactory to the
Administrative Agent, as to the enforceability of the Loan Documents
and the Security Interests of the Administrative Agent, for the ratable
benefit of the Administrative Agent and the Lenders, on the Collateral
and other property of the Grantors and such other matters relating to
the transactions contemplated hereby as the Administrative Agent or the
Required Lenders may reasonably request.
(viii) Each Grantor will comply in all material respects with
all Applicable Laws applicable to the Collateral or any material part
thereof or to the operation of such Grantor's business.
<PAGE>
12
(ix) Each Grantor will pay when due all material taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as
all material claims of any kind (including, without limitation, claims
for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if (A) the validity
thereof is being contested in good faith by appropriate proceedings,
(B) such proceedings do not involve any danger of the sale, forfeiture
or loss of, or creation of a Lien on, any of the Collateral or any
interest therein and (C) such charge is adequately reserved against on
such Grantor's books in accordance with GAAP.
(x) The Grantors shall not (A) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the Collateral, except
as permitted by the Credit Agreement or hereunder or (B) create or
suffer to exist any Lien or other charge or encumbrance upon or with
respect to any of the Collateral to secure indebtedness of any Person
or entity other than Permitted Liens.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to cause to
be collected from its Account Debtors, as and when due, any and all
amounts owing under or on account of each Account (including, without
limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with past practices) and to apply upon receipt
thereof all such amounts as are so collected to the outstanding balance
of such Account. The costs and expenses (including, without limitation,
attorneys fees) of collection of Accounts incurred by such Grantor or
the Administrative Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of an
Event of Default, upon request of the Administrative Agent or the
Required Lenders, each Grantor will promptly notify (and each Grantor
hereby authorizes the Administrative Agent so to notify) each Account
Debtor in respect of any Account that such Account has been assigned to
the Administrative Agent hereunder and that any payments due or to
become due in respect of such Account are to be made directly to the
Administrative Agent or its designee.
(iii) Each Grantor will perform and comply in all material
respects with all of its material obligations in respect of its
Accounts and the exercise by the Administrative Agent of any of its
rights hereunder shall not release such Grantor from any of its duties
or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to an Account in any
manner which could reasonably be expected to materially adversely
affect the value of the Collateral, (B) fail to exercise promptly and
diligently each and every material right which it may have under each
agreement giving rise to an Account (other than any right of
termination) which could reasonably be expected to materially adversely
affect the value of the Collateral or
<PAGE>
13
(C) fail to deliver to the Administrative Agent a copy of each written
material demand, notice or document received by it which could
reasonably be expected to materially adversely affect the value of the
Collateral relating in any way to any material agreement giving rise to
an Account.
(v) Other than in the ordinary course of business as generally
conducted by each Grantor, no Grantor will (A) grant any extension of
the time of payment of any of the Accounts with a face amount in excess
of $500,000 or (B) compromise, compound or settle the same for less
than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount
whatsoever hereon.
(vi) At the times set forth in Section 7.1(d) of the Credit
Agreement or, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent or the Required Lenders, the Grantors shall
deliver to the Administrative Agent with a copy for each Lender an
Accounts Aging Report. Unless otherwise indicated thereon or in writing
by the Grantors, each Accounts Aging Report delivered by the Grantors
to the Administrative Agent shall constitute a representation by the
Grantors with respect to the Accounts listed thereon that: (A) such
Accounts are genuine, are not evidenced by a judgment and are evidenced
by invoices issued in respect thereof; (B) such Accounts represent
undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto or in
accordance with past practices; (C) the amounts of the face value
shown, and any invoices and statements delivered to the Administrative
Agent with respect to any Account are owing to the applicable Grantor
and are not contingent for any reason; (D) there are no material
setoffs, counterclaims or disputes existing or asserted with respect to
such Accounts, and such Grantor has not made any agreement with any
Account Debtor thereunder for any deduction therefrom; (E) no Grantor
has knowledge of any facts, events, or occurrences which in any way
impair in any material respect the validity or enforceability of any
such Account or tend to reduce the amount payable thereunder from the
amount of the invoice face value shown on any Accounts Aging Report and
on all contracts, invoices and statements delivered to the
Administrative Agent with respect thereto; (F) no Grantor has knowledge
that any Account Debtor under any such Account did not have the
capacity to contract at the time any contract or other document giving
rise to the Account was executed; (G) the goods giving rise to such
Accounts are not, and were not at the time of the sale thereof, subject
to any Lien, except Permitted Liens; (H) no Grantor has knowledge of
any fact or circumstance which would materially impair the validity or
collectability of any such Account; (I) to the applicable Grantor's
knowledge, there are no proceedings or actions which are pending or,
threatened against any Account Debtor under such Accounts which could
result in any material adverse change in such Account Debtors
financial condition; (J) no security interest in such Accounts has been
granted to any Person other than that granted to the Administrative
Agent pursuant hereto and other Permitted Liens; and (K) each invoice
or other evidence of payment obligation furnished to Account Debtors
with respect to such Accounts is issued in the applicable Grantor's
corporate name.
<PAGE>
14
(c) Inventory, Equipment, Etc.
(i) At the times set forth in Section 7.1(d) of the Credit
Agreement and, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent or the Required Lenders, the Grantors shall
deliver to the Administrative Agent with a copy for each Lender a
Schedule of Inventory. Unless otherwise indicated thereon or in writing
by the Grantors, each Schedule of Inventory delivered by the Grantors
to the Administrative Agent shall constitute a representation by each
Grantor with respect to the Inventory listed thereon or referred to
therein that: (A) all such Inventory is located at places of business
listed in the Perfection Certificate or as to which the applicable
Grantor has complied with the provisions of Section 4(a)(i) or on the
premises identified on the then current Schedule of Inventory or is
Inventory in transit from one such location to another such location;
(B) no such Inventory is subject to any Lien whatsoever, except for
Permitted Liens; (C) no such Inventory in aggregate value exceeding
$1,000,000 at any time is, nor shall at any time or times be, kept,
stored or maintained with a bailee, warehouseman, carrier or similar
party (other than a carrier delivering Inventory to a purchaser in the
ordinary course of such Grantor's business) unless the Administrative
Agent has given its consent and the applicable Grantor has complied
with the provisions of Section 4(c)(iii); and (D) no such Inventory in
aggregate value exceeding $1,000,000 is, nor shall at any time or times
be, kept, stored or maintained with a consignee unless the
Administrative Agent has given its consent and the applicable Grantor
has complied with the provisions of Section 4(c)(iii).
(ii) Each Grantor will cause the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, to be
named as loss payee on each insurance policy covering risks relating to
any of its Inventory or Equipment, as reasonably requested by the
Administrative Agent. Each Grantor will deliver to the Administrative
Agent, upon request of the Administrative Agent, copies of the
insurance policies for such insurance. Each such insurance policy shall
provide that all insurance proceeds shall be adjusted with and payable
to the Administrative Agent, and provide that no cancellation or
termination thereof shall be effective until at least thirty (30) days
have elapsed after receipt by the Administrative Agent of written
notice thereof. The Administrative Agent agrees that, as long as no
Default or Event of Default has occurred and is continuing, any such
net cash proceeds received by it in an aggregate amount of (i) less
than $2,000,000 shall be promptly paid over to the Grantors and (ii)
greater than or equal to $2,000,000 shall be promptly paid over to the
Grantors who hereby agree to use such net cash proceeds in a diligent
manner to replace or restore the damaged property to which such
insurance proceeds relate within three hundred and sixty-five (365)
days of receipt of such proceeds. All such loss proceeds not so
utilized within such three hundred and sixty-five (365) day period
shall be applied to the Obligations in accordance with Section
2.5(b)(ii) of the Credit Agreement. Any surplus shall be paid by the
Administrative Agent to such Grantor or applied as may be otherwise
required by law.
