SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 15, 1999
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GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-27338 13-3689915
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation or identification no.)
organization)
417 Fifth Avenue, New York, NY 10016
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 726-6500
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Item 5. Other Events
On November 15, 1999, the Company and Infogrames Entertainment
S.A., a societe anonyme organized under the laws of France (together with its
wholly-owned U.S. subsidiary, "Infogrames"), entered into a securities purchase
agreement (the "GT Purchase Agreement") pursuant to which the Company agreed to
issue and Infogrames agreed to purchase from the Company: (i) 28,571,429 shares
of the Company's Common Stock at a purchase price of $1.75 per share and (ii) 5%
Subordinated Convertible Notes in the aggregate principal amount of
approximately $60.5 million (the "Infogrames Notes"), convertible into Common
Stock at a conversion price of $1.85 per share. Concurrently with the execution
of the GT Purchase Agreement, Infogrames purchased from the Company a Short-Term
Senior Secured Note in the aggregate principal amount of $25 million (the
"Short-Term Note"), with interest at the per annum rate of either the Base Rate
(as defined in the Short-Term Note) plus 2.5% or LIBOR plus 4%. On the closing
date of the GT Purchase Agreement, the outstanding principal of and interest on
the Short-Term Note shall be applied toward the payment by Infogrames for the
Infogrames Notes.
Concurrently with the execution of the GT Purchase Agreement,
Infogrames entered into equity purchase and voting agreements (the "Selling
Stockholder Agreements") with the Cayre family and General Atlantic, pursuant to
which Infogrames will purchase (a) from the Cayre family, (i) an aggregate of
33,789,000 shares of Common Stock for an aggregate purchase price of $25 million
(which represents a purchase price of $0.74 per share) and (ii) the Cayre
family's Notes in the aggregate principal amount of $10 million plus accrued
interest, and (b) from General Atlantic, warrants to purchase 4,500,000 shares
of Common Stock for nominal consideration.
In addition, concurrently with and as a condition of
Infogrames' execution of the GT Purchase Agreement, the Company entered into a
securities exchange agreement (the "Securities Exchange Agreement") with General
Atlantic pursuant to which the Company agreed to issue to General Atlantic
convertible non-interest bearing subordinated notes in the aggregate principal
amount of $50 million (the "GAP Notes"), convertible into Common Stock at a
conversion price of $4.00 per share, and General Atlantic agreed to transfer to
the Company, in exchange for and in consideration of the issuance of the GAP
Notes, subordinated notes of the Company held by General Atlantic in the
aggregate principal amount of $20 million and 600,000 shares of Preferred Stock
held by General Atlantic with a liquidation preference of $30 million.
The consummation of the transactions contemplated by the GT
Purchase Agreement, the Selling Stockholder Agreements and the Securities
Exchange Agreement is contingent upon the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and any applicable corresponding non-United States laws, and the
completion of all filings required pursuant to the rules and regulations of The
Nasdaq Stock Market, as well as certain other customary conditions set forth in
the GT Purchase Agreement.
On November 15, 1999, the Company and its banks amended the
New Credit Agreement to waive the covenant requiring minimal levels of EBITDA,
to increase the Company's receivables and inventory advance rates to 60% and
50%, respectively, and to increase the borrowing base availability by the amount
of cash held by the Company from time to time. The $20 million additional
borrowing base availability agreed in June 1999 will remain until the
consummation or termination of the Infogrames transactions described above
(collectively, the "Transaction"). The covenant requiring the Company to
permanently reduce the aggregate commitment under the New Credit Agreement with
net proceeds from the Transaction has also
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been waived by the banks. The termination date of the New Credit Agreement, as
amended, was changed to March 31, 2000 from June 30, 2000. Under the New Credit
Agreement, as amended, the banks consented to the Company entering into the
Transaction and the Short-Term Note, and the granting to Infogrames of a junior
lien on the Company's collateral. The amended New Credit Agreement also requires
that upon consummation of the Transaction the aggregate commitment is to be
reduced by $50 million to $75 million and that the borrowings will bear interest
at the reduced rate of either the bank's reference rate plus 1.0% or LIBOR plus
2.5%. To induce the banks to amend the New Credit Agreement, the Company has
agreed to pay the banks an amendment fee of $500,000 on the termination of the
New Credit Agreement; however, this fee is subject to reduction or elimination
if the Transaction is closed and the remaining balance refinanced or repaid
within a certain time period. In addition, following the closing of the
Transaction, the Company will pay the banks a monthly usage fee of $100,000. In
the event that the Transaction is terminated, or is not consummated by January
1, 2000 (or, in certain limited circumstances, if the closing is extended under
the terms of the GT Purchase Agreement), an event of default will occur under
the New Credit Agreement (as well as under the Short-Term Note), and amounts due
thereunder may be accelerated by the banks.
