UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
-----------------------
GT INTERACTIVE SOFTWARE CORP.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
36236E109
(CUSIP Number)
William E. Ford
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Tel. No.: (203) 629-8600
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
-----------------------
July 29, 1999
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 1(f) or 1(g), check the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
36236E109 Page 2 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
General Atlantic Partners, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
OO
<PAGE>
36236E109 Page 3 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
General Atlantic Partners 16, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
OO
<PAGE>
36236E109 Page 4 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
General Atlantic Partners 19, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
OO
<PAGE>
36236E109 Page 5 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
General Atlantic Partners II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
OO
<PAGE>
36236E109 Page 6 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
General Atlantic Partners 54, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
OO
<PAGE>
36236E109 Page 7 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GAP Coinvestment Partners II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
36236E109 Page 8 of 80 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GAP Coinvestment Partners, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [X]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,761,858
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,761,858
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,761,858
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.7%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
36236E109 Page 9 of 80 Pages
AMENDMENT NO. 1 TO SCHEDULE 13D
This Amendment No. 1 (this "Amendment") to Schedule 13D (the "Original
13D") is filed by the undersigned to amend and supplement the Schedule 13D,
dated as of March 4, 1999, with respect to the shares of common stock, par value
$.01 per share (the "Common Stock"), of GT Interactive Software Corp., a
Delaware corporation (the "Company").
Item 1. Security and Issuer.
This Amendment relates to the shares of Common Stock of the Company.
The address of the principal executive offices of the Company is 417 Fifth
Avenue, New York, New York 10016. Capitalized terms used in this Amendment and
not defined herein shall have the meanings ascribed to such terms in the
Original 13D.
Item 2. Identity and Background.
Unchanged.
<PAGE>
36236E109 Page 10 of 80 Pages
Item 3. Source and Amount of Funds or Other Consideration.
This Amendment is being filed as a result of recent acquisitions of (i)
the Warrants (as defined in Item 5(c) below) to purchase shares of Common Stock
and (ii) the Options (as defined in Item 5(c) below) to purchase shares of
Common Stock. As more fully described in Item 5(c) below, the Warrants and the
Options were acquired in consideration of the agreement by GAP 54 and GAPCO II
to enter into the Commitment Letter (as defined in Item 5(c) below) and the
unsecured subordinated loan of $20 million made by GAP 54 and GAPCO II to the
Company on July 29, 1999. In the event that the Warrants and the Options are
exercised, the source of the funds to be used for the exercise of such Warrants
and Options shall be contributions from the partners of GAP 54 and GAPCO II.
Item 4. Purpose of Transaction.
Item 4 is hereby amended and restated in its entirety as follows:
The Reporting Persons acquired the shares of Preferred Stock reported
in the Original 13D and the Warrants and the Options described in this Amendment
for investment purposes. From time to time, the Reporting Persons may acquire
additional shares of Common Stock upon exercise of the Warrants or the Options
or otherwise, convert shares of Preferred Stock into shares of Common Stock or
dispose of some or all of the shares of Common Stock owned by them. In addition,
as described in Item 5(c) below, the Reporting Persons may acquire Additional
Warrants (as defined in Item 5(c) below) upon the occurrence of the Triggering
Events (as defined in Item 5(c) below). Except as described in
<PAGE>
36236E109 Page 11 of 80 Pages
this Item 4 or in Item 5(c) below, none of the Reporting Persons has any other
plans which relate to or would result in any of the items listed in paragraphs
(a) through (j) of Item 4.
Item 5. Interest in Securities of the Issuer.
Item 5 is hereby amended and restated in its entirety as follows:
(a) As of the date hereof, GAP, GAP 16, GAP 19, GAP II and GAPCO each
owns of record no shares of Common Stock, 4,184,545 shares of Common Stock,
2,092,373 shares of Common Stock, 504,000 shares of Common Stock and 647,707
shares of Common Stock, respectively, or 0%, 5.3%, 2.7%, 0.6% and 0.8%,
respectively, of the Company's issued and outstanding shares of Common Stock. In
addition, as of the date hereof, (i) GAP 54 owns (x) shares of Preferred Stock
convertible into 4,897,440 shares of Common Stock or 6.1% of the Company's
issued and outstanding shares of Common Stock, (y) Warrants to purchase
1,632,480 shares of Common Stock or 2.0% of the Company's issued and outstanding
shares of Common Stock and (z) Options to purchase 1,088,320 shares of Common
Stock or 1.4% of the Company's issued and outstanding shares of Common Stock and
(ii) GAPCO II owns (x) shares of Preferred Stock convertible into 1,102,560
shares of Common Stock or 1.4% of the Company's issued and outstanding shares of
Common Stock, (y) Warrants to purchase 367,520 shares of Common Stock or 0.5% of
the Company's issued and outstanding shares of Common Stock and (z) Options to
purchase 245,013 shares of Common Stock or 0.3% of the Company's issued and
outstanding shares of Common Stock. Accordingly, on an as converted and
exercised basis, GAP 54 owns 7,618,240 shares of Common Stock or 9.4% of the
Company's issued and outstanding shares
<PAGE>
36236E109 Page 12 of 80 Pages
of Common Stock and GAPCO II owns 1,715,093 shares of Common Stock or 2.1% of
the Company's issued and outstanding shares of Common Stock.
By virtue of the fact that the GAP Managing Members are also the
general partners authorized and empowered to vote and dispose of the securities
held by GAPCO and GAPCO II, and that GAP is the general partner of GAP 16, GAP
19, GAP II and GAP 54, the Reporting Persons may be deemed to share voting power
and the power to direct the disposition of the shares of Common Stock owned by
each of the Reporting Persons. Accordingly, as of the date hereof, each of the
Reporting Persons may be deemed to own beneficially an aggregate of 16,761,858
shares of Common Stock or 20.7% of the Company's issued and outstanding shares
of Common Stock.
(b) Each of the Reporting Persons has the shared power to direct the
vote and the shared power to direct the disposition of the 16,761,858 shares of
Common Stock that may be deemed to be owned beneficially by each of them.
(c) On February 23, 1999, GAP 54 and GAPCO II acquired 600,000 shares
of Preferred Stock pursuant to a private stock purchase agreement entered into
with the Company. Each share of Preferred Stock is convertible at any time into
10 shares of Common Stock.
On June 29, 1999, pursuant to the Warrant Agreement, dated as of June
29, 1999 (the "Warrant Agreement"), among the Company, GAP 54, GAPCO II, Joseph
J. Cayre, Kenneth Cayre and Stanley Cayre, which Warrant Agreement is attached
as Exhibit 1 to this Amendment, the Company issued to GAP 54, warrants to
purchase, at an exercise price equal to $.01 per share, 408,120 shares of Common
Stock, and to GAPCO II,
<PAGE>
36236E109 Page 13 of 80 Pages
warrants to purchase, at an exercise price equal to $.01 per share, 91,880
shares of Common Stock, in consideration of the execution by GAP 54 and GAPCO II
of the Commitment Letter, dated June 29, 1999 (the "Commitment Letter"), among
the Company, First Union National Bank, as Administrative Agent, GAP 54, GAPCO
II and the other parties thereto. Pursuant to the Commitment Letter, GAP 54 and
GAPCO II agreed to make on July 30, 1999, on an aggregate basis, a $20 million
unsecured subordinated loan to the Company.
Pursuant to the Warrant Agreement, the aggregate number of warrants
automatically increases by the following number of warrants (the "Additional
Warrants") on the following dates upon the occurrence of the following events
(the "Triggering Events"): (i) 1,500,000 on July 30, 1999 if the parties to the
Warrant Agreement make the subordinated loans under the Commitment Letter, (ii)
2,500,000 on November 1, 1999 if the Company has not executed on or prior to
October 31, 1999, an agreement (a "Sale Agreement") relating to a
recapitalization, reorganization, merger, sale or other business combination
transaction after the consummation of which the stockholders of the Company do
not hold at least a majority of the voting power of the surviving person, (iii)
2,500,000 on the date of termination of such Sale Agreement if the Company
enters into such an agreement on or prior to October 31, 1999, but such Sale
Agreement thereafter terminates for any reason, (iv) 3,000,000 on February 29,
2000 if the Company has not closed the transactions contemplated by the Sale
Agreement on or prior to February 28, 2000 and repaid in full the subordinated
loans made pursuant to the Commitment Letter, and (v) 3,000,000 on June 30, 2000
and the last day of each fiscal quarter thereafter if the Company has not repaid
in full during such quarter the subordinated loans made pursuant to the
Commitment Letter. The Additional
<PAGE>
36236E109 Page 14 of 80 Pages
Warrants have an exercise price of $.01 per share. The Additional Warrants will
be allocated among GAP 54, GAPCO II and the other parties making the
subordinated loans as agreed upon by GAP 54, GAPCO II and such other parties.
On July 29, 1999, in accordance with the Commitment Letter, GAP 54 made
a $16,324,800 unsecured subordinated loan to the Company and GAPCO II made a
$3,675,200 unsecured subordinated loan to the Company. Concurrently, in
accordance with the Warrant Agreement, as described in clause (i) of the
immediately preceding paragraph, the Company issued to GAP 54, 1,224,360
Additional Warrants to purchase shares of Common Stock and to GAPCO II, 275,640
Additional Warrants to purchase shares of Common Stock. The Warrants issued by
the Company to GAP 54 and GAPCO II on June 29, 1999 and the Additional Warrants
issued by the Company to GAP 54 and GAPCO II on July 29, 1999 are referred to in
this Amendment as the "Warrants". The Warrants are exercisable at any time,
provided that they expire on June 29, 2004.
In addition, in order to induce GAP 54 and GAPCO II to make the
aggregate $20 million unsecured subordinated loan to the Company pursuant to the
Commitment Letter, Joseph J. Cayre, Kenneth Cayre and Stanley Cayre,
stockholders of the Company, granted to GAP 54 and GAPCO II options to purchase,
at an exercise price per share equal to $.01, an aggregate of 1,333,333 shares
of Common Stock (the "Options"), of which 1,088,320 options are allocated to GAP
54 and 245,013 options are allocated to GAPCO II. Such options were granted
pursuant to the Letter Agreement, dated June 29, 1999 (the "Letter Agreement"),
among GAP 54, GAPCO II, Joseph J. Cayre, Kenneth Cayre and Stanley Cayre. Such
parties will enter into an Option Agreement, dated as of July 30,
<PAGE>
36236E109 Page 15 of 80 Pages
1999 (the "Option Agreement"), among GAP 54, GAPCO II, Joseph J. Cayre, Kenneth
Cayre, Stanley Cayre and Thomas J. Murphy, as escrowholder, substantially in the
form attached as Exhibit 3 to this Amendment. The Options may be exercised in
whole or in part, at any time or from time to time after July 30, 1999, but on
or prior to July 30, 2006; provided, however, that in the event of the sale or
merger of the Company or other business combination transaction after the
closing of which the holders of a majority of the voting power of the Company
prior to such merger, sale or business combination transaction do not hold a
majority of the voting power of the surviving person, then the Options shall be
exercisable only until the closing of such merger, sale or business combination
transaction. In addition, as more fully described in Sections 3(b) through
3(e)(i) of the Letter Agreement, the number of Options is subject to reduction
if the Company issues Additional Warrants to GAP 54 and GAPCO II upon the
occurrence of certain of the Triggering Events. The Letter Agreement is attached
as Exhibit 2 to this Amendment.