<PAGE>
15
Any deficiency thereon shall be paid by such Grantor to the
Administrative Agent, on behalf of the Administrative Agent and the
Lenders, on demand.
(iii) If any Inventory or Equipment exceeding in value
$1,000,000 in the aggregate is at any time in the possession or control
of any warehouseman, bailee (other than a carrier transporting
Inventory to a purchaser in the ordinary course of business), or any of
any Grantor's agents or processors, such Grantor shall notify in
writing such warehouseman, bailee, agent or processor of the Security
Interests created hereby, shall obtain such warehousemans, bailees,
agents or processors agreement in writing to hold all such Inventory
or Equipment for the Administrative Agents account subject to the
Administrative Agents instructions, and shall cause such warehouseman,
bailee, agent or processor to issue and deliver to the Administrative
Agent warehouse receipts, bills of lading or any similar documents
relating to such Inventory in the Administrative Agents name and in
form and substance reasonably acceptable to the Administrative Agent.
(iv) If at any time during the term of this Agreement, any
Inventory or Equipment exceeding in value $1,000,000 is placed by any
Grantor on consignment with any consignee, such Grantor shall, prior to
the delivery of any such consigned Inventory or Equipment: (A) provide
the Administrative Agent with a copy of all consignment agreements and
other instruments and documentation to be used in connection with such
consignment, all of which agreements, instruments and documentation
shall be reasonably acceptable in form and substance to the
Administrative Agent; (B) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory or
Equipment showing the consignee as debtor, such Grantor as secured
party and the Administrative Agent as assignee of secured party; (C)
prepare, execute and file appropriate financing statements with respect
to any consigned Inventory or Equipment showing such Grantor as debtor
and the Administrative Agent as secured party; (D) after all financing
statements referred to in clauses (B) and (C) above shall have been
filed, conduct a search of all filings made against the consignee in
all jurisdictions in which the Inventory or Equipment to be consigned
is to be located while on consignment, and deliver to the
Administrative Agent copies of the results of all such searches; (E)
notify, in writing, all creditors of the consignee which would be
holders of security interests in the Inventory or Equipment to be
consigned that such Grantor expects to deliver certain Inventory to the
consignee, all of which Inventory shall be described in such notice by
item or type; and (F) if reasonably requested by the Administrative
Agent, deliver an opinion of counsel to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers of such Grantor and
such consignee have been filed in each filing office necessary or
desirable for such purposes and that all filing fees and taxes, if any,
payable in connection with such filings have been paid in full.
(d) Contracts, Etc.
<PAGE>
16
(i) Each Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(ii) No Grantor will amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be
expected to materially adversely affect the value of such Contract,
except for such amendments, modifications, terminations or waivers in
the ordinary course of such Grantor's business.
(iii) Each Grantor will exercise promptly and diligently each
and every material right which it may have under the Contracts (other
than any right of termination).
(iv) Each Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it
relating in any way to any Contract that questions the validity or
enforceability of such Contract.
(e) Intellectual Property, Etc.
(i) Each Grantor (either itself or through licensees) will (A)
continue to use each material Trademark on each and every trademark
class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use,
(B) maintain as in the past the quality of products and services
offered under such Trademark, (C) use such Trademark with the
appropriate notice of registration and all other notices and legends
required by applicable Requirements of Law, (D) not adopt or use any
mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent, for the ratable benefit of
the Lenders and the Administrative Agent, shall obtain a perfected
security interest in such mark pursuant to this Agreement, and (E) not
(and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(ii) No Grantor (either itself or through licensees) will do
any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(iii) Each Grantor (either itself or through licensees) (A)
will employ each material Copyright and (B) will not (and will not
permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material portion of the Copyrights may
become invalidated or otherwise impaired. No Grantor will (either
itself or through licensees) do any act whereby any material portion of
the Copyrights may fall into the public domain.
<PAGE>
17
(iv) No Grantor (either itself or through licensees) will do
any act that knowingly uses any material Intellectual Property to
infringe the intellectual property rights of any other Person.
(v) Each Grantor will notify the Administrative Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any material
adverse determination or development (including, without limitation,
the institution of, or any such material adverse determination or
development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or
tribunal in any country) regarding such Grantor's ownership of, or the
validity of, any material Intellectual Property or such Grantor's right
to register the same or to own and maintain the same.
(vi) Whenever a Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for
the registration of any Intellectual Property with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political
subdivision thereof, such Grantor shall report such filing to the
Administrative Agent within five (5) Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as
the Administrative Agent may request to evidence the Administrative
Agents and the Lenders Security Interests in any Copyright, Patent or
Trademark and the goodwill and General Intangibles of such Grantor
relating thereto or represented thereby.
(vii) Each Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in any other country or any
political subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(viii) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, the applicable
Grantor shall (A) take such actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such Intellectual
Property and (B) if such Intellectual Property is of material economic
value, promptly notify the Administrative Agent after it learns thereof
and sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution.
(f) Indemnification. Each Grantor agrees to pay, and to save
the Administrative Agent and the Lenders harmless from, any and all liabilities,
reasonable costs and expenses
<PAGE>
18
(including, without limitation, reasonable legal fees and expenses) incurred by
the Administrative Agent or any Lender (i) with respect to, or resulting from,
any and all excise, sales or other taxes which may be payable or determined to
be payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, complying with any Applicable Law applicable to any of the
Collateral or (iii) in connection with any of the transactions contemplated by
this Agreement (except to the extent any such liabilities, costs and expenses
result from the gross negligence or willful misconduct of the Administrative
Agent or such Lenders). In any suit, proceeding or action brought by the
Administrative Agent under any Account for any sum owing thereunder, or to
enforce any provisions of any Account, each Grantor will save, indemnify and
keep the Administrative Agent and each Lender harmless from and against all
expense, loss or damage suffered by the Administrative Agent or any Lender by
reason of any defense, setoff, counterclaim, recoupment or reduction or
liability whatsoever of the Account Debtor or any other obligor thereunder,
arising out of a breach by any Grantor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such Account Debtor or obligor or its successors from any Grantor
(except to the extent any such expense, loss or damage results from the gross
negligence or willful misconduct of the Administrative Agent or such Lenders).
The obligations of the Grantors under this Section 4(f) shall survive the
termination of the other provisions of this Agreement.
SECTION 5. Reporting and Recordkeeping. Each Grantor
respectively covenants and agrees with the Administrative Agent and the Lenders
that from and after the date of this Agreement and until the Aggregate
Commitment is terminated and all Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Each Grantor will keep
and maintain at its own cost and expense adequate records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral in accordance with past practices. All Chattel Paper given to such
Grantor with respect to any Accounts will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject to the
security interests of First Union National Bank, as Administrative Agent". For
the Administrative Agents and the Lenders further security, each Grantor
agrees that upon the occurrence and during the continuance of any Event of
Default, upon the request of the Administrative Agent or the Required Lenders,
such Grantor shall deliver and turn over any such books and records directly to
the Administrative Agent or its designee. Each Grantor shall permit any
representative of the Administrative Agent to inspect such books and records in
accordance with Section 8.11 of the Credit Agreement and will provide
photocopies thereof to the Administrative Agent upon its reasonable request.
<PAGE>
19
(b) Certain Provisions Regarding Maintenance of Records and
Reporting Re: Accounts.