Item 7. Exhibits
10.1 Securities Purchase Agreement, dated as of November 15, 1999, by and
among Infogrames Entertainment S.A., California U.S. Holdings, Inc. and
the Registrant
10.2 Securities Exchange Agreement, dated as of November 15, 1999, by and
among the Registrant, General Atlantic Partners 54, L.P., and GAP
Coinvestment Partners II, L.P.
10.3 Third Amendment, Consent, Waiver and Agreement, dated as of November
15, 1999, by and among the Registrant, the Lenders thereto and First
Union National Bank, as Administrative Agent
10.4 Second Amended and Restated Security Agreement, dated as of November
15, 1999, by and among the Registrant, certain of its subsidiaries,
First Union National Bank, as Administrative Agent, and California U.S.
Holdings, Inc.
10.5 Second Amended and Restated Pledge Agreement, dated as of November 15,
1999, by the Registrant and certain of its subsidiaries in favor of
First Union National Bank, as Administrative Agent, and California U.S.
Holdings, Inc.
10.6 Promissory Note of the Registrant in the aggregate principal amount of
$25,000,000 payable to California U.S. Holdings, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GT INTERACTIVE SOFTWARE CORP.
Date: November 18, 1999 By: /s/ JOHN T. BAKER IV
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Name: John T. Baker IV
Title: President and
Chief Operating Officer
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), made and entered
into as of November 15, 1999, by and among GT Interactive Software Corp., a
Delaware corporation (the "Company"), Infogrames Entertainment S.A., a societe
anonyme organized under the laws of France ("Parent"), and California U.S.
Holdings, Inc., a California corporation and a wholly-owned subsidiary of Parent
("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue, sell and deliver to
Purchaser, and Purchaser wishes to purchase from the Company, 28,571,429 shares
(the "Shares") of common stock, par value $0.01 per share, of the Company (the
"Common Stock") for a purchase price of $50 million and a 5% Subordinated
Convertible Note of the Company in the principal amount equal to the Note
Purchase Price (as hereinafter defined) in the form set forth in Exhibit A
hereto (the "Note"), pursuant to the terms and conditions set forth in this
Agreement (the Shares and the Note are sometimes collectively referred to herein
as the "Securities"); and
WHEREAS, concurrent with the execution and delivery of this
Agreement, the Company will issue, sell and deliver to Purchaser, and Purchaser
will purchase from the Company, a Short-Term Senior Secured Note of the Company
in the principal amount of $25,000,000 in the form set forth in Exhibit B hereto
(the "Short-Term Note"), the outstanding principal and accrued interest of
which, on the Closing Date (as hereinafter defined), shall be applied toward the
payment by Purchaser for the Note; and
WHEREAS, concurrent with the execution and delivery of this
Agreement and in consideration of Purchaser's purchase of the Short-Term Note,
the Company is issuing to Purchaser warrants covering 50,000 shares of the
Company's Common Stock, having an exercise price of $.01 per share, and paying
Purchaser a fee of $100,000; and
WHEREAS, in connection herewith, and as a condition to the
willingness of the Parent and Purchaser to enter into this Agreement, Parent has
required that certain holders of securities of the Company agree, and in order
to induce Parent to enter into the Purchase Agreement, such holders have agreed,
among other things, to exchange securities of the Company held by them for a 0%
Senior Subordinated Convertible Note of the Company in the form of Exhibit C
hereto (the "Senior Note"), pursuant to the terms and conditions set forth in an
agreement in the form of Exhibit D hereto (the "Exchange Agreement"); and
WHEREAS, in connection herewith, and as a condition to the
willingness of the Parent and Purchaser to enter into this Agreement, Parent has
required that certain stockholders (the "Principal Stockholders") of the Company