(d) No person other than the persons listed is known to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any securities owned by any member of the group.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationship with
Respect to the Securities of the Issuer.
Item 6 is hereby amended and restated in its entirety as follows:
As noted above, the GAP Managing Members are the partners authorized
and empowered to vote and dispose of the securities held by GAPCO and GAPCO
<PAGE>
36236E109 Page 16 of 80 Pages
II, and GAP is the partner authorized and empowered to vote and dispose of the
securities held by GAP 16, GAP 19, GAP II and GAP 54. Accordingly, GAP and any
of the GAP Managing Members may, from time to time, consult among themselves and
coordinate the voting and disposition of the Company's shares of Common Stock,
the conversion of the Company's shares of Preferred Stock, the exercise of the
Warrants and the Options and such other action taken on behalf of the Reporting
Persons with respect to the Company's shares of Common Stock or Preferred Stock
as they deem to be in the collective interest of the Reporting Persons.
As described in Item 5(c) above, GAP 54 and GAPCO II are parties to (i)
the Warrant Agreement pursuant to which GAP 54 and GAPCO were granted the
Warrants and may receive Additional Warrants and (ii) the Letter Agreement and
the Option Agreement pursuant to which GAP 54 and GAPCO II were granted the
Options.
Item 7. Materials to be Filed as Exhibits.
Exhibit 1: Warrant Agreement, dated as of June 29, 1999, among the
Company, GAP 54, GAPCO II and the other parties named
therein.
Exhibit 2: Letter Agreement, dated June 29, 1999, among GAP 54,
GAPCO II, Joseph J. Cayre, Kenneth Cayre and Stanley Cayre.
Exhibit 3: Form of Option Agreement, dated as of July 30, 1999,
among GAP 54, GAPCO II and the other parties named therein.
<PAGE>
36236E109 Page 17 of 80 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated as of August 9, 1999.
GENERAL ATLANTIC PARTNERS, LLC
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
GENERAL ATLANTIC PARTNERS 16, L.P.
By: General Atlantic Partners, LLC,
Its general partner
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
GENERAL ATLANTIC PARTNERS 19, L.P.
By: General Atlantic Partners, LLC,
Its general partner
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
<PAGE>
36236E109 Page 18 of 80 Pages
GENERAL ATLANTIC PARTNERS II, L.P.
By: General Atlantic Partners, LLC,
Its general partner
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
GENERAL ATLANTIC PARTNERS 54, L.P.
By: General Atlantic Partners, LLC,
Its general partner
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ Thomas J. Murphy
------------------------
Name: Thomas J. Murphy
Title: Attorney-In-Fact
36236E109 Page 19 of 80 Pages
EXHIBIT 1
to AMENDMENT NO. 1
to SCHEDULE 13D
WARRANT AGREEMENT
Dated as of
June 29, 1999
among
GT INTERACTIVE SOFTWARE CORP.
and
THE HOLDERS NAMED HEREIN
<PAGE>
36236E109 Page 20 of 80 Pages
WARRANT AGREEMENT, dated as of June 29, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, this Agreement"), by and
among GT INTERACTIVE SOFTWARE CORP., a Delaware corporation (the Company"), and
the Holders of the Warrants described herein.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement dated as of September 11,
1998 (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), by and among the Company, the lenders parties thereto
(collectively, the "Lenders") and the Administrative Agent, the Lenders made
certain loans and other extensions of credit to the Company as more particularly
described therein;
WHEREAS, the Company, 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;
WHEREAS, in connection with the execution of the Second Amendment, the
Company, the Administrative Agent and the Holders have agreed to execute the
Commitment Letter, dated June 29, 1999 (the "Commitment Letter") and each of the
Holders have severally agreed to make a Subordinated Loan (as defined in the
Commitment Letter) to the Company;
WHEREAS, in consideration of, among other things, each of the Holder's
agreement to execute the Commitment Letter and make the Subordinated Loan, the
Company has agreed to execute and deliver this Agreement and issue warrants (the
"Warrants") to purchase from the Company shares of common stock of the Company;
and
WHEREAS, in connection with the issuance of the Warrants to the Holders
pursuant to this Agreement, the Company hereby confirms that the Warrant Shares
are entitled to the registration rights granted by the Company pursuant to the
Registration Rights Agreement, dated as of February 28, 1999, by and among the
Company and the persons and entities listed on Schedule 1 thereto (as amended,
restated, supplemented or otherwise modified, the "Registration Rights
Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
<PAGE>
36236E109 Page 21 of 80 Pages
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person or any of its
Subsidiaries. The term "control" means (a) the power to vote ten percent (10%)
or more of the securities or other equity interests of a Person having ordinary
voting power, or (b) the possession, directly or indirectly, of any other power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in New York City are
authorized by law, regulation or executive order to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the date of
exercise over the Exercise Price per share and the denominator of which is the
Current Market Value per share of the Common Stock on the date of exercise.
"Combination" means an event or series of events in which the Company
consolidates with, merges with or into, or sells all or substantially all its
property and assets to, another Person or Persons.
"Common Stock" means the common stock, $0.01 par value, of the Company
together with any other equity securities that may be issued by the Company in
substitution therefor.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the fifth anniversary of the date hereof.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or
<PAGE>
36236E109 Page 22 of 80 Pages
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Holder" means any holder of a Warrant under the terms of this Warrant
Agreement.
"Officer" means any of the following: the chief executive officer,
chief operating officer, chief financial officer or vice president of the
Company.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Rule 144" means Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any successor rule or regulation
hereinafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission (or any successor
thereto).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by or the management is otherwise
controlled by such Person (irrespective of whether, at the time, capital stock
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency).
"Transfer Restricted Securities" means the Warrants and the Warrant
Shares issued to Holders upon exercise of the Warrants, whether or not such
exercise has been effected. Each such security shall cease to be a Transfer
Restricted Security when the legend set forth in Section 2.5 is, or may be,
removed pursuant to Section 2.4(b)(v).
"Voting Stock" of a corporation means all classes of capital stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Warrant Certificates" means the certificates evidencing the Warrants
to be delivered pursuant to this Agreement, substantially in the form of Exhibit
A hereto.
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36236E109 Page 23 of 80 Pages
"Warrant Shares" means the shares of Common Stock of the Company to be
issued and received, or issued and received, as the case may be, upon exercise
of the Warrants.
SECTION 1.2 Other Definitions.
Term Defined in Section
---- ------------------
"Agreement".......................................... Preamble
"Cashless Exercise".................................. 3.4
"Certificate Register"............................... 2.3
"Company"............................................ Preamble
"Credit Agreement"................................... Recitals
"Current Market Value"............................... 4.8
"Exercise Price"..................................... 3.1
"Fair Value"......................................... 4.2
"Registration Rights Agreement"...................... Recitals
"Required Holders"................................... 5.5
"Successor Company".................................. 4.5
"Time of Determination".............................. 4.8
"Transfer Agent"..................................... 3.5
"Warrants"........................................... Recitals
SECTION 1.3 Rules of Construction. Unless the text otherwise requires.
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural and words in the
plural include the singular.
<PAGE>
36236E109 Page 24 of 80 Pages
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Issuance and Dating. The Warrants shall initially be issued
on the date hereof. The Warrants shall be evidenced by Warrant Certificates
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company) and
shall bear the legend required by Section 2.5. Each Warrant shall be dated the
date of its execution by the Company. The terms of the Warrants set forth in
Exhibit A are part of the terms of this Agreement.
SECTION 2.2 Execution.
(a) With respect to the Warrants to be issued on the date hereof, one
or more Warrant Certificates representing the Warrants shall be executed on
behalf of the Company by manual or facsimile signature by one Officer and
attested by its Secretary or an Assistant Secretary under its corporate seal
which may be impressed, affixed, imprinted or reproduced on such Warrant
Certificates or may be in facsimile form.
(b) With respect to all other Warrants, the Warrant Certificates
therefor shall be executed on behalf of the Company by one Officer and attested
by its Secretary or an Assistant Secretary under its corporate seal. Such
signature may be manual or facsimile signature. The Company' seal shall be
impressed, affixed, imprinted or reproduced on the Warrant Certificates and may
be in facsimile form.
(c) Upon written order from any Holder, the Company shall execute and
deliver to such Holder Warrant Certificates registered in the name or names and
for such number of Warrants as shall be specified by such Holder in such order
in exchange for Warrant Certificate(s) then held by such Holder for a like
number of Warrants.
SECTION 2.3 Certificate Register. The Company shall keep a register
("Certificate Register") of the Warrant Certificates and of their transfer and
exchange. The Certificate Register shall show the names and addresses of the
respective Holders and the date and number of Warrants evidenced on the face of
each of the Warrant Certificates.
SECTION 2.4 Transfer and Exchange. (a) When Warrants are presented to
the Company with a request to register the transfer of such Warrants or to
exchange such Warrants for an equal number of Warrants of other authorized
denominations, the Company shall register the transfer or make the exchange as
requested; provided, however, that the Warrant Certificates representing such
Warrants surrendered for transfer or exchange:
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36236E109 Page 25 of 80 Pages
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Warrants that are Transfer Restricted
Securities, shall be accompanied by the following additional
information and documents:
(A) a certificate from such Holder in substantially
the form of Exhibit C hereto certifying that:
(1) such securities are being delivered for
registration in the name of such Holder without
transfer;
(2) such securities are being transferred to
the Company;
(3) such securities are being transferred
pursuant to an effective registration statement under
the Securities Act; or
(4) such securities are being transferred
(w) to a "qualified institutional buyer" ("QIB") as
defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, if available, (x) in an
offshore transaction in accordance with Rule 904
under the Securities Act, (y) in a transaction
meeting the requirements of Rule 144 under the
Securities Act or (z) pursuant to another available
exemption from the registration requirements of the
Securities Act; and
(B) in the case of any transfer described under
clause (a)(ii)(A)(4)(x), (y) or (z) of this Section 2.4,
evidence reasonably satisfactory to the Company (which may
include an opinion of counsel) as to compliance with the
restrictions set forth in the legend in Section 2.5.
(b) (i) To permit registrations of transfers and exchanges,
the Company shall execute Warrant Certificates as required pursuant to the
provisions of this Section 2.4.
(ii) All Warrant Certificates issued upon any registration of
transfer or exchange of Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Agreement, as the Warrant Certificates
surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Company may deem and treat the Person in whose name any Warrant
is registered as the absolute owner of such Warrant and the Company shall not be
affected by notice to the contrary.
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36236E109 Page 26 of 80 Pages
(iv) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Warrant Certificate.
However, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrants pursuant to an
effective registration statement under the Securities Act, pursuant to Rule
144(k) under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required, the Company shall permit
the Holder thereof to exchange such Warrants for Warrants represented by Warrant
Certificates that do not bear the legend set forth in Section 2.5 and rescind
any restriction on the transfer of such Warrants.