(i) In the event any amounts due and owing in excess of
$500,000 individually or $1,000,000 in the aggregate are in dispute
between any Account Debtor and any Grantor, such Grantor shall provide
the Administrative Agent with written notice thereof promptly after
such Grantor's learning thereof, explaining the reason for the dispute,
all claims related thereto and the amount in controversy.
(ii) Each Grantor will promptly notify the Administrative
Agent in writing if any Account or Accounts, the face value of which
exceeds $500,000 individually or $1,000,000 in the aggregate, arises or
arise out of a contract with the United States of America, or any
department, agency, subdivision or instrumentality thereof, or of any
state (or department, agency, subdivision or instrumentality thereof)
where such state has a state assignment of claims act or other law
comparable to the Federal Assignment of Claims Act. Each Grantor will
take any action required or requested by the Administrative Agent or
give notice of the Administrative Agents Security Interest in such
Accounts under the provisions of the Federal Assignment of Claims Act
or any comparable law or act enacted by any state or local Governmental
Authority. Any notifications or other documents executed and delivered
to the Administrative Agent in connection with the Federal Assignment
of Claims Act or any comparable state law may be promptly filed with
the appropriate Governmental Authority by the Administrative Agent or
held by the Administrative Agent until the Administrative Agent or the
Required Lenders decide in its or their sole discretion to make any
such filing.
(iii) Each Grantor will promptly upon, but in no event later
than ten (10) Business Days after: (A) such Grantor's learning thereof,
inform the Administrative Agent, in writing, of any material delay in
such Grantor's performance of any of its obligations to any Account
Debtor and of any assertion of any claims, offsets or counterclaims by
any Account Debtor and of any allowances, credits and/or other monies
granted by such Grantor to any Account Debtor, in each case involving
amounts in excess of $500,000 for any single Account or Account Debtor
or in excess of $1,000,000 in the aggregate for all Accounts and
Account Debtors; and (B) such Grantor's receipt or learning thereof,
furnish to and inform the Administrative Agent of any adverse
information that, to the knowledge of such Grantor, could reasonably be
expected to materially adversely affect the financial condition of any
Account Debtor with respect to Accounts exceeding $500,000 individually
or $1,000,000 in the aggregate.
(c) Further Identification of Collateral. Each Grantor will,
if so reasonably requested by the Administrative Agent, furnish to the
Administrative Agent statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
<PAGE>
20
(d) Notices. In addition to the notices required by Section
5(b), each Grantor will advise the Administrative Agent promptly, in reasonable
detail, (i) of any material Lien or claim made or asserted against any of the
Collateral, (ii) of any material adverse change in the composition of the
Collateral and (iii) of the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the Collateral or on the
validity, perfection or priority of the Security Interests.
SECTION 6. Collateral Account.
(a) There is hereby established with the Administrative Agent
a Collateral Account in the name and under the exclusive dominion and control of
the Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to Section 6(b) or any other provision of this
Agreement. Any income received by the Administrative Agent with respect to the
balance from time to time on deposit in the Collateral Account, including any
interest or capital gains on investments of amounts on deposit in the Collateral
Account, shall remain, or be deposited, in the Collateral Account together with
any investments from time to time made pursuant to Section 6(c), shall vest in
the Administrative Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Obligations until applied thereto as
hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event
of Default, if requested by the Administrative Agent, each Grantor shall
instruct all Account Debtors and other Persons obligated in respect of all
Accounts to make all payments in respect of the Accounts either (i) directly to
the Administrative Agent (by instructing that such payments be remitted to a
post office box which shall be in the name and under the exclusive dominion and
control of the Administrative Agent) or (ii) to one or more banks in any state
in the United States (by instructing that such payments be remitted to a post
office box which shall be in the name and under the exclusive dominion and
control of any such bank) under a Lockbox Letter substantially in the form of
Annex I hereto duly executed by each Grantor and any such bank or under other
arrangements, in form and substance reasonably satisfactory to the
Administrative Agent, pursuant to which such Grantor shall have irrevocably
instructed such bank (and such bank shall have agreed) to remit all proceeds of
such payments directly to the Administrative Agent for deposit into the
Collateral Account or as the Administrative Agent may otherwise instruct such
bank, and thereafter if the proceeds of any Collateral shall be received by any
of the Grantors, such Grantor will promptly deposit such proceeds into the
Collateral Account and until so deposited, all such proceeds shall be held in
trust by such Grantor for and as the property of the Administrative Agent, for
the benefit of itself and the Lenders, and shall not be commingled with any
other funds or property of such Grantor. At any time after the occurrence and
during the continuance of an Event of Default, the Administrative Agent may
itself so instruct each Grantor's Account Debtors. All such payments made to the
Administrative Agent shall be deposited in the Collateral Account.
<PAGE>
21
(c) Amounts on deposit in the Collateral Account shall be
promptly liquidated and applied to the payment of the Obligations in the manner
specified in Section 10.
SECTION 7. General Authority.
(a) Each Grantor hereby irrevocably appoints the
Administrative Agent their true and lawful attorney, with full power of
substitution, in the name of each Grantor, the Administrative Agent, the Lenders
or otherwise, for the sole use and benefit of the Administrative Agent and the
Lenders, but at the Grantors' expense, to exercise, at any time from time to
time all or any of the following powers:
(i) to file any financing statements, financing statement
amendments, continuation statements and any other agreements,
instruments, documents and papers to evidence the Security Interests in
the Collateral;
(ii) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due with respect to any
Collateral or by virtue thereof;
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral and the Proceeds thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof;
(v) to do all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the Collateral and
the Security Interests therein and to effect the intent of this
Agreement, all as fully and effectively as if the Administrative Agent
were the absolute owner thereof; and
(vi) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference to the
Collateral;
provided that the Administrative Agent shall not take any of the actions
described in this Section 7(a), except those described in clause (i) above,
unless an Event of Default shall have occurred and be continuing. The
Administrative Agent shall give the Grantors not less than ten (10) Business
Days prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantors agree that any such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC (to
the extent such Section is applicable).
(b) Ratification. The Grantors hereby ratify all that said
attorney shall lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to Section 7(a) is a power coupled with an interest
and shall be irrevocable.
<PAGE>
22
(c) Other Powers. The Grantors also authorize the
Administrative Agent, after the occurrence and during the continuance of an
Event of Default, at any time and from time to time, to execute, in connection
with any sale provided for in Section 8, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
(a) If any Event of Default has occurred and is continuing,
the Administrative Agent may, upon the request of the Required Lenders (and only
upon such request), exercise on behalf of the Administrative Agent and the
Lenders all rights of a secured party under the UCC (whether or not in effect in
the jurisdiction where such rights are exercised) and, in addition, the
Administrative Agent may, upon the request of the Required Lenders (and only
upon such request), (i) withdraw all cash, if any, in the Collateral Account and
investments made with amounts on deposit in the Collateral Account, and apply
such monies, investments and other cash, if any, then held by it as Collateral
as specified in Section 10 and (ii) if there shall be no such monies,
investments or cash or if such monies, investments or cash shall be insufficient
to pay the Obligations then outstanding in full, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future delivery,
and at such price or prices as the Administrative Agent may deem satisfactory.