agree, and in order to induce Parent to enter into the Purchase Agreement, the
Principal Stockholders have agreed, among other things, to enter into equity
purchase and voting agreements in the forms of Exhibits E-1 and E-2 hereto (the
"Selling Stockholder Agreements"); and
WHEREAS, concurrent with the execution and delivery of this
Agreement, Parent has agreed to purchase, and certain Principal Stockholders
have agreed to sell, subordinated
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notes of the Company in the face amount of $10 million, plus accrued interest,
pursuant to the terms and conditions of the Note Purchase Agreement in the form
annexed as Exhibit E-3 (the "Note Purchase Agreement"); and
WHEREAS, the Company and Purchaser have agreed to enter into a
Registration Rights Agreement in the form of Exhibit F hereto (the "Registration
Rights Agreement"); and
WHEREAS, the Board of Directors of the Company has approved
and deemed it advisable for the Company to enter into this Agreement, the
Exchange Agreement, and the Registration Rights Agreement and to issue the
Securities and the Short-Term Note to be issued to Purchaser, the Senior Note to
be issued to certain affiliates of General Atlantic Partners L.P. and the shares
of Common Stock issuable upon conversion of the Notes (the "Conversion Shares")
(all such agreements, Notes and securities are referred to collectively as the
"Transaction Documents") and has determined that the issuance of the Securities
in accordance with the terms of this Agreement, and the issuance of the
Short-Term Note and the Senior Note, are fair to and in the best interests of
the Company and the holders (other than the Principal Stockholders) of the
Common Stock; and
WHEREAS, the Company, Purchaser and Parent desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the transactions contemplated hereby:
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 The Purchase.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing: (i) the Company shall issue, sell and deliver to
Purchaser, and Purchaser shall purchase from the Company, the Shares, and (ii)
the Company shall issue and deliver to Purchaser, and Purchaser shall purchase
from the Company, the Notes (collectively, the "Purchase").
(b) The aggregate purchase price for the Shares (the "Stock Purchase
Price") shall be $50 million and the aggregate purchase price for the Note (the
"Note Purchase Price") shall be the sum of $60 million plus the interest accrued
through Closing on each of the Short-Term Note and the notes to be purchased
pursuant to the Note Purchase Agreement. At the Closing, the Company shall
deliver to Purchaser, registered in its name or the name of its nominee, the
Note and the share certificates evidencing the Shares, registered in its name or
the name of its nominee, each duly executed and dated as of the Closing Date,
against payment of the Stock Purchase Price and the Note Purchase Price by wire
transfer of immediately available funds to the account of the Company as
specified by written notice to Parent at least two business days prior to the
Closing Date. Purchaser shall pay a portion of the Note Purchase Price by
cancellation of the Short-Term Note and the interest then accrued thereon.
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1.2 The Closing. The closing of the Purchase (the "Closing") shall take
place at 10:00 a.m., New York time, on a date to be specified by the parties,
which in any event shall be no later than the third business day following the
satisfaction (or waiver) of all of the conditions set forth in Article VI (such
date, the "Closing Date"), at the offices of Kramer Levin Naftalis & Frankel
LLP, 919 Third Avenue, New York, New York, unless another time, date or place is
agreed to in writing by the parties hereto. At the Closing, the opinions,
certificates and other documents required by this Agreement to be delivered
(other than those required to be delivered prior to the Closing) shall be
delivered.