SECTION 2.5 Legends. Except for Warrant Certificates delivered pursuant
to Section 2.4(b)(v) of this Agreement, each Warrant Certificate evidencing the
Warrants (and all Warrant Certificates issued in exchange therefor or
substitution thereof) and each certificate representing the Warrant Shares
(unless such Warrant Shares are not Transfer Restricted Securities) shall bear a
legend in substantially the following form (with any appropriate modification
for the Warrant Shares):
"THE WARRANTS AND THE COMMON STOCK (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER
THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN
OFFSHORE TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE
<PAGE>
36236E109 Page 27 of 80 Pages
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Company or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue a replacement Warrant Certificate if
the requirements of Section 8-405 of the Uniform Commercial Code as in effect in
the State of New York are met. If required by the Company, such Holder shall
furnish an indemnity sufficient in the reasonable judgment of the Company to
protect the Company from any loss which it may suffer if a Warrant Certificate
is replaced. The Company may charge the Holder for its reasonable expenses in
replacing a Warrant Certificate. Every replacement Warrant Certificate is an
additional obligation of the Company.
SECTION 2.7 Cancellation. (a) In the event the Company shall purchase
or otherwise acquire Warrants, the Warrant Certificates in respect thereof shall
thereupon be delivered to the Company for cancellation.
(b) The Company shall cancel and destroy all Warrant Certificates
surrendered for transfer, exchange, replacement, exercise or cancellation. The
Company may not issue new Warrant Certificates to replace Warrant Certificates
to the extent they evidence Warrants which have been exercised or Warrants which
the Company has purchased or otherwise acquired.
SECTION 2.8 Issuance of Additional Warrants. Upon the occurrence of
each of the events set forth on Schedule 1 hereto, on the applicable date with
respect to such event, the number of Warrants shall automatically be increased
by the number of additional Warrants set forth opposite such event on Schedule
1.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall entitle the Holder
thereof to purchase one share of Common Stock for a per share exercise price of
$0.01 (the "Exercise Price").
SECTION 3.2 Limitations on Exercise. Except as otherwise provided in
the relevant Warrant Certificate with respect to Warrants which are not
exercisable prior to the occurrence of certain events as set forth therein, each
Warrant may be exercised at any time in the discretion of the Holder thereof,
provided, that no Warrant shall be exercisable after the Expiration Date.
<PAGE>
36236E109 Page 28 of 80 Pages
SECTION 3.3 Expiration. A Warrant shall terminate and become void as of
the earlier of (a) the close of business on the Expiration Date and (b) the time
and date such Warrant is exercised. The Warrants shall terminate and become void
after the Expiration Date.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon (a)
surrender to the Company of the Warrant Certificates, together with the form of
election to purchase Common Stock attached as Exhibit B hereto duly filled in
and signed by the Holder thereof and (b) payment to the Company of the Exercise
Price for the number of Warrant Shares in respect of which such Warrant is then
exercised. Such payment shall be made (i) in cash or by certified or official
bank check payable to the order of the Company or by wire transfer of funds to
an account designated by the Company for such purpose or (ii) by the surrender
(which surrender shall be evidenced by cancellation of the number of Warrants
represented by any Warrant Certificate presented in connection with a Cashless
Exercise) of a Warrant or Warrants (represented by one or more relevant Warrant
Certificates), and without the payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price as of the
date of exercise were being made in cash and (2) the Cashless Exercise Ratio. An
exercise of a Warrant in accordance with clause (ii) of the immediately
preceding sentence is herein called a "Cashless Exercise". All provisions of
this Agreement shall be applicable with respect to an exercise of Warrant
Certificates pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Subject to Section 3.2, the rights represented by
the Warrants shall be exercisable at the election of the Holders thereof either
in full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the Expiration Date a
new Warrant Certificate exercisable for the remaining Warrant Shares will be
issued. The Company shall execute and deliver to the relevant Holders the
required new Warrant Certificates.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section 2.6, upon
the surrender of Warrant Certificates and payment of the per share Exercise
Price, as set forth in Section 3.4, the Company shall issue (and, if applicable,
cause any transfer agent for the Common Stock (the "Transfer Agent") to
countersign) and deliver to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered or otherwise to
the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.6 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. Such certificate or certificates shall be deemed to
have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the per share
Exercise Price.
<PAGE>
36236E109 Page 29 of 80 Pages
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the Current Market Value for one Warrant Share on the Business Day
immediately preceding the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. Any registrar for the Common Stock shall at all times until the
Expiration Date, or the time at which all Warrants have been exercised or
canceled, reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with any
Transfer Agent. All Warrant Shares which may be issued upon exercise of Warrants
shall, upon issue, be fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof. The Company will supply any Transfer Agent with duly executed
stock certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.6. The Company
will furnish to any Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder.
SECTION 3.8 Compliance with Law. If any shares of Common Stock required
to be reserved for purposes of exercise of Warrants require, under any other
Federal or state law or applicable governing rule or regulation of any national
securities exchange, registration with or approval of any Governmental
Authority, or listing on any such national securities exchange before such
shares may be issued upon exercise, the Company will cause such shares to be
duly registered or approved by such Governmental Authority or listed on the
relevant national securities exchange; provided that the Company shall not have
any obligation to register the Warrant Shares under the Securities Act except
pursuant to the Registration Rights Agreement.
SECTION 3.9 Registration Rights. The holders of the Warrants and the
Warrant Shares shall be entitled to the registration rights in respect of the
Warrant Shares set forth in the Registration Rights Agreement.
<PAGE>
36236E109 Page 30 of 80 Pages
ARTICLE 4.
Antidilution Provisions
SECTION 4.1 Changes in Common Stock. In the event that at any time or
from time to time after the date hereof the Company shall (a) pay a dividend or
make a distribution on its Common Stock in shares of its Common Stock or other
shares of capital stock, (b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (c) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or (d)
increase or decrease the number of shares of Common Stock outstanding by
reclassification of its Common Stock, then the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately after the happening of
such event shall be adjusted so that, after giving affect to such adjustment,
the Holder of each Warrant shall be entitled to receive the number of shares of
Common Stock upon exercise that such holder would have owned or have been
entitled to receive had such Warrants been exercised immediately prior to the
happening of the events described above (or, in the case of a dividend or
distribution of Common Stock, immediately prior to the record date therefor). An
adjustment made pursuant to this Section 4.1 shall become effective immediately
after the effective date, retroactive to the record date therefor in the case of
a dividend or distribution in shares of Common Stock, and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
SECTION 4.2 Cash Dividends and Other Distributions. In the event that
at any time or from time to time after the date hereof the Company shall
distribute to holders of Common Stock (a) any dividend or other distribution of
cash, evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (b) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case set
forth in (a) and (b), (i) any dividend or distribution described in Section 4.1
or (ii) any rights, options, warrants or securities described in Section 4.3)
then the number of shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock purchasable upon the exercise
of such Warrant immediately prior to the record date for any such dividend or
distribution by a fraction, the numerator of which shall be the Current Market
Value per share of Common Stock on the record date for such distribution, and
the denominator of which shall be such Current Market Value per share of Common
Stock less the sum of (x) any cash distributed per share of Common Stock and (y)
the fair value (the "Fair Value") (as determined in good faith by the Board,
whose determination shall be evidenced by a Board resolution delivered to each
Holder) of the portion, if any, of the distribution applicable to one share of
Common Stock consisting of evidences of indebtedness, shares of stock,
securities, other property, warrants, options or subscription of purchase rights
(notwithstanding the foregoing, if the Fair Value per share of Common Stock in
the above formula equals or exceeds the Current Market Value per share of Common
Stock in the
<PAGE>
36236E109 Page 31 of 80 Pages
above formula, then the Current Market Value per share of Common Stock shall be
equal to the Fair Value per share of the Common Stock on the record date as
determined in good faith by the Board and described in a Board resolution
delivered to each Holder). Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution; provided, however,
that the Company is not required to make an adjustment pursuant to this Section
4.2 if at the time of such distribution the Company makes the same distribution
to Holders of Warrants as it makes to holders of Common Stock pro rata based on
the number of shares of Common Stock for which such Warrants are exercisable
(whether or not currently exercisable).
SECTION 4.3 Rights Issue. In the event that at any time or from time to
time after the date hereof the Company shall issue, sell, distribute or
otherwise grant any rights to subscribe for or to purchase, or any options or
warrants for the purchase of, or any securities convertible or exchangeable
into, Common Stock, entitling such holders to subscribe for or purchase shares
of Common Stock or stock or securities convertible into Common Stock, whether or
not immediately exercisable, convertible or exchangeable, as the case may be,
and the price per share of Common Stock issuable upon exercise, conversion or
exchange thereof is lower at the record date for such issuance than the then
Current Market Value per share of Common Stock, then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately prior to the
date of issuance of such rights, options, warrants or securities by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities are convertible or exchangeable, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
total number of shares of Common Stock which could be purchased at the Current
Market Value with the aggregate consideration received through issuance of such
rights, warrants, options, or convertible securities. Such adjustment shall be
made whenever such rights, options or warrants are issued and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such rights, options, warrants or
securities. Notwithstanding any other provision of this Section 4.3, the number
of shares of Common Stock purchasable upon exercise of any Warrant shall not be
adjusted pursuant to this Section 4.3 in connection with the issuance or grant
of Common Stock upon the exercise of rights or options to the Company's
employees under bona fide employee benefit plans adopted prior to the date of
this Agreement by the Board and approved by the holders of Common Stock when
required by law, if the number of shares of Common Stock underlying such rights
and options do not exceed 5% of the Common Stock outstanding on the date of this
Agreement.
<PAGE>
36236E109 Page 32 of 80 Pages
If the Company at any time shall issue two or more securities as a unit
and one or more of such securities shall be rights, options or warrants for or
securities convertible or exchangeable into, Common Stock subject to this
Section 4.3, the consideration allocated to each such security shall be
determined in good faith by the Board.
SECTION 4.4 Issuance of Additional Shares of Common Stock. In the event
that at any time or from time to time after the date hereof the Company shall
issue or sell any additional shares of Common Stock for consideration in an
amount per additional share of Common Stock less than the Current Market Value,
then the number of shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock purchasable upon the exercise
of each Warrant immediately prior to such issue or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale, and the denominator of which shall be the
sum of (i) the number of shares of Common Stock outstanding immediately prior to
such issue or sale, and (ii) the number of shares of Common Stock which could be
purchased at the Current Market Value with the aggregate consideration received
from the issuance or sale of the additional shares of Common Stock. For the
purposes of this Section 4.4, the date as of which the Current Market Value per
share of Common Stock shall be computed shall be the earlier of (x) the date on
which the Company shall enter into a firm contract for the issuance of such
additional shares of Common Stock or (y) the date of actual issuance of such
additional shares of Common Stock. Notwithstanding any other provision of this
Section 4.4, the number of shares of Common Stock purchasable upon exercise of
any Warrant shall not be adjusted pursuant to this Section 4.4 as a result of
the issuance or sale of Common Stock in connection with: (a) a bona fide firm
commitment underwritten public offering of Common Stock of the Company, (b) a
transaction to which Section 4.1, 4.2 or 4.3 is applicable, (c) the exercise of
the Warrants, the exercise of any other warrants issued by the Company prior to
the date of this Agreement or the exercise of any warrants issued in connection
with the Second Amendment, (d) a private placement of Common Stock of the
Company sold for a cash purchase price not more than 10% below the Current
Market Value of the Common Stock so sold in such private placement and (e) the
exercise of rights or options issued to the Company's employees under bona fide
employee benefit plans adopted by the Board and approved by the holders of
Common Stock when required by law, if such Common Stock would otherwise be
covered by this Section 4.4.