The Administrative Agent or any Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations or if otherwise permitted under
applicable law, at any private sale) and thereafter hold the same, absolutely,
free from any right or claim of whatsoever kind. Each Grantor will execute and
deliver such documents and take such other action as the Administrative Agent
deems reasonably necessary or advisable in order that any such sale may be made
in compliance with law. Upon any such sale the Administrative Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold (without warranty). Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely, free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Grantor. To
the extent permitted by law, each Grantor hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale shall be given to the
Grantors ten (10) Business Days prior to such sale and (A) in case of a public
sale, state the time and place fixed for such sale, and (B) in the case of a
private sale, state the day after which sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Administrative Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Administrative Agent may determine. The
Administrative Agent shall not be obligated to make any such sale pursuant to
any such notice. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Administrative Agent
until the
<PAGE>
23
selling price is paid by the purchaser thereof, but the Administrative Agent
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Administrative Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction. The Grantors shall remain liable for any
deficiency.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement, the Administrative Agent may (i) require each
Grantor to, and each Grantor agrees that it will, at its expense and upon the
request of the Administrative Agent, forthwith assemble all or any part of the
Collateral as directed by the Administrative Agent and make it available at a
place designated by the Administrative Agent which is, in the Administrative
Agents opinion, reasonably convenient to the Administrative Agent and such
Grantor, whether at the premises of such Grantor or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premises where any of the Collateral is or may
be located and, without charge or liability to the Administrative Agent, seize
and remove such Collateral from such premises, (iii) have access to and use such
Grantor's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer such Collateral without charge
in or by means of any storage or transportation facility owned or leased by such
Grantor, process, repair or recondition such Collateral or otherwise prepare it
for disposition in any manner and to the extent the Administrative Agent deems
appropriate.
SECTION 9. Limitation on Duty of Administrative Agent in
Respect of Collateral. The Administrative Agents sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar property
for its own account. Neither the Administrative Agent, any Lender nor any of
their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent and the Lenders hereunder are
solely to protect the Administrative Agents and the Lenders interests in the
Collateral and shall not impose any duty upon the Administrative Agent or any
Lender to exercise any such powers. The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct. The Administrative Agent shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the
Administrative Agent in good faith.
<PAGE>
24
SECTION 10. Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be applied by
the Administrative Agent in accordance with Section 4.5 of the Credit Agreement
and then to payment to the Grantors or their successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds. The Administrative Agent may make distribution hereunder in cash
or in kind or, on a ratable basis, in any combination thereof.
SECTION 11. Concerning the Administrative Agent. The
provisions of Article XII of the Credit Agreement shall inure to the benefit of
the Administrative Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or,
when expressly required by this Agreement or the Credit Agreement, all
the Lenders) or, in the absence of such instructions, in accordance
with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by reason of any
action or omission to act on its part (other than any such action or
inaction constituting gross negligence or willful misconduct). The
Administrative Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
any Grantor.
SECTION 12. Appointment of Collateral Agents. At any time or
times, with, so long as no Default or Event of Default has occurred and is
continuing, the consent of the Grantors (which consent shall not be unreasonably
withheld), in order to comply with any legal requirement in any jurisdiction or
in order to effectuate any provision of the Loan Documents, the Administrative
Agent may appoint a bank or trust company or one or more other Persons, either
to act as collateral agent or agents, jointly with the Administrative Agent or
separately, on behalf of the Administrative Agent and the Lenders with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment (which may, in
the discretion of the Administrative Agent, include provisions for the
protection of such collateral agent similar to the provisions of Section 11).
SECTION 13. Expenses. In the event that the Grantors fail to
comply with the provisions of the Credit Agreement, this Agreement or any other
Loan Document, such that the value of any Collateral or the validity,
perfection, rank or value of the Security Interests are
<PAGE>
25
thereby diminished or potentially diminished or put at risk, the Administrative
Agent if requested by the Required Lenders may, but shall not be required to,
effect such compliance on behalf of the Grantors, and the Grantors shall
reimburse the Administrative Agent for the reasonable costs thereof on demand.
All insurance expenses and all reasonable expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, any and all excise, stamp, intangibles, transfer, property, sales,
and use taxes imposed by any state, federal, or local authority or any other
Governmental Authority on any of the Collateral, or in respect of the sale or
other disposition thereof, shall be borne and paid by the Grantors, and if the
Grantors fail promptly to pay any portion thereof when due, the Administrative
Agent or any Lender may, at its option, but shall not be required to, pay the
same and charge the Grantors' account therefor, and the Grantors agree to
reimburse the Administrative Agent or such Lender therefor on demand. All sums
so paid or incurred by the Administrative Agent or any Lender for any of the
foregoing and any and all other sums for which the Grantors may become liable
hereunder and all reasonable costs and expenses (including reasonable attorneys
fees, legal expenses and court costs) incurred by the Administrative Agent or
any Lender in enforcing or protecting the Security Interests or any of their
rights or remedies hereunder shall be payable by the Grantors on demand and
shall bear interest (after as well as before judgment) until paid at the rate
then applicable to Base Rate Loans under the Credit Agreement and shall be
additional Obligations hereunder.
SECTION 14. Notices. Notices. All notices and communications
hereunder to a Grantor shall be made in accordance with Section 13.1 of the
Credit Agreement and given to the addresses or transmission numbers for notices
set forth under its signature below.
SECTION 15. Release and Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral by any Grantor in accordance with the terms of the Loan
Documents (other than sales of Collateral in the ordinary course of business
consistent with past practices), the Administrative Agent will, at such
Grantor's expense, execute and deliver to such Grantor such documents as such
Grantor shall request to evidence the release of such item of Collateral from
the assignment and security interests granted hereby.
(b) This Agreement shall remain in effect from the Closing
Date through and including the date upon which all Obligations shall have been
indefeasibly and irrevocably paid and satisfied in full and the Aggregate
Commitment is terminated and upon such date the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantors. Upon any such termination, (i) the Administrative Agent shall promptly
assign, release, transfer and deliver to the Grantors the Collateral held by it
hereunder, all instruments of assignment executed in connection therewith,
together with all monies held by the Administrative Agent or any of its agents
hereunder, free and clear of the Liens hereof and (ii) the Administrative Agent
and the Lenders will promptly execute and deliver to the Grantors such documents
and instruments (including but not limited to appropriate UCC termination
statements) as the Grantors shall request to evidence such termination in each
such case at the expense of the Grantors.
<PAGE>
26
SECTION 16. Waivers, Non-Exclusive Remedies Remedies. No
failure on the part of the Administrative Agent or any Lender to exercise, and
no delay in exercising and no course of dealing with respect to, any right under
the Credit Agreement, this Agreement or any other Loan Document shall operate as
a waiver thereof or hereof; nor shall any single or partial exercise by the
Administrative Agent or any Lender of any right under the Credit Agreement, this
Agreement or any other Loan Document preclude any other or further exercise
thereof, and the exercise of any rights under this Agreement, the Credit
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law. This Agreement is a Loan Document executed
pursuant to the Credit Agreement.
SECTION 17. Successors and Assigns. This Agreement is for the
benefit of the Administrative Agent and the Lenders and their successors and
assigns (as permitted by the Credit Agreement), and in the event of an
assignment of all or any of the Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on the Grantors and their
successors and assigns; provided, that the Grantors may not assign any of their
rights or obligations hereunder without the prior written consent of the
Administrative Agent and the Lenders.
SECTION 18. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Grantors and the Administrative Agent with the
consent of the Required Lenders (or, when expressly required by this Agreement
or the Credit Agreement, all of the Lenders).
SECTION 19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 20. Consent to Jurisdiction. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
<PAGE>
27
similar form of mail), postage prepaid, to such Grantor at its address
set forth under its signature below;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
SECTION 21. Waiver of Jury Trial. EACH GRANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
SECTION 22. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the
Administrative Agent and the Lenders in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (b) the invalidity or
unenforceability of any provisions hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 23. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
SECTION 24. Counterparts. This Agreement may be executed by
the parties hereto in several counterparts (including by telecopy), each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
[Signature Pages Follow]
<PAGE>
28
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
HUMONGOUS ENTERTAINMENT, INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
29
WIZARDWORKS GROUP, INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
SINGLETRAC ENTERTAINMENT TECHNOLOGIES, INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
30
SWAN ACQUISITION CORP.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
CANDEL INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
ONE ZERO MEDIA, INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
FORMGEN, INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
GOLD MEDALLION SOFTWARE INC.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
MEDIATECHNICS, LTD.