1.3 Short-Term Note, etc. Concurrent with the execution and delivery of
this Agreement, the Company is issuing to Purchaser and Purchaser is purchasing
from the Company the Short-Term Note for a purchase price of $25,000,000, and in
consideration of Purchaser's purchase of the Short-Term Note, the Company is
issuing to Purchaser warrants exercisable for 50,000 shares of Common Stock,
exercisable at a price of $.01 per share, and paying to Purchaser a fee of
$100,000. On November 16, 1999, the Company shall deliver to Purchaser the
Short-Term Note and such warrants; and Parent shall cause to be wire transferred
$25.0 million in immediately available funds to the account of the Company as
specified to Parent and the Company shall cause to be wire transferred $100,000
in immediately available funds to the account of Parent as specified by Parent
to Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that,
except as set forth in the correspondingly numbered Sections of the letter,
dated the date hereof, from the Company to Parent (the "Company Disclosure
Letter"):
2.1 Organization and Good Standing. The Company and each of the Company
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company and each of the
Company Subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the character of the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a Material
Adverse Effect. The Company has previously made available to Parent accurate and
complete copies of the Certificate of Incorporation and Bylaws, as currently in
effect, of the Company and each Company Subsidiary. For purposes of this
Agreement, the term "Company Subsidiary" shall mean any "subsidiary" (as such
term is defined in Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "SEC") of the Company.
2.2 Capitalization. As of November 12, 1999, the authorized capital
stock of the Company consists of (a) 150,000,000 shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") and (b) 5,000,000
shares of preferred stock of the Company, of which 600,000 have been designated
as Series A Convertible Preferred Stock ("Preferred Shares"). As of November 12,
1999, (i) 74,633,940 shares of Common Stock were
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issued and outstanding, (ii) 600,000 Preferred Shares were issued and
outstanding, (iii) no shares of Common Stock or shares of preferred stock of the
Company were issued and held in the treasury of the Company, (iv) no shares of
Common Stock or preferred stock of the Company were held by any Company
Subsidiary, (v) 6,000,000 shares of Common Stock were reserved for future
issuance upon conversion of the outstanding Preferred Shares, (vi) 16,541,727
shares of Common Stock are authorized for issuance under the Company's stock
incentive plans, of which options covering 985,160 shares have been exercised,
and of which options covering 13,566,640 of Common Stock have been granted and
remain outstanding ("Company Options"), and of which 5,565 shares of Common
Stock were issued as restricted stock awards, (vii) 6,356,625 shares of Common
Stock were reserved for future issuance upon exercise of warrants (the "Company
Warrants"), and (viii) 1,000,000 shares of Common Stock are authorized for
issuance under the Company's 1998 Employee Stock Purchase Plan, of which 116,364
shares have been issued. No change in the capitalization of the Company has
occurred between November 12, 1999 and the date hereof, except for the issuance
of Shares upon the exercise or lapse of Company Options and Stock Purchase
Options. No other capital stock of the Company is authorized or issued. All
issued and outstanding shares of the Common Stock and Series A Preferred Stock
are duly authorized, validly issued, fully paid and non-assessable and were
issued free of preemptive rights and in compliance with all applicable Laws.
Except as set forth in Schedule 2.2 of the Company Disclosure Letter or as
otherwise contemplated by this Agreement, as of the date hereof, there are no
outstanding rights, subscriptions, warrants, puts, calls, unsatisfied preemptive
rights, options (except as set forth in Schedule 2.15(h) of the Company
Disclosure Letter) or other agreements to which the Company or any Company
Subsidiary is a party, of any kind relating to any of the outstanding,
authorized but unissued or treasury shares of the capital stock or any other
security of the Company, and there is no authorized or outstanding security of
any kind convertible into or exchangeable for any such capital stock or other
security. Except as disclosed in Schedule 2.2 of the Company Disclosure Letter,
there are no obligations, contingent or other, of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of Common Stock
or the capital stock of any Company Subsidiary or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such Company Subsidiary or any other entity. Except as disclosed in Schedule 2.2
of the Company Disclosure Letter, there are no registration rights, and to the
best knowledge of the Company, there are no voting trusts, proxies or other
agreements or understandings with respect to the voting rights of any class of
the Company's capital stock.