SECTION 4.5 Combination; Liquidation. (a) Except as provided in Section
4.5(b), in the event of any Combination, capital reorganization,
reclassification or spin-off by the Company of another Person (each, a
"Transaction"), each Warrant shall be automatically converted into the right to
receive (in the case of a Transaction other than a spin-off) or shall also be
exercisable for (in the case of a Transaction that is a spin-off) such number of
shares of capital stock or other securities or property upon or as a result of
such Transaction that a Holder of such Warrant would have been entitled to
receive had such Warrants been exercised immediately prior to such event.
<PAGE>
36236E109 Page 33 of 80 Pages
(b) In the event of (i) a Transaction where consideration to holders of
Common Stock in exchange for their shares is payable solely in cash, or (ii) the
dissolution, liquidation or winding-up of the Company, then the Holders of the
Warrants will be entitled to receive distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price. In case of any Transaction described in this Section
4.5(b), the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company shall make payment to each
Holder by delivering a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by such Holder
surrendering such Warrants.
SECTION 4.6 Tender Offers: Exchange Offers. In the event that the
Company or any subsidiary of the Company shall purchase shares of Common Stock
pursuant to a tender offer or an exchange offer for a price per share of Common
Stock that is greater than the then Current Market Value per share of Common
Stock in effect at the end of the trading day immediately following the day on
which such tender offer or exchange offer expires, then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately prior to such
purchase by a fraction the numerator of which shall be the sum of (x) the fair
market value of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer or
exchange offer) of all shares of Common Stock validly tendered or exchanged and
not withdrawn as of the expiration time of such tender offer or exchange offer
(the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less the Purchased Shares) at the expiration time of such
offer or exchange offer and the first reported sales price of the Common Stock
on the trading day immediately following the day on which such tender offer or
exchange offer expires and the denominator of which shall be the number of
shares of Common Stock outstanding (including any Purchased Shares) at the
expiration time of such tender offer or exchange offer multiplied by the first
reported sales price of the Common Stock on the trading day immediately
following the day on which such tender offer or exchange offer expires, such
increase to become effective immediately prior to the opening of business on the
day immediately following the day on which such tender offer or exchange offer
expires.
SECTION 4.7 Other Events. If any event occurs as to which the foregoing
provisions of this Article 4 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board, fairly and
adequately protect the purchase rights of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of such Board, to protect such purchase rights as aforesaid, but
in no event shall any
<PAGE>
36236E109 Page 34 of 80 Pages
such adjustment have the effect of decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant.
SECTION 4.8 Current Market Value. For the purpose of any computation of
Current Market Value under this Article 4 and Section 3.6, the "Current Market
Value" per share of Common Stock at any date shall be (a) for purposes of
Section 3.6, the closing price on the Business Day immediately prior to the date
of the exercise of the applicable Warrant pursuant to Article 3 and (b) in all
other cases, the average of the daily closing prices for the 20 consecutive
trading days ending on the last full trading day on the exchange or market
specified in the second succeeding sentence prior to such date. The closing
price for any day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case (1) on the principal
national securities exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the Common Stock is not
listed or admitted to trading on a national securities exchange, in the
over-the-counter market as reported by the Nasdaq National Market or any
comparable system or (3) if the Common Stock is not listed on the Nasdaq
National Market or a comparable system, as furnished by two members of the NASD
selected from time to time in good faith by the Board for that purpose. In the
absence of all of the foregoing, or if for any other reason the Current Market
Value per share cannot be determined pursuant to the foregoing provisions of
this Section 4.8, the Current Market Value per share shall be the (x) the fair
market value thereof determined in good faith in the most recently completed
arm's-length transaction between the Company and a person other than an
Affiliate of the Company and the closing of which occurs on such date or shall
have occurred within the three months preceding such date or (y) if no
transaction shall have occurred on such date or within such three-month period,
the fair market value thereof as determined by an investment bank of nationally
recognized standing selected by the Company and acceptable to the Required
Holders. The Company shall pay the fees and expenses of any investment bank
involved in the determination of Current Market Value.
SECTION 4.9 Superseding Adjustment. Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which resulted in the
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (a) the only shares of Common Stock issuable
upon exercise of such rights, options, warrants, conversion or exchange
privileges were the shares of Common Stock, if any, actually issued upon the
exercise of such rights, options, warrants or conversion or exchange privileges
and (b) shares of Common Stock actually issued, if any, were issuable for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange privileges whether or not exercised; provided, however, that no such
readjustment shall (except by reason of an intervening adjustment under Section
4.1) have the effect of decreasing the number of Warrant Shares purchasable
<PAGE>
36236E109 Page 35 of 80 Pages
upon the exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
SECTION 4.10 Minimum Adjustment. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the number of shares of Common Stock purchasable upon exercise of Warrants
that would otherwise be required shall be made (except in the case of a
subdivision or combination of shares of Common Stock, as provided for in Section
4.1) unless and until such adjustment either by itself or with other adjustments
not previously made increases or decreases by at least 1% the number of shares
of Common Stock purchasable upon exercise of Warrants immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 4 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Article 4, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share.
SECTION 4.11 Notice of Adjustment. Whenever the number of shares of
Common Stock and other property, if any, purchasable upon exercise of Warrants
is adjusted, as herein provided, the Company shall deliver to each Holder a
certificate of a firm of independent accountants (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of any evidences of indebtedness, other securities or
property or warrants or other subscription or purchase rights), and specifying
the number of shares of Common Stock purchasable upon exercise of Warrants after
giving effect to such adjustment.
SECTION 4.12 Notice of Certain Transactions. In the event that the
Company shall propose (a) to pay any dividend payable in securities of any class
to the holders of its Common Stock or to make any other distribution to the
holders of its Common Stock, (b) to offer the holders of its Common Stock rights
to subscribe for or to purchase any securities convertible into shares of Common
Stock or shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) to effect any reclassification of its Common
Stock, spin-off, capital reorganization or Combination or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
or in the event of a tender offer or exchange offer described in Section 4.6,
the Company shall within five Business Days send to each Holder a notice, which
shall specify the record date for the purposes of such dividend, distribution or
rights, or the date such issuance or event is to take place and the date of
participation therein by the holders of Common Stock,
<PAGE>
36236E109 Page 36 of 80 Pages
if any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, purchasable upon exercise of each Warrant after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be given by the Company as promptly as possible and,
in the case of any action covered by clause (a) or (b) above, at least ten days
prior to the record date for determining holders of the Common Stock for
purposes of such action and, in the case of any other such action, at least 15
Business Days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Common Stock, whichever shall be
the earlier.
SECTION 4.13 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same number of shares of Common Stock as are stated in any Warrant Certificates
issued prior to the adjustment. The Company, however, may at any time in its
sole discretion make any change in the form of Warrant Certificate that it may
deem appropriate to give effect to such adjustments and that does not affect the
substance of the Warrant Certificate, and any Warrant Certificate thereafter
issued, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, may be in the form as so changed.
ARTICLE 5.
Miscellaneous
SECTION 5.1 Representations and Warranties. The Company hereby
represents and warrants to each Holder that (a) the Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, (b) the Company has the corporate power and authority to
execute and deliver this Warrant Agreement and the Warrant Certificates, to
issue Warrants and Warrant Shares and to perform its obligations under this
Warrant Agreement and the Warrant Certificates, (c) the execution, delivery and
performance by the Company of this Warrant Agreement and the Warrant
Certificates, the issuance of the Warrants and the issuance of the Warrant
Shares upon exercise of the Warrants have been duly authorized by all necessary
corporate action and do not and will not violate, or result in a breach of, or
constitute a default under, or require any consent under, or result in the
creation of any lien upon the Company's assets pursuant to, any law, rule,
regulation or contractual obligation binding upon the Company, (d) this Warrant
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid, binding and enforceable obligation of the Company, (e) when the
Warrants and Warrant Certificates have been issued by the Company as
contemplated hereby, such Warrants and Warrant Certificates will constitute
legal, valid, binding and enforceable obligations of the Company and (f) the
Warrant Shares, when issued by the Company upon
<PAGE>
36236E109 Page 37 of 80 Pages
exercise of the related Warrants in accordance with the terms hereof, will be
duly authorized, validly issued, fully paid and nonassessable shares of the
Common Stock of the Company with no personal liability attaching to the
ownership thereof.
SECTION 5.2 Reports; Rule 144A. (a) The Company shall provide the
Holders with such financial statements and reports as are distributed to holders
of Common Stock generally.
(b) The Company hereby agrees to make available upon request, for so
long as any Warrants or Warrant Shares remain outstanding and during any period
in which the Company is not subject to Section 13 or 15(d) of the Exchange Act,
to any Holder or beneficial owner of Warrants or Warrant Shares in connection
with any sale thereof and any prospective purchaser thereof from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales pursuant to Rule 144A.
SECTION 5.3 Persons Benefitting. Nothing in this Agreement is intended
or shall be construed to confer upon any Person other than the Company and the
Holders any right, remedy or claim under or by reason of this agreement or any
part hereof.
SECTION 5.4 Rights of Holders. Except as otherwise specifically
required herein, holders of unexercised Warrants are not entitled (a) to receive
dividends or other distributions, (b) to receive notice of or vote at any
meeting of the stockholders, (c) to consent to any action of the stockholders,
(d) to receive notice of any other proceedings of the Company or (e) to exercise
any other rights as stockholders of the Company.
SECTION 5.5 Amendment. Any amendment or supplement to this Agreement
(including any Exhibit hereto) shall require the written consent of the Holders
of a majority of the outstanding Warrants (the "Required Holders"). The consent
of each Holder directly affected shall be required for any amendment pursuant to
which the exercisability of any Warrant would be delayed, the Exercise Price
would be increased or the number of Warrant Shares purchasable upon exercise of
Warrants would be decreased (other than pursuant to adjustments provided
herein). In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by the
Company or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded
and deemed not to be outstanding.
SECTION 5.6 Notices.
(a) All notices and communications hereunder shall be in writing. Any
notice shall be effective if delivered by hand delivery or sent via telecopy,
recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be
<PAGE>
36236E109 Page 38 of 80 Pages
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested.
(b) Notices to any party shall be sent to it at the following
addresses, or any other address as to which the Company or the Holders, as the
case may be, are notified in writing.
If to the Company: GT Interactive Software Corp.
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Director of Legal Services
Telephone No.: (212) 726-6572
Telecopy No.: (212) 726-6590
If to any Holder: To the Address set forth in the Certificate
Register
SECTION 5.7 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
WARRANT CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 5.8 Successors. All agreements of the Company in this Agreement
and the Warrant Certificates shall bind its successors.
SECTION 5.9 Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 5.10 Headings. The headings of the Articles and Sections of
this Agreement have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 5.11 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect
<PAGE>
36236E109 Page 39 of 80 Pages
such clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
<PAGE>
36236E109 Page 40 of 80 Pages
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Thomas Heymann
------------------
Name: Thomas Heymann
Title: Chairman and Chief Executive
Officer
HOLDERS:
GENERAL ATLANTIC PARTNERS 54, L.P.