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
LEGEND ENTERTAINMENT COMPANY LLC
By: /s/ Walter Parks
--------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ Julia Bouhuys
----------------------------
Name: Julia Bouhuys
Title: Senior Vice President
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (as amended,
restated, supplemented, or otherwise modified, this "Pledge Agreement"), dated
as of June 29, 1999, is made by GT Interactive Software Corp. (the "Borrower")
and certain of its subsidiaries identified on the signature pages attached
hereto (together with the Borrower and each additional subsidiary who becomes
party hereto pursuant to a Joinder Agreement, the "Pledgors", each individually,
a "Pledgor") in favor of First Union National Bank, a national banking
association, as administrative agent (the "Administrative Agent"), for the
ratable benefit of the Administrative Agent and the financial institutions who
are or may from time to time become parties to the Credit Agreement referred to
below (the "Lenders").
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, dated as of
September 11, 1998 (as amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the Lenders and the
Administrative Agent, the Lenders agreed to make certain Extensions of Credit to
the Borrower as more particularly described therein.
In connection with the execution and delivery of the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent a Pledge Agreement, dated as of September 11, 1998 (as heretofore amended,
restated, supplemented or otherwise modified, the "Existing Pledge Agreement"),
pursuant to which the Borrower pledged to the Administrative Agent, for the
ratable benefit of the Lenders, the Collateral to secure the Obligations (as
such terms are defined in the Existing Pledge Agreement).
The Borrower, the Lenders and the Administrative Agent have
agreed to execute a Second Amendment, Waiver and Agreement, dated as of June 29,
1999 (the "Second Amendment"), under the Credit Agreement to, among other
things, amend certain provisions thereof.
The Pledgors are the record and beneficial owner of (a) the
shares of Pledged Stock (as hereinafter defined) issued by certain corporations
as specified on Schedule I attached hereto and incorporated herein by reference
(collectively, the "Issuers") and (b) the Partnership/LLC Interests (as
hereinafter defined) in the partnerships and limited liability companies listed
on Schedule I hereto (collectively, the "Partnerships/LLCs").
In connection with the transactions contemplated by the Second
Amendment and as a condition precedent thereto, the Administrative Agent and the
Lenders have requested that the Existing Pledge Agreement be amended and
restated, and that each Pledgor execute and deliver this Pledge Agreement
together with, the Pledged Stock, to the extent not previously delivered to the
Administrative Agent, and the Partnership/LLC Interests to the Administrative
Agent, for the ratable benefit of the Administrative Agent and the Lenders, and
each of the Pledgors has agreed to do so pursuant to the terms hereof.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and
to induce the Administrative Agent and the Lenders to enter into the Second
Amendment, each Pledgor hereby agrees with the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so defined,
and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code as in effect in the
State of New York; provided that if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of
the security interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York,
"Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Collateral" means, with respect to each Pledgor, the Stock
Collateral and the Partnership/LLC Collateral.
"Obligations" means the Pledgors' obligations under the Loan
Documents in respect of the unpaid principal of and interest on the
Notes (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to any Pledgor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) and all other
obligations and liabilities of the Pledgors to the Administrative
Agent, the Issuing Lender and the Lenders in respect of the Loans, the
Notes, the Letters of Credit, the L/C Obligations, any Hedging
Agreements permitted or required under the Credit Agreement, the
Concentration Account or any cash management arrangements with any
Lender, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit Agreement, the Notes,
the Letters of Credit, the L/C Obligations, any Hedging Agreements
permitted or required under the Credit Agreement, this Pledge
Agreement, the other Loan Documents or any other document made,
delivered or given in connection herewith or therewith, in each case
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent, the Issuing Lender or the Lenders that are required to be paid
by any Pledgor pursuant to the terms of the Credit Agreement, this
Pledge Agreement or any other Loan Document).
"Partnership/LLC Collateral" means, with respect to each
Pledgor, all of the Partnership/LLC Interests of such Pledgor in the
Partnerships/LLCs and all Proceeds therefrom.
"Partnership/LLC Interests" means, with respect to each
Pledgor, the entire partnership or membership interest of such Pledgor
in each Partnership/LLC listed under
<PAGE>
3
such Pledgor's name on Schedule I hereto, including, without
limitation, such Pledgor's capital account, such Pledgor's interest as
a partner or member in the net cash flow, net profit and net loss, and
items of income, gain, loss, deduction and credit of the
Partnerships/LLCs, such Pledgor's interest in all distributions made or
to be made by the Partnerships/LLCs to such Pledgor and all of the
other economic rights, titles and interests of such Pledgor as a
partner or member of the Partnerships/LLCs, whether set forth in the
partnership agreement or membership agreement of the Partnerships/LLCs,
by separate agreement or otherwise.
"Permitted Liens" means all Liens respecting the Collateral
permitted pursuant to Section 10.3 of the Credit Agreement.
"Pledged Stock" means, with respect to each Pledgor, the
shares of capital stock of each Issuer listed under such Pledgor's name
on Schedule I hereto, together with all stock certificates, options or
rights of any nature whatsoever that may be issued or granted by any
Issuer to such Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock and the Partnership/LLC Interests, collections
thereon, proceeds of sale thereof or distributions with respect
thereto.
"Stock Collateral" means, with respect to each Pledgor, the
Pledged Stock owned by such Pledgor and all Proceeds therefrom.
2. Pledge and Grant of Security Interest.
(a) Each Pledgor hereby delivers to the Administrative Agent,
for the ratable benefit of the Administrative Agent and the Lenders,
all of the Pledged Stock of such Pledgor, to the extent not previously
delivered to the Administrative Agent.
(b) The Borrower hereby confirms and reaffirms its grant of a
security interest in the Collateral (as defined in the Existing Pledge
Agreement) pursuant to the Existing Pledge Agreement. In order to
secure the payment when due whether at the stated maturity, by
acceleration or otherwise of the Obligations, each Pledgor (including
the Borrower) hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders and the Administrative Agent, a security
interest in the Pledged Stock listed under such Pledgor's name on
Schedule I and all of such Pledgor's other Collateral.
3. Stock Powers; Register of Pledge. Concurrently with the
delivery to the Administrative Agent of each certificate representing one or
more shares of Pledged Stock (with respect to each Domestic Subsidiary, and,
where applicable, with respect to each Foreign Subsidiary), each Pledgor shall
deliver an undated stock power covering such certificate, duly
<PAGE>
4
executed in blank by such Pledgor with, if the Administrative Agent so requests,
signature guaranteed.
4. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) each Pledgor shall remain liable to perform all of its
duties and obligations as a partner or member of the Partnerships/LLCs to the
same extent as if this Pledge Agreement had not been executed, (b) the exercise
by the Administrative Agent or any Lender of any of its rights hereunder shall
not release any Pledgor from any of its duties or obligations as a partner or
member of the Partnerships/LLCs and (c) neither the Administrative Agent nor any
Lender shall have any obligation or liability as a partner or member of the
Partnerships/LLCs by reason of this Pledge Agreement.