2.3 Subsidiaries. Schedule 2.3 of the Company Disclosure Letter sets
forth the name and jurisdiction of incorporation of each Company Subsidiary,
each of which is wholly owned by the Company except for directors' qualifying
shares and except as otherwise indicated in Schedule 2.3 of the Company
Disclosure Letter. All of the capital stock and other interests of the Company
Subsidiaries so held by the Company are owned by it or a Company Subsidiary as
indicated in Schedule 2.3 of the Company Disclosure Letter, free and clear of
any lien, charge, encumbrance, hypothecation, pledge, option, trust, mortgage or
security interest of any kind (collectively, "Liens") with respect thereto,
except pursuant to the Credit Agreement, or as disclosed in Schedule 2.3 of the
Company Disclosure Letter. All of the outstanding shares of capital stock of
each of the Company Subsidiaries directly or indirectly held by the Company are
duly authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with all applicable Laws. No equity
securities or other interests of any
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of the Company Subsidiaries are or may become required to be issued or purchased
by reason of any options, warrants, rights to subscribe to, puts, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any Company
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Company Subsidiary is bound to issue additional shares
of its capital stock, or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or securities convertible into or
exchangeable for such shares. Except as set forth in Schedule 2.3 of the Company
Disclosure Letter, the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity, with respect to which
interest the Company has invested or is required to invest $20,000 or more or
for which the Company or any Company Subsidiary has liability which is not
limited. Reflections Interactive Limited ("RIL"), a wholly owned subsidiary of
the Company, has the full right and power to obtain, in accordance with the
terms of the Deed of Partnership dated December 4, 1998, between RIL and Martin
Lee Edmondson ("Edmondson"), as amended by the amendment dated September 23,
1999 (the "Deed"), all right, title and interest in the business, property and
assets (the "RIL Partnership Property") of the partnership created under the
Deed (the "RIL/Edmondson Partnership"). Since December 4, 1998, none of RIL,
Edmondson or the RIL/Edmondson Partnership has sold or otherwise transferred any
of the rights or interests in the business, property and assets (other than
sales of products in the normal course of business) owned or held by the
RIL/Edmondson Partnership, directly or indirectly, or created or permitted to
exist any lien on such rights or interests, other than the lien created in
connection with the Credit Agreement. RIL has sent a notice to Edmondson
pursuant to clause 12.5 of the Deed and no action by any of RIL, Edmondson or
any third party, except for the passage of time until November 30, 1999 as
specified therein and except for obtaining the consent of the Landlord with
respect to the assignment to RIL of the lease to Edmondson of certain real
property, is necessary to effect the termination of the RIL/Edmondson
Partnership and to transfer all right, title and interest in the RIL/Partnership
Property to RIL, free of any Lien. Edmondson has no right to receive, either
currently or in the future, any income, capital or other payment from the
Company or any Company Subsidiary (including without limitation RIL) other than
(i) payments that may become due in the future under the terms of the Service
Agreement, annexed to the Escrow Deed, by and among the Company, RIL and
Edmondson, dated December 4, 1998, (ii) the return of his capital account and
his current account pursuant to clause 12.8 of the Deed in an aggregate amount
equal to (pound)260,000, (iii) his draw of (pound)10,333 for November 1999, (iv)
any payment to be made pursuant to Section 3.7 of the agreement for the sale and
purchase of the share capital and future operation of Reflections Interactive
Limited, dated December 23, 1998 between the Company and Edmondson (the "RIL
Purchase Agreement"), by the Company to Edmondson, or by Edmondson to the
Company, based upon the determination of the net asset value (as defined in the
RIL Purchase Agreement) which net asset value has not been determined as of the
date hereof; provided, however, that in no event will such payment exceed
(pound)250,000, and (v) any expenses to be borne by the Company in accordance
with the terms of the Registration Rights Agreement between the Company and
Edmondson dated December 23, 1998.
2.4 Authorization; Binding Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation
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of the transactions contemplated hereby and by the Selling Stockholders
Agreements (collectively, the "Transactions") have been duly and validly
authorized (including for purposes of Delaware General Corporation Law (the
"DGCL") Section 203) by the Company's Board of Directors and a majority of its
directors who do not have any financial interest in the Transactions, and no
other corporate proceedings on the part of the Company or any Company Subsidiary
are necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby, except that the Company's
Certificate of Incorporation shall be amended to increase the number of
authorized shares of Common Stock to permit the reservation of Common Stock
issuable in connection with the transactions contemplated hereby in accordance
with the DGCL. This Agreement has been duly and validly executed and delivered
by the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies ("Enforceability Exceptions").