By: General Atlantic Partners, LLC, its
general partner
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A General Partner
/s/ Joseph J. Cayre
-------------------
Joseph J. Cayre
/s/ Kenneth Cayre
-----------------
Kenneth Cayre
/s/ Stanley Cayre
-----------------
Stanley Cayre
<PAGE>
36236E109 Page 41 of 80 Pages
EXHIBIT A
TO WARRANT AGREEMENT
[FORM OF FACE OF WARRANT CERTIFICATE]
THE WARRANTS AND THE COMMON STOCK (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER
THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN
OFFSHORE TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. __ Certificate for ___ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
GT INTERACTIVE SOFTWARE CORP.
THIS CERTIFIES THAT ____________, or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant
<PAGE>
36236E109 Page 42 of 80 Pages
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement referred to below, to
purchase from GT Interactive Software Corp., a Delaware corporation (the
"Company"), one share of Common Stock, $0.01 par value, of the Company (the
"Common Stock") at the per share exercise price of $0.01 (the "Exercise Price"),
or by Cashless Exercise referred to below. This Warrant Certificate shall
terminate and become void as of the close of business on June 29, 2004 (the
"Expiration Date") or upon the exercise hereof as to all the shares of Common
Stock subject hereto. The number of shares purchasable upon exercise of the
Warrants shall be subject to adjustment from time to time as set forth in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of June 29, 1999 (as amended, restated, supplemented
or otherwise modified from time to time, the "Warrant Agreement"), among the
Company and the Holders referred to therein, and is subject to the terms and
provisions contained in the Warrant Agreement. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company and the Holders of
the Warrants. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Warrant Agreement.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by surrender of this Warrant Certificate with
the form of election to purchase Warrant Shares attached hereto duly executed
and with the simultaneous payment of the Exercise Price in cash (subject to
adjustment) to the Company or (ii) by Cashless Exercise. Payment of the Exercise
Price in cash shall be made in cash or by certified or official bank check
payable to the order of the Company or by wire transfer of funds to an account
designated by the Company for such purpose. Payment by Cashless Exercise shall
be made by the surrender of a Warrant or Warrants represented by one or more
Warrant Certificates and without payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price were
being made in cash and (2) the Cashless Exercise Ratio.
The Warrants shall be exercisable from time to time in the discretion
of the Holder on or after June 29, 1999, provided, that in no event shall the
Warrants be exercisable after the Expiration Date.
Upon the occurrence of each of the events set forth on Schedule 1
hereto, on the applicable date with respect to such event, the number of
Warrants shall automatically be increased by the number of additional Warrants
set forth opposite such event on Schedule 1.
In the event the Company enters into a Combination, capital
reorganization or reclassification or the spin-off by the Company of another
Person (each, a "Transaction"),
<PAGE>
36236E109 Page 43 of 80 Pages
each Warrant evidenced by this Warrant Certificate will be automatically
converted into the right to receive (in the case of a Transaction other than a
spin-off) or shall also be exercisable for (in the case of a Transaction that is
a spin-off) the shares of capital stock or other securities or other property of
such surviving entity upon or as the result of such Transaction that a Holder of
such Warrant would have been entitled to receive had such Warrant been exercised
immediately prior to such Transaction; provided, that in the event that, in
connection with such Transaction, consideration to holders of Common Stock in
exchange for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of the Company, the Holder hereof will be
entitled to receive distributions on an equal basis with the holders of Common
Stock or other securities issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such events, less the Exercise
Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the
Holder hereof a new Warrant Certificate in respect of the shares of Common Stock
as to which the Warrants shall not have been exercised. This Warrant Certificate
may be exchanged by presenting this Warrant Certificate to the Company properly
endorsed with a request to exchange this Warrant Certificate for other Warrant
Certificates evidencing an equal number of Warrants. No fractional Warrant
Shares will be issued upon the exercise of the Warrants, but the Company shall
pay an amount in cash equal to the Current Market Value for one Warrant Share on
the date the Warrant is exercised, multiplied by such fraction, computed to the
nearest whole cent.
<PAGE>
36236E109 Page 44 of 80 Pages
The Warrants do not entitle any holder hereof to any of the rights of a
stockholder of the Company. All shares of Common Stock issuable by the Company
upon the exercise of the Warrants shall, upon such issuance, be duly and validly
issued and fully paid and non-assessable.
GT INTERACTIVE SOFTWARE CORP.
By:
Title:
[SEAL]
Attest: ___________________________
Secretary
DATED:
<PAGE>
36236E109 Page 45 of 80 Pages
EXHIBIT B
TO
WARRANT AGREEMENT
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise [ ] Warrants at
an exercise price per Warrant (subject to adjustment) of $.01 to acquire an
equal number of shares of Common Stock of GT Interactive Software Corp., on the
terms and conditions specified in the within Warrant Certificate and the Warrant
Agreement therein referred to, surrenders this Warrant Certificate and all
right, title and interest therein to GT Interactive Software Corp., and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
Date: ________________, ____
----------------------------------
(Signature of Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
36236E109 Page 46 of 80 Pages
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
36236E109 Page 47 of 80 Pages
EXHIBIT C
TO
WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of GT
Interactive Software Corp. (the "Company")
This Certificate relates to __________ Warrants held in definitive form
by _______________ (the "Transferor").
The Transferor has requested the Company by written order to exchange
or register the transfer of a Warrant or Warrants. In connection with such
request and in respect of each such Warrant, the Transferor does hereby certify
that the Transferor is familiar with the Warrant Agreement relating to the above
captioned Warrants and that the transfer of this Warrant does not require
registration under the Securities Act of 1933 (the "Securities Act"), because1:
o Such Warrant is being acquired for the Transferor's own account
without transfer.
o Such Warrant is being transferred to the Company.
o Such Warrant is being transferred in a transaction meeting the
requirements of Rule 144 under the Securities Act.
o Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
o Such Warrant is being transferred pursuant to an offshore transaction
in accordance with Rule 904 under the Securities Act.
o Such Warrant is being transferred pursuant to another available
exemption from the registration requirements under the Securities Act.
<PAGE>
36236E109 Page 48 of 80 Pages
The Company is entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
By________________________
Title:
Date:
<PAGE>
36236E109 Page 49 of 80 Pages
Schedule 1
Upon the occurrence of each of the Events set forth below, the Company
shall issue to each Holder on the applicable Trigger Date additional Warrants in
the numbers set forth opposite such Event:
Number of
Event Trigger Date Additional Warrants
- ----- ------------ -------------------
A Holder makes any Subordinated July 30, 1999 The product of (a)
Loans pursuant to the Commitment 1,500,000 multiplied
Letter. by (b) a fraction,
the numerator of
which is the amount
of the Subordinated
Loans made by such
Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
<PAGE>
36236E109 Page 50 of 80 Pages
The Company has not executed on or November 1, 1999 The product of (a)
prior to October 31, 1999 an 2,500,000 multiplied
agreement relating to a by (b) a fraction,
recapitalization, reorganization, the numerator of
merger, sale (including, without which is the amount
limitation, a sale of all or of the Subordinated
substantially all of the assets of Loans made by such
the Company (which shall include a Holder to the
sale of the Humongous business)) Company pursuant to
or other business combination the Commitment
transaction after the consummation Letter and the
of which the stockholders of denominator of
the Company prior to such which is the
transaction do not hold at least aggregate amount of
a majority of the voting power all Subordinated
of the surviving Person (the Loans made by all
foregoing, "a Change of Control Holders pursuant
Transaction"). to the Commitment
Letter, subject to
any agreement among
the Holders.
The Company executes on or date of termination The product of (a)
prior to October 31, 1999 of Sale Agreement 2,500,000 multiplied
an agreement relating to a by (b) a fraction,
Change of Control Transaction the numerator of
(a "Sale Agreement"), but such which is the amount
agreement terminates for any of the Subordinated
reason after such date. Loans made by such
Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
<PAGE>
36236E109 Page 51 of 80 Pages
The Company has not closed February 29, 2000 The product of (a)
the transactions contemplated 3,000,000 multiplied
by the Sale Agreement on or by (b) a fraction,
prior to February 28, 2000 the numerator of
and repaid in full to the Holders the which is the amount
aggregate amount of the Subordinated of the Subordinated
Loans made by the Holders pursuant Loans made by such
to the Commitment Letter. Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
On the last day of each fiscal June 30, 2000 and The product of (a)
quarter of the Company, the last day of each 3,000,000 multiplied
commencing with the fiscal fiscal quarter by (b) a fraction,
quarter ending June 30, 2000 and thereafter until the the numerator of
ending on the date that the Company date of repayment of which is the amount
repays in full the aggregate amount the Subordinated of the Subordinated
of the Subordinated Loans, if the Loans Loans made by such
Company has not repaid in full to Holder to the
the Holders the aggregate amount Company pursuant to
of the Subordinated Loans made by the Commitment
the Holders pursuant to the Letter and the
Commitment Letter during such denominator of
quarter. which is the
aggregate amount of
all Subordinated
Loans made by all
Holders pursuant to
the Commitment
Letter, subject to
any agreement among
the Holders.
36236E109 Page 52 of 80 Pages
EXHIBIT 2
to AMENDMENT NO. 1
to SCHEDULE 13D
June 29, 1999
Confidential
- ------------
Joseph J. Cayre
Kenneth Cayre
Stanley Cayre
c/o GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Dear Sirs:
Reference is made to the Commitment Letter, dated the date hereof (the
"Commitment Letter"), among GT Interactive Software Corp., First Union National
Bank, as Administrative Agent, General Atlantic Partners 54, L.P. ("GAP LP"),
GAP Coinvestment Partners II, L.P. ("GAP Coinvestment" and, together with GAP
LP, "General Atlantic") and Joseph Cayre, Kenneth Cayre and Stanley Cayre (the
"Cayre Family"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Commitment Letter.
Reference is also made to the Warrant Agreement, dated as of the date
hereof (as the same may be amended from time to time, the "Warrant Agreement"),
among the Borrower, GAP LP, GAP Coinvestment and the Cayre Family.
If the obligation to make the Subordinated Loans was allocated between
General Atlantic and the Cayre Family based on their respective percentage
ownership interests in the Borrower, then General Atlantic would be obligated to
make $10 million of the Subordinated Loans and the Cayre Family would be
obligated to make $20 million of the Subordinated Loans. In consideration of
General Atlantic's agreement pursuant to the Commitment Letter to make $20
million of the Subordinated Loans, notwithstanding General Atlantic's percentage
ownership interest in the Borrower, each of Joseph J. Cayre, Kenneth Cayre and
Stanley Cayre hereby severally agree with GAP LP and GAP Coinvestment as
follows:
<PAGE>
36236E109 Page 53 of 80 Pages
1. June 29, 1999 Commitment Warrants.
(a) In order to induce the Subordinated Lenders to enter into the
Commitment Letter, the Borrower has agreed to issue to the Subordinated Lenders
on the date hereof warrants to purchase, at an exercise price per share equal to
$.01 per share, an aggregate of 500,000 shares of common stock of the Borrower.
The Cayre Family hereby assigns to General Atlantic the Cayre Family's right to
receive its pro rata share of such warrants, which the parties hereby agree is
warrants to purchase 166,667 shares of common stock of the Borrower (the
"Assigned Commitment Warrants") allocated among the Cayre Family in accordance
with the Allocable Percentage (as hereinafter defined). "Allocable Percentage"
means the percentage set forth opposite the name of each of Joseph J. Cayre,
Kenneth Cayre and Stanley Cayre on the signature page hereto.