5. Representations and Warranties. To induce the
Administrative Agent and the Lenders to make Extensions of Credit and to enter
into the Second Amendment, each Pledgor hereby represents and warrants to the
Administrative Agent and the Lenders that:
(a) such Pledgor is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to execute and
deliver, to perform its obligations under, and to grant the Lien on its
Collateral pursuant to, this Pledge Agreement and has taken all
necessary corporate action to authorize its execution, delivery and
performance of, and grant of the Lien on its Collateral pursuant to,
this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of such Pledgor enforceable against such Pledgor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) the execution, delivery and performance by such Pledgor of
this Pledge Agreement will not violate any provision of any (i)
Applicable Law relating to such Pledgor or (ii) material contractual
obligation of the Pledgor, the violation of which could reasonably be
expected to have a Material Adverse Effect, and will not result in the
creation or imposition of any Lien on any of the properties or the
revenues of such Pledgor pursuant to any Applicable Law or such
contractual obligation, except as contemplated hereby and by the Credit
Agreement;
(d) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of such Pledgor or any Issuer or any general or
limited partner or member of any Partnership/LLC), is required in
connection with the execution, delivery or performance by, or validity
or enforceability against, such Pledgor of this Pledge Agreement,
except (i) as may be required in connection with the disposition of the
Pledged Stock and the Partnership/LLC Interests by laws affecting the
<PAGE>
5
offering and sale of securities generally and (ii) filings under the
Uniform Commercial Code.
(e) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of such Pledgor, threatened by or against such Pledgor or
against any of its properties or revenues, in each case with respect to
this Pledge Agreement or any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed under such Pledgor's
name on Schedule I constitute all of the issued and outstanding shares
of all classes of the capital stock of each Issuer that is a Domestic
Subsidiary and constitute sixty-five percent (65%) of all of the issued
and outstanding shares of all classes of capital stock of each Issuer
that is a Foreign Subsidiary, in each case owned by such Pledgor, and
Schedule I accurately reflects such Pledgor's Partnership/LLC Interest
in each of the Partnerships/LLCs listed under such Pledgor's name on
Schedule I and the Partnership/LLC Interests pledged by such Pledgor
constitute all of the outstanding ownership interests in which such
Pledgor has any right, title or interest in each Partnership/LLC which
is a Domestic Subsidiary and constitutes sixty-five percent (65%) of
the outstanding ownership interests in which such Pledgor has any
right, title and interest in each Partnership/LLC which is a Foreign
Subsidiary;
(g) the shares of Pledged Stock listed under such Pledgor's
name on Schedule I have been duly and validly issued and are fully paid
and nonassessable and all of the Partnership/LLC Interests listed under
such Pledgor's name on Schedule I have been duly and validly issued;
(h) such Pledgor is the record and beneficial owner of, and
has good and marketable title to the Pledged Stock and Partnership/LLC
Interests listed under such Pledgor's name on Schedule I, free of any
and all Liens or options in favor of, or claims of, any other Person,
except the Liens created by this Pledge Agreement or Permitted Liens.
(i) the jurisdiction in which such Pledgor is located for
purposes of Section 9-103 and Section 9-401 of the Code is listed
opposite such Pledgor's name on Schedule II hereto;
(j) upon delivery to the Administrative Agent of the stock
certificates evidencing such Pledgor's Pledged Stock and the filing of
appropriate financing statements (or, with respect to any Foreign
Subsidiary, any filing required by the applicable foreign jurisdiction)
in the jurisdictions listed opposite such Pledgor's name on Schedule
II, the Liens granted by such Pledgor pursuant to this Pledge Agreement
will constitute valid, perfected first priority Liens on the
Collateral, enforceable as such against all creditors of such Pledgor
and any Persons purporting to purchase any of such Collateral from such
Pledgor; and
<PAGE>
6
(k) such Pledgor has delivered to the Administrative Agent
true and complete copies of the partnership agreements and operating
agreements, as applicable, for each of the Partnerships/LLCs listed
under such Pledgor's name on Schedule I, which partnership agreements
and operating agreements are currently in full force and effect and
have not been amended or modified except as disclosed to the
Administrative Agent in writing.
6. Certain Covenants. Each Pledgor hereby covenants and agrees
with the Administrative Agent and the Lenders, that, from and after the date of
this Pledge Agreement until the Obligations are paid in full and the Aggregate
Commitment is terminated:
(a) Such Pledgor agrees that as a partner or member in the
Partnerships/LLCs listed under such Pledgor's name on Schedule I it
will abide by, perform and discharge each and every material
obligation, covenant and agreement to be abided by, performed or
discharged by such Pledgor as and when required under the terms of the
partnership agreements and operating agreements, as applicable, of such
Partnerships/LLCs, at no cost or expense to the Administrative Agent
and the Lenders;
(b) If such Pledgor shall, as a result of its ownership of the
Collateral, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any of the Collateral, or otherwise in respect thereof,
such Pledgor shall accept the same as the agent of the Administrative
Agent, hold the same in trust for the Administrative Agent and deliver
the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by such Pledgor to the Administrative Agent, if
required, together with an undated stock power covering such
certificate duly executed in blank by such Pledgor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by
the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligations; provided, that at no time
shall the Pledged Stock or Partnership/LLC Interests of any Issuer or
Partnership/LLC that is a Foreign Subsidiary exceed sixty-five percent
(65%) of the issued and outstanding shares of all classes of capital
stock of such Subsidiary or Partnership/LLC Interests of such
Subsidiary owned by such Pledgor. In addition, any sums paid to such
Pledgor upon or in respect of such Collateral upon the liquidation or
dissolution of any Issuer or Partnership/LLC shall be held by the
Administrative Agent as additional collateral security for the
Obligations.
(c) Without the prior written consent of the Administrative
Agent, such Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer or Partnership/LLC listed under such
Pledgor's name on Schedule I to issue any stock, partnership interests,
limited liability company interests or other equity securities of any
nature or to issue any other securities convertible into or granting
the right to purchase or
<PAGE>
7
exchange for any stock, partnership interests, limited liability
company interests or other equity securities of any nature of such
Issuer or Partnership/LLC, (ii) except as expressly provided to the
contrary herein, consent to any modification, extension or alteration
of the material terms of any partnership agreement or operating
agreement of any such Partnerships/LLCs, (iii) accept a surrender of
any partnership agreement or operating agreement of any such
Partnerships/LLCs or waive any material breach of or default under any
partnership agreement or operating agreement of any such
Partnerships/LLCs by any other party thereto, (iv) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with
respect to the Collateral, except as permitted by the Loan Documents,
or (v) create, incur or permit to exist any Lien on or option in favor
of, or any claim of any Person with respect to, any of the Collateral,
or any interest therein, except for the Liens provided for by this
Pledge Agreement or Permitted Liens. Such Pledgor will defend the
right, title and interest of the Administrative Agent in and to the
Collateral against the claims and demands of all Persons whomsoever.
(d) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such
Pledgor, such Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner reasonably satisfactory
to the Administrative Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(e) Such Pledgor agrees to pay when due, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying
(except due to any delay caused by the gross negligence or willful
misconduct of the Administrative Agent or any Lender), any and all
applicable stamp, excise, sales or other similar taxes which may be
payable or determined to be payable with respect to the Collateral or
in connection with any of the transactions contemplated by this Pledge
Agreement.
(f) On or prior to the formation or acquisition of any
Subsidiary by such Pledgor, such Pledgor agrees to execute the Joinder
Agreement, attached to the Credit Agreement (which among other things,
supplements this Pledge Agreement), and such other documents and
instruments as required pursuant to Section 8.12 of the Credit
Agreement.