2.5 Governmental Approvals. No material consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Governmental
Consent") any nation or government, any state or other political subdivision
thereof or any entity, authority or body exercising executive, legislative,
judicial or regulatory functions of or pertaining to government, including,
without limitation, any governmental or regulatory authority, agency,
department, board, commission or instrumentality, any court, or tribunal
("Governmental Authority"), on the part of the Company or any of the Company
Subsidiaries is required in connection with the execution or delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby other than (a) the filing of the Certificate of Amendment to
the Certificate of Incorporation of the Company in the form of Exhibit J hereto
(the "Certificate Amendment") with the Secretary of State of Delaware in
accordance with the DGCL, (b) customary filings with the SEC for transactions of
the type contemplated hereby, (c) filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), and filings or consents under any applicable foreign
antitrust requirements, (d) filings pursuant to the rules and regulations of the
Nasdaq National Market ("Nasdaq/NMS") and (e) all filings and mailings required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The
Company has received a written waiver from the Nasdaq/NMS in which Nasdaq/NMS
has granted an exception under NASD Rule 4310(c)(25)(H)(ii) from the requirement
that the Company obtain stockholder approval in connection with the transactions
contemplated hereby.
2.6 No Violations. Except as referred to in Schedule 2.6 of the Company
Disclosure Letter, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by the
Company with any of the provisions hereof will not (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws of
the Company or any of the Company Subsidiaries; provided, however, that the
issuance of a portion of the shares issuable upon conversion of the Note and the
Senior Notes will require that the Certificate Amendment have become effective,
(b) require any Consent under or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or
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acceleration) under any of the terms, conditions or provisions of, any Company
Material Contract (as hereinafter defined), (c) result in the creation or
imposition of any material Lien upon any of the assets of the Company or any
Company Subsidiary or (d) subject solely to obtaining the Governmental Consents
from Governmental Authorities referred to in Section 2.5 hereof, violate in any
material way any applicable provision of any statute, law, rule or regulation or
any order, decision, injunction, judgment, award or decree ("Law") to which the
Company or any Company Subsidiary or its assets or properties are subject.
2.7 Securities Filings. The Company has made available to Parent true
and complete copies of (a) its Annual Reports on Form 10-K, as amended, for the
three fiscal years ended March 31, 1999, as filed with the SEC (the "1999
10-K"), (b) its proxy statements relating to all of the meetings of stockholders
(whether annual or special) of the Company since December 13, 1995, as filed
with the SEC, (c) its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999 as filed on November 15, 1999 as set forth in Schedule
2.9(a)(ii) (the "Form 10-Q"), and (d) all other reports, statements and
registration statements and amendments thereto (including, without limitation,
Quarterly Reports on Form 10-Q, as amended, and Current Reports on Form 8-K, as
amended) filed by the Company with the SEC since January 1, 1996 and prior to
the date hereof. The reports and statements set forth in clauses (a) through (c)
above, and those subsequently provided or required to be provided pursuant to
this Section 0, are referred to collectively herein as the "Company Securities
Filings." Except as set forth in Schedule 2.7 of the Company Disclosure Letter,
as of their respective dates, or as of the date of the last amendment thereof,
if amended after filing and prior to the date hereof, each of the Company
Securities Filings was prepared in all material respects in accordance with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), as the case may be,
and none of the Company Securities Filings contained or, as to the Company
Securities Filings subsequent to the date hereof, will contain, any untrue
statement of a material fact or omitted or, as to the Company Securities Filings
subsequent to the date hereof, will omit, to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.8 Company Financial Statements. The audited consolidated financial
statements and unaudited interim financial statements of the Company included in
the Company Securities Filings filed prior to the date hereof (the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and present fairly, in all material respects,
the financial position of the Company and the Company Subsidiaries as at the
dates thereof and the results of their operations and cash flows for the periods
then ended subject, in the case of the unaudited interim financial statements,
to normal year-end audit adjustments, any other adjustments described therein
and the fact that certain information and notes have been condensed or omitted
in accordance with the Exchange Act.