(b) In the event that the Commitment Letter terminates on or prior to
July 30, 1999 and each of the Subordinated Lenders is released and discharged
from making any Subordinated Loans thereunder, then on August 1, 1999, General
Atlantic shall transfer, subject to applicable securities laws, the Assigned
Commitment Warrants to the Cayre Family; provided, however, that if such
transfer by General Atlantic will cause General Atlantic to violate Section 16
of the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, then such transfer shall be delayed until a date upon which no such
violation shall occur; and provided further, that in lieu of such transfer,
General Atlantic and the Cayre Family may agree upon a cash settlement of the
Assigned Commitment Warrants at such time and under such circumstances as the
parties may agree.
2. July 30, 1999 Options. The Cayre Family hereby grants to General
Atlantic, effective on July 30, 1999, options to purchase, at an exercise price
per share equal to $.01, an aggregate of 1,333,333 shares of common stock of the
Borrower held by the Cayre Family, allocated among the Cayre Family in
accordance with the Allocable Percentage and subject to adjustment as provided
in Section 3(b)-(e)(i) below (the "Original Options"). As soon as practicable
after the date hereof, but in any case not later than the close of business on
July 30, 1999, General Atlantic and the Cayre Family shall enter into an option
agreement, in form and substance reasonably satisfactory to General Atlantic and
the Cayre Family, pursuant to which, among other things, each of Joseph J.
Cayre, Kenneth Cayre and Stanley Cayre shall be severally obligated to escrow
his shares of common stock of the Borrower subject to the Original Options. Each
of Joseph J. Cayre, Kenneth Cayre and Stanley Cayre severally covenant and agree
that from and after the date hereof until the earlier of (a) the exercise of the
Original Options by General Atlantic and (b) the date upon which the parties
hereto execute an option agreement requiring such escrow as described above, he
shall not sell, transfer, hypothecate, encumber or otherwise dispose of his
shares of common stock of the Borrower subject to the Original Options.
3. Assignment of the Right to Receive Warrants.
<PAGE>
36236E109 Page 54 of 80 Pages
(a) July 30, 1999. If the Holders make the Subordinated Loans pursuant
to the Commitment Letter, then pursuant to the Warrant Agreement the Borrower is
obligated to issue to General Atlantic and the Cayre Family warrants to
purchase, at an exercise price per share equal to $.01, an aggregate of
1,500,000 shares of common stock of the Borrower. The Cayre Family hereby
assigns to General Atlantic the Cayre Family's right to receive its pro rata
share of such warrants, which the parties hereby agree is warrants to purchase
500,000 shares of common stock of the Borrower allocated among the Cayre Family
in accordance with the Allocable Percentage.
(b) October 31, 1999. If the Borrower has not delivered to the Holders
on or prior to October 31, 1999, an agreement relating to a recapitalization,
reorganization, merger, sale (including, without limitation, a sale of all or
substantially all of the assets of the Borrower (which shall include a sale of
the Humongous business)) or other business combination transaction after the
consummation of which the stockholders of the Borrower prior to such transaction
do not own at least a majority of the voting power of the surviving person (a
"Sale Agreement"), then pursuant to the Warrant Agreement the Borrower is
obligated to issue on November 1, 1999 to General Atlantic and the Cayre Family
warrants to purchase, at an exercise price per share equal to $.01, an aggregate
of 2,500,000 shares of common stock of the Borrower (the "October Warrants").
The Cayre Family hereby assigns to General Atlantic the Cayre Family's right to
receive its pro rata share of such warrants, which the parties hereby agree is
warrants to purchase 833,333 shares of common stock of the Borrower allocated
among the Cayre Family in accordance with the Allocable Percentage, and upon the
issue of the 2,500,000 October Warrants to General Atlantic, the number of
shares of common stock of the Borrower subject to the Original Options shall be
reduced by 500,000; provided, however, that notwithstanding the foregoing, (i)
if General Atlantic has exercised the Original Options in whole on or prior to
November 1, 1999, then the assignment to General Atlantic by the Cayre Family of
its right to receive such warrants to purchase 833,333 shares of common stock
shall automatically terminate and the warrants shall be allocated pursuant to
Schedule 1 of the Warrant Agreement and (ii) if General Atlantic has exercised
the Original Options in part on or prior to November 1, 1999, then the remaining
number of shares of common stock of the Borrower subject to the Original Options
and, if necessary, the number of warrants assigned by the Cayre Family to
General Atlantic pursuant to this subsection (b) shall be proportionately
reduced.
(c) Termination of Sale Agreement. If the Borrower has delivered to the
Holders on or prior to October 31, 1999 a Sale Agreement, but such agreement
terminates for any reason after such date, then pursuant to the Warrant
Agreement the Borrower is obligated to issue on the date of such termination
(the "Termination Date") to General Atlantic and the Cayre Family warrants to
purchase, at an exercise price per share equal to $.01, an aggregate of
2,500,000 shares of common stock of the Borrower (the "Termination Warrants").
The Cayre Family hereby assigns to General Atlantic the Cayre Family's right to
receive its pro rata share of such warrants, which the parties hereby agree is
warrants to purchase 833,333 shares of
<PAGE>
36236E109 Page 55 of 80 Pages
common stock of the Borrower allocated among the Cayre Family in accordance with
the Allocable Percentage, and upon the issue of the 2,500,000 Termination
Warrants to General Atlantic, the number of shares of common stock of the
Borrower subject to the Original Options shall be reduced by 500,000; provided,
however, that notwithstanding the foregoing, (i) if General Atlantic has
exercised the Original Options in whole on or prior to the Termination Date,
then the assignment to General Atlantic by the Cayre Family of its right to
receive such warrants to purchase 833,333 shares of common stock shall
automatically terminate and the warrants shall be allocated pursuant to Schedule
1 of the Warrant Agreement and (ii) if General Atlantic has exercised the
Original Options in part on or prior to the Termination Date, then the remaining
number of shares of common stock of the Borrower subject to the Original Options
and, if necessary, the number of warrants assigned by the Cayre Family to
General Atlantic pursuant to this subsection (c) shall be proportionately
reduced.
(d) February 28, 2000. If on or prior to February 28, 2000, the
Borrower has not closed the transactions contemplated by the Sale Agreement and
paid in full to the Holders the aggregate amount of the Subordinated Loans made
under the Commitment Letter, then pursuant to the Warrant Agreement the Borrower
is obligated to issue on February 29, 2000 to General Atlantic and the Cayre
Family warrants to purchase, at an exercise price per share equal to $.01, an
aggregate of 3,000,000 shares of common stock of the Borrower (the "February
Warrants"). The Cayre Family hereby assigns to General Atlantic the Cayre
Family's right to receive its pro rata share of such warrants, which the parties
hereby agree is warrants to purchase 1,000,000 shares of common stock of the
Borrower allocated among the Cayre Family in accordance with the Allocable
Percentage, and upon the issue of the 3,000,000 February Warrants to General
Atlantic, the number of shares of common stock of the Borrower subject to the
Original Options shall be reduced by 500,000; provided, however, that
notwithstanding the foregoing, (i) if General Atlantic has exercised the
Original Options in whole on or prior to February 29, 2000, then the assignment
to General Atlantic by the Cayre Family of its right to receive such warrants to
purchase 1,000,000 shares of common stock shall automatically terminate and the
warrants shall be allocated pursuant to Schedule 1 of the Warrant Agreement and
(ii) if General Atlantic has exercised the Original Options in part on or prior
to the Termination Date, then the remaining number of shares of common stock of
the Borrower subject to the Original Options and, if necessary, after giving
effect to any adjustments previously made under subsection (b) or (c) above, the
number of warrants assigned by the Cayre Family to General Atlantic pursuant to
this subsection (d) shall be proportionately reduced.
(e) June 30, 2000 and Fiscal Quarters Thereafter.
(i) June 30, 2000. If on or prior to the last day the
Borrower's fiscal quarter ending June 30, 2000, the Borrower has not paid in
full to the Holders the aggregate amount of the Subordinated Loans made under
the Commitment Letter, then pursuant to the Warrant Agreement the Borrower is
obligated to issue to General Atlantic and the Cayre Family on the last day of
such fiscal quarter warrants to purchase, at an exercise price per share equal
to $.01, an aggregate of 3,000,000 shares of common stock of the Borrower (the
"June Warrants").
<PAGE>
36236E109 Page 56 of 80 Pages
The Cayre Family hereby assigns to General Atlantic the Cayre Family's right to
receive its pro rata share of such warrants, which the parties hereby agree is
warrants to purchase 1,000,000 shares of common stock of the Borrower allocated
among the Cayre Family in accordance with the Allocable Percentage, and upon the
issue of the 3,000,000 June Warrants to General Atlantic, the number of shares
of common stock of the Borrower subject to the Original Options shall be reduced
by 333,333; provided, however, that notwithstanding the foregoing, (i) if
General Atlantic has exercised the Original Options in whole on or prior to June
30, 2000, then the assignment to General Atlantic by the Cayre Family of its
right to receive such warrants to purchase 1,000,000 shares of common stock
shall automatically terminate and the warrants shall be allocated pursuant to
Schedule 1 of the Warrant Agreement and (ii) if General Atlantic has exercised
the Original Options in part on or prior to the Termination Date, then, if
necessary, after giving effect to any adjustments previously made under
subsection (b), (c) or (d) above, the remaining number of shares of common stock
of the Borrower subject to the Original Options and the number of warrants
assigned by the Cayre Family to General Atlantic pursuant to this subsection
(e)(i) shall be proportionately reduced.
(ii) September 30, 2000 and Thereafter. If on the last day of
each fiscal quarter of the Borrower commencing with the fiscal quarter ending
September 30, 2000, the Borrower has not paid in full to the Holders the
aggregate amount of the Subordinated Loans made under the Commitment Letter,
then pursuant to the Warrant Agreement the Borrower is obligated to issue to
General Atlantic and the Cayre Family on the last day of each such fiscal
quarter warrants to purchase, at an exercise price per share equal to $.01, an
aggregate of 3,000,000 shares of common stock of the Borrower. With respect to
each such fiscal quarter, such warrants shall be allocated pursuant to Schedule
1 of the Warrant Agreement.
4. Termination. In the event that the Commitment Letter terminates on
or prior to July 30, 1999, and each of the Subordinated Lenders is released and
discharged from making any Subordinated Loans thereunder, this letter agreement
shall terminate and be of no further force or effect, other than Sections 1 and
5 hereof, which shall survive such termination.
5. Assignment. None of the parties hereto may assign any of its rights
or obligations under this letter agreement without the prior written consent of
the other party, provided that GAP may assign its rights hereunder to one or
more affiliated limited partnerships.
<PAGE>
36236E109 Page 57 of 80 Pages
If the terms of this letter agreement are acceptable, please so
indicate on the enclosed copy of this letter and return it to the undersigned.
Very truly yours,
General Atlantic Partners 54, L.P.
By: General Atlantic Partners, LLC,
its general partner
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A Managing Member
GAP Coinvestment Partners II, L.P.
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A General Partner
Accepted and Agreed:
Allocable Percentage
/s/ Joseph J. Cayre 50%
- -------------------
Joseph J. Cayre
/s/ Kenneth Cayre 25%
- -----------------
Kenneth Cayre
<PAGE>
36236E109 Page 58 of 80 Pages
/s/ Stanley Cayre 25%
- -----------------
Stanley Cayre
Total 100%
36236E109 Page 59 of 80 Pages
EXHIBIT 3
to AMENDMENT NO. 1
to SCHEDULE 13D
[Form of Option Agreement]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT
TO A WRITTEN OPINION OF COUNSEL FOR GT INTERACTIVE SOFTWARE CORP. (THE
"COMPANY"), THAT SUCH REGISTRATION IS NOT REQUIRED.