7. Cash Dividends and Distributions; Voting Rights. Unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the Pledgors of the Administrative Agent's
intent to exercise its rights pursuant to Paragraph 8 below, the Pledgor shall
be permitted to receive all cash dividends and shareholder, partnership and
membership distributions paid in accordance with the terms of the Credit
Agreement in
<PAGE>
8
respect of the Collateral and to exercise all voting and corporate, partnership
or membership rights, as applicable, with respect to the Collateral; provided,
that no vote shall be cast or corporate, partnership or membership right
exercised or other action taken which, in the Administrative Agent's reasonable
judgment, would impair the Collateral or which would be inconsistent with or
result in any violation of any provision of the Credit Agreement, the Notes, any
other Loan Document or this Pledge Agreement. The Administrative Agent shall
execute and deliver all proxies and other instruments as any Pledgor may
reasonably request from time to time for the purpose of enabling such Pledgor to
exercise the voting and other rights that it is entitled to exercise and to
receive the dividends and distributions that it is authorized to receive and
retain pursuant to this Paragraph 7, in each case at the sole cost and expense
of such Pledgor.
8. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise
such rights to the Pledgors, (i) the Administrative Agent shall have
the right to receive any and all cash dividends paid in respect of the
Pledged Stock or partnership and membership distributions in respect of
the Partnership/LLC Interests and make application thereof to the
Obligations in accordance with Section 4.5 of the Credit Agreement and
(ii) all shares of the Pledged Stock and the Partnership/LLC Interests
represented by instruments shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate,
partnership, membership and other rights pertaining to such Collateral
at any meeting of shareholders, partners or members of the applicable
entity or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to
such Collateral as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all
of the Collateral upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure
of the applicable entity, or upon the exercise by the relevant Pledgor
or the Administrative Agent of any right, privilege or option
pertaining to such Collateral, and in connection therewith, the right
to deposit and deliver any and all of the Collateral with any
committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Pledgor to exercise
any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent or any Lender of any right or remedy against
any Pledgor or against any other Person which may be or become liable
in respect of all or any part of the Obligations or against any
collateral security therefor, guarantee thereof or right of offset with
respect thereto. Neither the Administrative Agent nor any Lender shall
be liable for any failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so, nor shall the
<PAGE>
9
Administrative Agent be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Pledgor or any other
Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
9. Remedies.
<PAGE>
10
(a) If an Event of Default shall occur and be continuing, upon
the request of the Required Lenders, the Administrative Agent shall
exercise, on behalf of itself and the Lenders, all rights and remedies
granted in this Pledge Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, and in
addition thereto, all rights and remedies of a secured party under the
Code. Without limiting the generality of the foregoing with regard to
the scope of the Administrative Agent's remedies, the Administrative
Agent, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice
required by Applicable Law referred to below) to or upon any Pledgor,
any Issuer, any Partnership/LLC or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels at public or private sale
or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere
upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Administrative
Agent or any Lender shall have the right upon any such public sale or
sales, and, to the extent permitted by Applicable Law, upon any such
private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any
Pledgor, which right or equity is hereby waived or released. The
Administrative Agent shall apply any Proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Administrative
Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel thereto, to the
payment in whole or in part of the Obligations then outstanding, in
accordance with Section 4.5 of the Credit Agreement, and only after
such application and after the payment by the Administrative Agent of
any other amount required by any provision of Applicable Law,
including, without limitation, Section 9-504(1)(c) of the Code, need
the Administrative Agent account for the surplus, if any, to the
relevant Pledgor. To the extent permitted by Applicable Law, the
Pledgors waive all claims, damages and demands they may acquire against
the Administrative Agent or any Lender arising out of the exercise by
them of any rights hereunder. Written notice of a proposed sale or
other disposition of Collateral shall be given to the appropriate
Pledgors at least ten (10) Business Days before such sale or other
disposition and shall be deemed reasonable and proper if so given. To
the extent permitted by applicable law, the Pledgors further waive and
agree not to assert any rights or privileges which they may acquire
under Section 9-112 of the Code. Nothing in this Paragraph 9 or
otherwise in this Pledge Agreement shall be construed to require the
Administrative Agent to give any notice of an action not otherwise
required by Applicable Law and the express provisions of this Pledge
Agreement, the Credit Agreement or any other Loan Document.
<PAGE>
11
(b) Effective upon the occurrence and during the continuance
of an Event of Default, each Pledgor hereby constitutes and appoints
the Administrative Agent as its true and lawful attorney-in-fact, with
full power of substitution and full power to do any and all things
which the Administrative Agent deems advisable or necessary to be done
hereunder as fully and effectively as such Pledgor might or could do
but for this appointment and hereby ratifies all that said
attorney-in-fact shall lawfully do or cause to be done by virtue
hereof. Neither the Administrative Agent nor any of its agents shall be
liable for any acts or omissions or for any error in judgment or
mistake of fact or law in its capacity as such attorney-in-fact, except
due to its gross negligence or willful misconduct. This power of
attorney is coupled with an interest and shall be irrevocable so long
as any Extensions of Credit shall remain outstanding or the Aggregate
Commitment shall remain in effect.
10. Indemnity and Expenses. Each Pledgor hereby, jointly and
severally, agrees to pay to the Administrative Agent, upon demand, the amount of
any and all reasonable out-of-pocket expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Administrative
Agent may incur in connection with (i) the administration of this Pledge
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon the Collateral, (iii) the exercise or enforcement of
any of the rights of the Administrative Agent and the Lenders hereunder or (iv)
the failure by any Pledgor to perform or observe any of the provisions hereof.
11. Registration Rights: Private Sales.
(a) If the Administrative Agent shall determine to exercise
its right to sell any or all of the Pledged Stock pursuant to Paragraph
8, and if in the opinion of the Administrative Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), each relevant Pledgor will use its best
efforts to cause the applicable Issuer to (i) execute and deliver, and
cause the directors and officers of the applicable Issuer to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the reasonable opinion of the
Administrative Agent, necessary or advisable to register the Pledged
Stock, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) to use its best efforts to cause the registration
statement relating thereto to become effective and to remain effective
for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, or until all
such Pledged Stock is sold and (iii) to make all amendments thereto
and/or to the related prospectus which, in the reasonable opinion of
the Administrative Agent, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable
thereto. Each Pledgor agrees to use its best efforts to cause the
applicable Issuer to comply with the provisions of the securities or
"Blue Sky" laws of any and all jurisdictions which the Administrative
Agent
<PAGE>
12
shall designate and to make available to its security holders, as soon
as practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Pledgor
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay
a sale of any of the Pledged Stock for the period of time necessary to
permit the applicable Issuer to register such securities for public
sale under the Securities Act, or under applicable state securities
laws, even if the applicable Issuer would agree to do so.
(c) Each Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to
this Paragraph 11 valid and binding and in compliance with any and all
other Applicable Laws. Each Pledgor further agrees that a breach of any
of the covenants contained in this Paragraph 11 will cause irreparable
injury to the Administrative Agent and the Lenders not compensable in
damages, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Paragraph 11 shall be
specifically enforceable against such Pledgor, and such Pledgor hereby
waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no
Event of Default has occurred and is continuing under the Credit
Agreement.