2.9 Absence of Certain Changes or Events.
(a) Except as identified with specificity in (i) Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Form 10-Q, without reference to (A) the first paragraph thereof, (B) the
subsection titled "--Year 2000 Compliance" or (C) the
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"Factors Affecting Future Performance" incorporated by reference in the Form
10-Q from the Company's Annual Report on Form 10-K, as amended, for the fiscal
year ended March 31, 1999, (ii) the financial statements included in the Form
10-Q attached hereto as Schedule 2.9(a)(i) of the Company Disclosure Letter or
(iii) Schedule 2.9(a)(ii) and Schedule 2.9(a)(ii)(F) of the Company Disclosure
Letter, since June 30, 1999, through the date of this Agreement, there has not
been: (A) any event that has had or would have a Material Adverse Effect; (B)
any declaration, payment or setting aside for payment of any dividend or other
distribution or any redemption or other acquisition (other than pursuant to the
Repurchase Agreement) of any shares of capital stock or securities of the
Company by the Company; (C) any damage or loss involving an amount in excess of
$100,000 to any material asset or property (without reference to Company
Intellectual Property Rights (as hereinafter defined)), whether or not covered
by insurance; (D) any change by the Company in accounting principles or
practices; (E) any material revaluation by the Company of any of its assets,
including writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or (F) any sale of
property (without reference to Company Intellectual Property Rights) of the
Company or any Company Subsidiary with the value in excess of $100,000, except
for sale of inventory in the ordinary course of business.
(b) Except as disclosed on Schedule 2.9(b) of the Company Disclosure
Letter, neither the Company nor any of the Company Subsidiaries: (i) has since
March 31, 1999, amended any Employee Plan (as hereinafter defined) in a manner
that would reasonably be expected to increase the cost to the Company or any
Company Subsidiary of maintaining such Employee Plan in excess of (A) $500,000
in the aggregate annually, or (B) $100,000 with respect to officers of the
Company or any Company Subsidiary, except as to benefits they share generally
with all employees of the Company or any Company subsidiary, as applicable; or
(ii) has any announced plan or commitment to create any additional Employee Plan
or to make any modification or change to any existing Employee Plan that would,
in either case, reasonably be expected to materially increase the benefits
payable to employees or former employees of the Company or any Company
Subsidiary.
2.10 No Undisclosed Liabilities. Except as set forth in the 1999 Form
10-K, the Form 10-Q or Schedule 2.10 of the Company Disclosure Letter, neither
the Company nor any Company Subsidiary has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for in the Company's unaudited balance sheet (including any related
notes thereto) as of September 30, 1999 included in the Form 10-Q or of the type
not required under generally accepted accounting principles to be reflected as a
balance sheet and incurred since September 30, 1999 in the ordinary course of
business, (b) in an aggregate amount of less than $500,000 and not required
under generally accepted accounting principles to be reflected on a balance
sheet, (c) disclosed on the Company Disclosure Letter or of a type described in
the representations and warranties of the Company in this Article II and not
required to be disclosed in such Company Disclosure Letter, or (d) incurred
under the terms of this Agreement.
2.11 Compliance with Laws. The business of the Company and each of the
Company Subsidiaries has been operated in material compliance with all Laws
applicable thereto.
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2.12 Permits. Except as set forth in Schedule 2.12 of the Company
Disclosure Letter, (a) the Company and the Company Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations from
Governmental Authorities required in connection with the operation of their
respective businesses (collectively, "Company Permits"), (b) neither the Company
nor any Company Subsidiary is in violation of any Company Permit and (c) no
proceedings are pending or, to the knowledge of the Company, threatened, to
revoke or limit any Company Permit, except, in the case of each of clauses (a),
(b) and (c) above, those the absence or violation of which would not create a
liability or obligation of the Company of more than $100,000.
2.13 Litigation. Except as disclosed in Schedule 2.13 of the Company
Disclosure Letter, there is no suit, action or proceeding ("Litigation") pending
or, to the knowledge of the Company, threatened (and involving an amount in
excess of $100,000) against the Company or any of the Company Subsidiaries, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Authority outstanding against the Company or any Company Subsidiary. Except as
disclosed in Schedule 2.13 of the Company Disclosure Letter, to the best
knowledge of the Company, no investigation or review by any Governmental
Authority is pending or threatened against the Company or any Company
Subsidiary.