OPTION AGREEMENT
OPTION AGREEMENT (this "Agreement"), dated as of July 30, 1999, among
Joseph J. Cayre, Kenneth Cayre and Stanley Cayre (collectively, the "Cayre
Family" or the "Optionors"), General Atlantic Partners 54, L.P., a Delaware
limited partnership ("GAP LP"), GAP Coinvestment Partners II, L.P., a New York
limited partnership ("GAP Coinvestment" and, together with GAP LP, the "Option
Holders"), and Thomas J. Murphy (as "Escrowholder").
1 Grant of Option.
1.1 Grant of Option; Exercise Price. Subject to the terms and
conditions set forth herein, the Optionors grant to the Option Holders an option
(the "Option") to purchase from the Optionors up to an aggregate of 1,333,333
shares (subject to adjustment as provided in Sections 2.1 and 2.2) of common
stock, par value $.01 per share (the "Option Shares"), of
<PAGE>
36236E109 Page 60 of 80 Pages
GT Interactive Software Corp., a Delaware corporation (the "Company"), held by
the Cayre Family, as allocated among the Cayre Family in accordance with the
percentages set forth opposite each name on Schedule I hereto (the "Allocable
Percentages"), represented by the stock certificates listed on Schedule II
hereto (the "Stock Certificates"), at an exercise price of $.01 per share (the
"Exercise Price"). The number of Option Shares that may be received upon
exercise of the Option and the Exercise Price shall be subject to adjustment as
provided herein.
1.2 Duration of Option. The Option may be exercised in whole or in
part, at any time or from time to time after the date hereof, but on or prior to
July 30, 2006; provided, however, that in the event of the sale or merger of the
Company or other business combination transaction after the closing of which the
holders of a majority of the voting power of the Company prior to such merger,
sale or business combination transaction do not hold a majority of the voting
power of the surviving person, then this Option shall be exercisable only until
the closing of such merger, sale or business combination transaction (the
"Termination Date").
1.3 Exercise. Upon exercise of the Option in accordance with Section
1.4, the aggregate number of Option Shares for which the Option shall have been
exercised shall be transferred to the Option Holders by each of the Optionors
pro rata according to the Allocable Percentages. All rights of the Option
Holders to purchase the Option Shares from the Optionors shall be deemed to be
exercised pro rata in accordance with the Allocable Percentages.
<PAGE>
36236E109 Page 61 of 80 Pages
1.4 Manner of Exercising Option.
(a) The Option shall be exercisable by the Option Holders in
whole or in part only by surrender of a completed and fully executed option
exercise notice (in the form attached hereto as Exhibit A) (the "Option Exercise
Notice") to the Escrowholder (as defined and named in the signature pages
hereto), with a copy to the Optionors, not less than 10 days prior to the date
specified in the Option Exercise Notice for the closing of the purchase and sale
of the Option Shares pursuant to such Option Exercise Notice (the "Closing
Date").
(b) On the Closing Date, the Option Holders shall deliver to
each of the Optionors by wire transfer of immediately available funds, with
notice of such payment to the Escrowholder, that portion of the aggregate
Exercise Price for the number of Option Shares so purchased, against delivery by
the Escrowholder to the Option Holders of a certificate or certificates
representing such Option Shares, together with a duly exercised assignment or
duly executed assignments in proper form to transfer such Option Shares to the
Option Holders. The Option Shares delivered by the Escrowholder to the Option
Holders shall be allocated between the Option Holders in accordance with the
percentages set forth on Schedule III hereto. The aggregate Exercise Price for
the Option Shares shall be allocated between each of the Optionors according to
the Allocable Percentages. If the Option Holders exercise the Option for a
number of Option Shares less than the aggregate number of Option Shares, then
the remainder of the Option Shares shall remain available for exercise at one or
more later times prior to the Termination Date in accordance with this
Agreement.
<PAGE>
36236E109 Page 62 of 80 Pages
1.5 Transfer of Option and Option Shares. The Option Holders shall not
sell, give, assign, hypothecate, pledge, encumber, grant a security interest in
or otherwise dispose of, whether by operation of law or otherwise (each a
"Transfer") this Agreement, including the Option, or any right, title or
interest therein or thereto, except to one or more affiliates of the Option
Holders. The Option Holders may Transfer the Option Shares issued upon exercise
of the Option subject to and in compliance with applicable securities laws.
2 Adjustment of Number of Shares; Substitute Shares.
2.1 Adjustment for Changes in Capital Structure. "Auxiliary Security"
means any property receivable by the Optionors as owners of any Option Shares or
as owners of any Auxiliary Securities other than cash dividends, including, but
not limited to, noncash dividends, securities or other property, arising from or
issued in connection with a reorganization, combination, recapitalization, stock
split, spin-off, liquidation, issue of securities or sale or merger of the
Company or the issuer of any security which is an Auxiliary Security, or other
similar change in the capital structure of the Company, or as a result of any
other disposition or conversion of the Option Shares or the proceeds therefrom.
If Auxiliary Securities are issued with respect to the Option Shares:
(a) (i) the number and type of shares transferable by the
Optionors upon exercise of the Option by the Option Holders shall be equitably
adjusted (but only to the extent such adjustment is made with respect to the
shares underlying the Option), (ii) any Auxiliary Securities shall become a part
of the Option Shares to which such Auxiliary Securities relate and (iii) upon
exercise of the Option, such Auxiliary Securities shall be transferred to the
Option Holders without extra cost; and
<PAGE>
36236E109 Page 63 of 80 Pages
(b) the certificates or other instruments evidencing title to
such Auxiliary Securities, together with appropriate instruments of transfer,
shall be delivered to the Escrowholder to be held in Escrow pursuant to Section
3 hereof.
2.2 Adjustment of Option Shares. The number of Option Shares subject to
this Option Agreement shall be subject to adjustment as provided in the provisos
to Section 3(b) through 3(e)(i) of the Letter Agreement dated June 29, 1999
among the parties, a copy of which is attached hereto as Exhibit C (the "Letter
Agreement"). If the number of Option Shares is reduced pursuant to provisos to
Section 3(b) through 3(e)(i) of the Letter Agreement, then such number of Option
Shares no longer subject to this Option Agreement pursuant to such provisos
shall be returned by the Escrowholder to the Optionors in accordance with the
Allocable Percentages not more than five days after the occurrence of the
particular event causing such reduction in the number of Option Shares.
3 Escrow.
3.1 Creation of Escrow. To ensure the Optionors' general ability to
perform their obligations under this Agreement, the Optionors will, concurrently
with the delivery of this Agreement, deliver to the Escrowholder the Stock
Certificates together with a stock power (the "Stock Power") duly executed in
blank, in the form attached hereto as Exhibit B, such documents to be held in
escrow (the "Escrow") by the Escrowholder pursuant to the terms of this Section
3.
3.2 Duties Upon Exercise of Option. If, on or prior to the Termination
Date, the Escrowholder receives an Option Exercise Notice, the Escrowholder
shall on the Closing Date (i) date the Stock Power necessary for the transfer in
question, (ii) fill in the number of
<PAGE>
36236E109 Page 64 of 80 Pages
Option Shares purchased from the Optionors by the Option Holders, and (iii)
deliver to the Option Holders the Stock Power, together with a certificate or
certificates representing the number of Option Shares and Auxiliary Securities,
if any, purchased against delivery to the Optionors of the aggregate Exercise
Price for such Option Shares so transferred; provided, however, that the
Escrowholder's duties hereunder are subject to the cooperation of the Optionors,
and the Company's transfer agent or counsel with respect to furnishing to the
Escrowholder all necessary stock certificates, legal opinions, and other related
instruments as appropriate.
3.3 Term of Escrow. The Escrow shall continue until the earlier of (i)
fifteen (15) days following the Termination Date, provided that if the Option
has been duly exercised prior to the Termination Date, the Escrow shall continue
until the transfer of the Option Shares so exercised has been completed on the
Closing Date, and (ii) such date as the Option Holders and the Optionors have
certified to the Escrowholder that the Option has expired or has been exercised
in full.
3.4 Attorney-In-Fact; Additional Stock Assignments. The Optionors
hereby constitute and appoint the Escrowholder as the Optionors'
attorney-in-fact and agent for the term of this Escrow, to execute, with respect
to such securities or other property as are deposited with the Escrowholder
hereunder, all documents necessary or appropriate to make such securities or
other property negotiable, and to complete any transaction herein contemplated.
The Optionors shall deliver to the Escrowholder from time to time such number of
Stock Powers or other documents duly executed by the Optionors as may be
reasonably requested by the Escrowholder.
<PAGE>
36236E109 Page 65 of 80 Pages
3.5 Return of Property. If at the time of termination of the Escrow
pursuant to Section 3.3, the Escrowholder still has in his or her possession any
documents, securities, or other property belonging to the Optionors, including,
without limitation, the Option Shares, Auxiliary Securities or the Stock Power
specified in Section 3.1, then the Escrowholder shall deliver all of same to the
Optionors and shall then be discharged of all further obligations hereunder.
3.6 Escrow Sole Source of Option Shares. The parties agree that the
Stock Certificates, together with any other property deposited into the Escrow
pursuant to Section 2.2, shall constitute the sole recourse for satisfaction of
the Option Holders' rights upon exercise of the Option.
3.7 Duties; Modification of Duties.
(a) The Escrowholder shall carry out the Escrowholder's duties
hereunder to the best of his or her ability and the Escrowholder shall be liable
only for gross negligence or willful misconduct. The Escrowholder's duties
hereunder may be altered, amended, modified or revoked only by a written
instrument signed by the Option Holders, the Optionors and the Escrowholder.
(b) The Escrowholder shall be obligated only for the
performance of such duties as are specifically set forth herein, and may rely
upon, and shall be protected in acting or refraining from acting in reliance
upon, any instrument reasonably believed by the Escrowholder to be genuine and
to have been signed or presented by the proper party or parties. The
Escrowholder shall not be personally liable for any action the Escrowholder may
take or omit to take hereunder as Escrowholder or as attorney-in-fact for the
Optionors
<PAGE>
36236E109 Page 66 of 80 Pages
while acting in good faith and in the exercise of the Escrowholder's own good
judgment, and any action taken or omitted to be taken by the Escrowholder
pursuant to the advice of the Escrowholder's or the Company's own attorneys
shall be conclusive evidence of such good faith.
(c) The Escrowholder is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of any court of
law, but, notwithstanding the foregoing, is also hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court of law. In case
the Escrowholder obeys or complies with any such order, judgment or decree of
any court, the Escrowholder shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such compliance,
notwithstanding that any such order, judgment or decree is subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
(d) So long as the Escrowholder performs his or her duties in
accordance with this Section 3.7, the Optionors and the Option Holders shall
indemnify and hold harmless the Escrowholder from and against any losses, claims
or written threats thereof, damages, expenses (including reasonable attorneys'
fees) incurred by the Escrowholder in any action by and among the Escrowholder,
the Optionors and the Option Holders (or any combination thereof), or between
the Escrowholder and a third party, in either case resulting from or arising out
of the performance of his or her duties as Escrowholder pursuant to this
Agreement.