12. Amendments, etc. With Respect to the Obligations. Each
Pledgor shall remain obligated hereunder, and the Collateral shall remain
subject to the Liens granted hereby, notwithstanding that, without any
reservation of rights against such Pledgor, and without notice to or further
assent by such Pledgor, any demand for payment of any of the Obligations made by
the Administrative Agent or any Lender may be rescinded by the Administrative
Agent or such Lender, and any of the Obligations continued, and the Obligations,
or the liability of such Pledgor or any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered, or
released by the Administrative Agent or any Lender, and the Credit Agreement,
the Notes, any other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or part, as the Lenders (or the
<PAGE>
13
Required Lenders, as the case may be) may deem advisable from time to time, and
any guarantee, right of offset or other collateral security at any time held by
the Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any other Lien at any time held by it as security for the Obligations or
any property subject thereto. Each Pledgor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative Agent or any Lender upon this Pledge
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Pledge
Agreement; and all dealings between any Pledgor, on the one hand, and the
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. To the extent permitted by Applicable Law, each Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon such Pledgor with respect to the Obligations.
13. No Subrogation. Notwithstanding any payment or payments
made by any Pledgor hereunder, or any setoff or application of funds of any
Pledgor by the Administrative Agent, or the receipt of any amounts by the
Administrative Agent with respect to any of the Collateral, no Pledgor shall be
entitled to be subrogated to any of the rights of the Administrative Agent
against any guarantor or against any other collateral security held by the
Administrative Agent for the payment of the Obligations, nor shall any Pledgor
seek any reimbursement from any guarantor in respect of payments made by any
Pledgor in connection with the Collateral, or amounts realized by the
Administrative Agent in connection with the Collateral, until all amounts owing
to the Administrative Agent and the Lenders on account of the Obligations are
paid in full and the Credit Agreement is terminated. If any amount shall be paid
to a Pledgor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by such
Pledgor in trust for the Administrative Agent, segregated from other funds of
such Pledgor, and shall, forthwith upon receipt by such Pledgor, be turned over
to the Administrative Agent in the exact form received by such Pledgor (duly
endorsed by such Pledgor, if required) to be applied against the Obligations,
whether matured or unmatured, in accordance with Section 4.5 of the Credit
Agreement.
14. Limitation on Duties Regarding Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. Neither the Administrative Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Pledgor or otherwise.
15. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral constitute irrevocable
powers coupled with an interest.
<PAGE>
14
16. Severability. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
17. Paragraph Headings. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
18. No Waiver; Cumulative Remedies. Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument pursuant
to Paragraph 19) be deemed to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
19. Waivers and Amendments; Successors and Assigns. None of
the terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by the Pledgors and
the Administrative Agent; provided that any consent by the Administrative Agent
to any waiver, amendment, supplement or modification hereto shall be subject to
approval thereof by the Lenders or Required Lenders, as applicable, in
accordance with Section 13.11 of the Credit Agreement. This Pledge Agreement
shall be binding upon the successors and assigns of the Pledgors and shall inure
to the benefit of the Administrative Agent, the Lenders and their respective
permitted successors and assigns.
20. Notices. All notices and communications hereunder to a
Pledgor shall be made in accordance with Section 13.1 of the Credit Agreement
and given to the addresses or transmission numbers for notices set forth under
its signature below.
21. Control Agreement; Acknowledgment by Issuers and
Partnership/LLC.
(a) Each Pledgor hereby authorizes and instructs each
applicable Issuer and Partnership/LLC to comply, and each Issuer and
Partnership/LLC hereby agrees to so comply, with any instruction
received thereby from the Administrative Agent in accordance with the
terms of this Pledge Agreement with respect to the Collateral, without
any consent or further instructions from such Pledgor (or other
registered owner),
<PAGE>
15
and such Pledgor agrees that such Issuer and Partnership/LLC shall be
fully protected in so complying. Each Partnership/LLC agrees that its
agreement set forth in the preceding sentence shall be sufficient to
create in favor of the Administrative Agent, for the benefit of the
Lenders, "control" of the Partnership/LLC Interests within the meaning
of such term under Section 8-106(c) of the Code. Notwithstanding the
foregoing, nothing in this Pledge Agreement is intended or shall be
construed to mean or imply that the Partnership/LLC Interests
constitute "securities" within the meaning of such term under Section
8-102(a)(15) of the Code or otherwise to limit or modify the
application of Section 8-103(c) of the Code. Rather, the Administrative
Agent has requested that this provision be included in this Pledge
Agreement solely out of an abundance of caution in the event the
Partnership/LLC Interests are, nevertheless, deemed to constitute
"securities" under the Code.
(b) Each Issuer and Partnership/LLC acknowledges receipt of a
copy of this Pledge Agreement and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to
it. Each Issuer and Partnership/LLC agrees to notify the Administrative
Agent promptly in writing of the occurrence of any of the events
described in Paragraph 6(c). Each Issuer and Partnership/LLC further
agrees that the terms of Paragraph 11 shall apply to it with respect to
all actions that may be required of it under or pursuant to or arising
out of Paragraph 9.
22. Authority of Administrative Agent. Each Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Pledge Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Pledge Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and such
Pledgor, the Administrative Agent shall be conclusively presumed to be acting as
agent for itself and the Lenders with full and valid authority so to act or
refrain from acting, and neither such Pledgor nor any Issuer or Partnership/LLC
shall be under any obligation, or entitlement, to make any inquiry respecting
such authority.
23. Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
24. Consent to Jurisdiction. Each Pledgor hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Pledge Agreement and the other Loan
Documents to which it is a party, or for recognition and enforcement of
any judgement in respect thereof, to the non-exclusive
<PAGE>
16
general jurisdiction of the courts of the State of New York, the courts
of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Pledgor at its address set forth under its signature
below;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
25. Waiver of Jury Trial. EACH PLEDGOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
26. Entire Agreement. This Pledge Agreement, together with the
other Loan Documents, constitutes the entire agreement with respect to the
subject matter hereof and supersedes all prior agreements with respect to the
subject matter hereof.
27. Release and Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral permitted in accordance with the terms of the Loan
Documents, the Administrative Agent will, at the relevant Pledgor's
expense, execute and deliver to such Pledgor such documents as such
Pledgor shall reasonably request to evidence the release of such item
of Collateral from the assignment and security interest granted hereby.
(b) This Pledge Agreement shall remain in effect from the
Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full
and the Aggregate Commitment is terminated and upon such date the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgors. Upon any such termination, (i)
the Administrative Agent shall promptly assign, release, transfer and
deliver to the appropriate Pledgors the
<PAGE>
17
Collateral pledged hereunder, all instruments of assignment executed in
connection therewith, and all stock certificates or other certificates
or instruments held by the Administrative Agent in connection
therewith, together with all monies held by the Administrative Agent or
any of its agents hereunder, free and clear of the Liens hereof and
(ii) the Administrative Agent and the Lenders will promptly execute and
deliver to the appropriate Pledgors such documents and instruments
(including but not limited to appropriate UCC termination statements)
as such Pledgors shall reasonably request to evidence such termination
in each such case at the cost and expense of such Pledgors.
[Signature Pages Follow]
<PAGE>
18
IN WITNESS WHEREOF, each Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its duly authorized officer as of the date first
above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
HUMONGOUS ENTERTAINMENT, INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
19
WIZARDWORKS GROUP, INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
SINGLETRAC ENTERTAINMENT
TECHNOLOGIES, INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
20
SWAN ACQUISITION CORP.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
CANDEL INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
21
ONE ZERO MEDIA, INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
FORMGEN, INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
22
GOLD MEDALLION SOFTWARE INC.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
MEDIATECHNICS LTD.
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
23
LEGEND ENTERTAINMENT COMPANY LLC
By: /s/ WALTER PARKS
------------------------------
Name: Walter Parks
Title: Vice President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Mr. Walter Parks
Attention: Vice President, Legal Affairs
Telephone: (212) 726-6572
Telecopy: (212) 726-6590
<PAGE>
24
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ JULIA BOUHUYS
------------------------------
Name: Julia Bouhuys
Title: Senior Vice President