<PAGE>
36236E109 Page 67 of 80 Pages
3.8 Authorization to Invest. Any cash distributions received by the
Escrowholder pursuant to this Agreement and designated as Auxiliary Securities
which are to be retained in escrow by the Escrowholder for more than fifteen
(15) days shall be invested in an interest bearing savings account specified by
the Option Holders, and the interest thereon shall be deemed to constitute a
part of such Auxiliary Securities, as applicable.
3.9 Statute of Limitations. The Escrowholder shall not be liable for
the lapse of any rights because of any statute of limitations applicable with
respect to this Agreement or any documents deposited with the Escrowholder.
3.10 Legal Counsel. The Escrowholder shall be entitled to employ such
legal counsel and other experts as the Escrowholder may reasonably deem
necessary to advise the Escrowholder properly in connection with the
Escrowholder's obligations, and may pay such counsel or experts reasonable
compensation therefor, for which the Escrowholder shall be reimbursed by the
Option Holders.
3.11 Termination of Duties; Successor. The Escrowholder's
responsibilities as the Escrowholder hereunder shall terminate if (i) the
Escrowholder shall resign by 30 days' written notice to the Optionors and the
Option Holders, (ii) the Optionors and the Option Holders jointly agree to
discharge the Escrowholder and to appoint the Escrowholder's successor or (iii)
the Escrowholder dies. In the event of any Escrowholder's discharge as
Escrowholder, by resignation, death or by otherwise becoming unable to perform
his/her duties, his/her successor shall be the successor Secretary of the
Company. Upon the Escrowholder's receipt of notice of any such appointment of
the Escrowholder's successor,
<PAGE>
36236E109 Page 68 of 80 Pages
he/she shall deliver all documents, shares and other property then in the
Escrowholder's possession pursuant to this Agreement to such successor.
3.12 Further Instruments. If the Escrowholder reasonably requires other
or further instruments in connection with this Agreement or obligations in
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
3.13 Conflicting Notices; Disputes. If the Escrowholder receives a
notice from the Option Holders that the Option Holders are exercising any of
their rights hereunder, then the Escrowholder shall first complete all action
required with respect to such notice before taking action with respect to any
subsequently received notice which in any way conflicts with the prior notice.
It is understood and agreed that should any dispute arise with respect to the
delivery, ownership or right to possession of the Option Shares, the Auxiliary
Securities with respect thereto, and/or any other property held by the
Escrowholder hereunder, the Escrowholder is authorized and directed to retain in
his/her possession, without liability to anyone, all or any part of such
securities and/or such other property until such dispute shall have been settled
either by mutual written agreement of the parties concerned or by a final order,
decree, or judgment of a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected (with the understanding that
the Escrowholder shall be under no duty whatsoever to institute or defend any
such proceedings).
3.14 Voting of Shares. So long as the Option Shares and/or Auxiliary
Securities and any other voting securities of the Company shall be held by the
Escrowholder, the Optionors shall be entitled to vote the Option Shares and/or
the Auxiliary Securities in all
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36236E109 Page 69 of 80 Pages
matters presented to the shareholders of the Company and shall be entitled to
exercise all other rights as shareholders of the Company with respect to such
securities.
4 Representations, Warranties and Covenants of the Optionors.
4.1 Ownership of Option Shares; No Conflicts. Each of the Optionors
represents and warrants, severally and not jointly, as of the date hereof, and
covenants, severally and not jointly, for the period beginning on the date
hereof and ending on the Termination Date, that (i) such Optionor has the legal
capacity to execute, deliver and perform his obligations under this Agreement;
(ii) such Optionor owns beneficially and of record such Optionor's Option
Shares, free and clear of any lien, claim, encumbrance or restriction of any
type or nature whatsoever (other than restrictions on resale that may arise
under applicable federal and securities laws) (collectively, "Liens"); (iii)
such Optionor has and will have the right to enter into this Agreement and to
Transfer to the Option Holders all or any part of such Optionor's Option Shares
and Auxiliary Securities free and clear of any Liens; (iv) such Optionor's
Option Shares and Auxiliary Securities are not and will not be subject to any
right of first refusal, right of repurchase or any similar right granted to, or
retained by, the Company, any shareholder of the Company or any other person;
and (v) there is no provision of any existing agreement, nor will such Optionor
enter into any agreement, by which such Optionor is or would be bound (or to
which such Optionor is or would become subject) that conflicts or would conflict
with this Agreement or the performance of such Optionor's obligations under this
Agreement, other than any such conflicts that have been waived.
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36236E109 Page 70 of 80 Pages
4.2 Further Assurances. Upon the reasonable request of the Escrowholder
or the Option Holders, each of the Optionors will prepare, execute and deliver
any further instruments and take any further action that may be necessary to
carry out more effectively the purpose of this Agreement.
5. Representations and Covenants of the Option Holders. If the
Company's counsel reasonably deems it necessary, the purchase of the Option
Shares and the Auxiliary Securities, if any, upon exercise of the Option may be
conditioned upon the Option Holders representing to the Company as follows:
(a) The Option Shares and the Auxiliary Securities, if any,
are being acquired (i) solely for the Option Holders' own account(s) (not for
the account of any other person), and (ii) for investment purposes and not with
a view to distribution or resale except in compliance with applicable federal
and state laws; and
(b) Such other representations and warranties as are required
in the opinion of the Company's counsel to comply with applicable state and
federal securities laws.
6 Miscellaneous.
6.1 Amendment. Except as provided in Section 3.7, this Agreement may
only be amended by a writing signed by the Optionors and the Option Holders.
6.2 Entire Agreement; Controlling Document. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersedes any and all prior negotiations, correspondence and understandings
between the parties with respect to the subject matter hereof, whether oral or
in writing.
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36236E109 Page 71 of 80 Pages
6.3 Notices. All notices and other communications under this Agreement
shall be in writing, shall be effective when received, and shall in any event be
deemed to have been received: on the date of delivery if delivered personally or
by telecopier; on the second business day after the business day of deposit with
the U.S. Postal Service for delivery by first class mail, registered or
certified, postage prepaid; or on the first business day after the business day
of deposit with a courier for overnight delivery, freight prepaid; in each such
case, addressed as follows (until any such address is changed by notice duly
given):
(a) to the Optionors, to:
Joseph J. Cayre
Kenneth Cayre
Stanley Cayre
c/o Good Times Home Video
16 East 40th Street
New York, New York 10016
Telecopy: (212) 696-4880
(b) to the Option Holders, to:
General Atlantic Partners 54, L.P.
GAP Coinvestment Partners II, L.P.
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
(c) to the Escrowholder, to:
General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 618-9207
Attention: Thomas J. Murphy
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36236E109 Page 72 of 80 Pages
6.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Severability. If any provision of this Agreement shall be
determined to be invalid or unenforceable, the remainder shall be valid and
enforceable to the maximum extent possible.
6.6 Headings. The section headings used in this Agreement are intended
principally for convenience and shall not by themselves determine the rights and
obligations of the parties to this Agreement.
6.7 Delay and Waiver. No delay on the part of any party in exercising
any right under this Agreement shall operate as a waiver of such right. The
waiver by any party of any other term or condition of this Agreement shall not
be construed as a waiver of a subsequent breach or failure of the same term or
condition or a waiver of any other term or condition contained in this
Agreement.
6.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
<PAGE>
36236E109 Page 73 of 80 Pages
IN WITNESS WHEREOF, the undersigned have executed this Agreement the
day and year first above written.
GENERAL ATLANTIC PARTNERS 54, L.P.
By: General Atlantic Partners, LLC,
Its general partner
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ William E. Ford
-------------------
Name: William E. Ford
Title: A General Member
<PAGE>
36236E109 Page 74 of 80 Pages
/s/ Joseph J. Cayre
-------------------
Joseph J. Cayre
/s/ Kenneth Cayre
-----------------
Kenneth Cayre
/s/ Stanley Cayre
-----------------
Stanley Cayre
Escrowholder hereby acknowledges receipt of
the subject matter of the escrow as
described in the foregoing Agreement and
hereby accepts same as Escrowholder
hereunder, subject to the terms and
conditions hereof.
Dated as of this 30th day of July, 1999
/s/ Thomas J. Murphy
--------------------
Thomas J. Murphy
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36236E109 Page 75 of 80 Pages
Schedule I
Allocable Percentages
The Optionors Percentage Option Shares
- ------------- ---------- -------------
Joseph J. Cayre 50% 666,667
Kenneth Cayre 25% 333,333
Stanley Cayre 25% 333,333
Total 100% 1,333,333
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36236E109 Page 76 of 80 Pages
Schedule II
[Stock Certificate Numbers]
<PAGE>
36236E109 Page 77 of 80 Pages
Schedule III
Allocation of Option Shares
Percentage Option Shares
---------- -------------
GAP LP 81.624% 1,088,320
GAP Coinvestment 18.376% 245,013
Total 100% 1,333,333
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36236E109 Page 78 of 80 Pages
Exhibit A
Option Exercise Notice
[Date]
Joseph Cayre
Kenneth Cayre
Stanley Cayre
c/o GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
1 Exercise of Option. Effective as of the above date, the undersigned
hereby exercises its option to purchase __________ shares of common stock, par
value $0.01 per share, of GT Interactive Software Corp., a Delaware corporation,
pursuant to the Option Agreement, dated as of July 30, 1999 (the "Agreement"),
among Joseph J. Cayre, Kenneth Cayre, and Stanley Cayre (collectively, the
"Cayre Family" and the "Optionors"), General Atlantic Partners 54, L.P., a
Delaware limited partnership, and GAP Coinvestment Partners II, L.P., a New York
limited partnership (collectively, the "Option Holders"), and Thomas J. Murphy,
as Escrowholder. The exercise price per share is $.01 for an aggregate purchase
price of $______________.
2 Delivery of Payment. The undersigned has wire transferred the above
aggregate purchase price to the Optionors and attached is a confirmation of such
transfer.
3 Delivery of Certificates. You are instructed to deliver the
Certificates to the undersigned as required by the Agreement.
Submitted by: Accepted by:
Name: Name: Thomas J. Murphy
Title: Title: Escrowholder
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36236E109 Page 79 of 80 Pages
Exhibit B
STOCK POWER
FOR VALUE RECEIVED and pursuant to the Option Agreement, dated as of
July 30, 1999 (the "Option Agreement"), between the undersigned assignor,
General Atlantic Partners 54, L.P., GAP Coinvestment Partners II, L.P., and
Thomas J. Murphy, as Escrowholder, the undersigned hereby sells, assigns and
transfers unto _______________ (_______) shares, par value $0.01 per share, of
common stock of GT Interactive Software Corp., a Delaware corporation, standing
in the undersigned's name on the books of said corporation represented by
certificate number __________ delivered herewith, and does hereby irrevocably
constitute and appoint __________ as attorney-in-fact, with full power of
substitution, to transfer said stock on the books of said corporation.
Dated: , 19__
[Optionor]
By:
(Signature)
(Type or Print Name)
Its
This Stock Power was executed in conjunction with the terms of the Option
Agreement, and may be utilized only in connection with the terms of such
agreement.
Instruction: Please do not fill in any blanks other than the signature line.
Please check applicable box.
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36236E109 Page 80 of 80 Pages