2.14 Contracts. Schedule 2.14 of the Company Disclosure Letter contains
a complete list of all loan agreements and financing agreements, all equipment
lease financing agreements and all other contracts and agreements involving
obligations of the Company or any Company Subsidiary in excess of $100,000, true
and complete copies of which have been made available to Parent. Neither the
Company nor any of the Company Subsidiaries is a party or is subject to any
note, bond, mortgage, indenture, contract, lease, license, agreement or
instrument that is required to be described in or filed as an exhibit to any
Company Securities Filing filed prior to the date of this Agreement
(collectively with those agreements listed in Schedule 2.14 of the Company
Disclosure Letter, the "Company Material Contracts") that is not so described in
or filed as required by the Securities Act or the Exchange Act, as the case may
be. Except as disclosed in Schedule 2.14 of the Company Disclosure Letter, all
Company Material Contracts are valid and binding and are in full force and
effect and enforceable against the Company or such Company Subsidiary and, to
the knowledge of the Company, the other parties thereto in accordance with their
respective terms, subject to the Enforceability Exceptions. Except as set forth
in Schedule 2.14 of the Company Disclosure Letter, neither the Company nor any
Company Subsidiary is in material violation or breach of or default under any
such Company Material Contract. To the best knowledge of the Company, no party
(other than the Company or Company Subsidiaries) is in material violation or
breach of or default under any Company Material Contract.
2.15 Employee Benefit Plans.
(a) Schedule 2.15(a) of the Company Disclosure Letter lists all
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all employee
welfare benefit plans (as defined in Section 3(1) of ERISA) and all other
employee benefit plans, programs or arrangements, including, without limitation,
any bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee benefit
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plans, programs or arrangements, and any employment, executive compensation or
severance agreements, in any case that are maintained or contributed to by the
Company, any Company Subsidiary or any other entity (whether or not
incorporated) that is a member of a controlled group including the Company or
which is under common control with the Company (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder (the "Code") or Section 4001(a)(14)
or (b) of ERISA, for the benefit of any current or former employee of the
Company or any Company Subsidiary ("Employee Plans").
(b) Prior to the date of this Agreement, the Company has provided, or
made available, to Parent or Parent's counsel, to the extent applicable with
respect to any Employee Plan, copies of: (i) each written Employee Plan document
and each related trust agreement, insurance or other funding contract; (ii) each
current summary plan description prepared for such Employee Plan; (iii) the most
recent annual report on Form 5500 filed with the Department of Labor and the
Internal Revenue Service with respect to each Employee Plan; and (iv) the most
recent favorable determination letter issued for each Employee Plan intended to
be a qualified plan under Section 401(a) of the Code.
(c) None of the Employee Plans provides retiree health or welfare
benefits to any person (other than in accordance with Section 4980B of the Code
or Part 6 of Subtitle B of Title I of ERISA or any other similar benefits
continuation law).
(d) Each Employee Plan has been established and maintained
substantially in accordance with its terms and in substantial compliance with
applicable law (including ERISA and the Code). In addition, to the best
knowledge of the Company, each Employee Plan has been established and maintained
in accordance with its terms and in compliance with applicable Law (including
ERISA and the Code).
(e) No Employee Plan is subject to Title IV of ERISA.
(f) With respect to each Employee Plan, all payments due from Company
or any Company Subsidiary to date have been made when due, and all amounts
properly accrued to date or as of the Closing as liabilities of the Company or
any Company Subsidiary that have not been paid have been properly recorded on
the books of the appropriate entity. With respect to each Employee Plan that is
funded wholly or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid and all
premiums required to be paid under the insurance policy through the Closing will
have been paid on or before the Closing.
(g) Except as disclosed in Schedule 2.15(g) of the Company Disclosure
Letter, the Company has not received any written notice of, and is not otherwise
aware of, any actions, claims (other than routine claims for benefits), lawsuits
or arbitrations pending or, to the best knowledge of the Company, threatened
with respect to any Employee Benefit Plan (including against any fiduciary of
any Employee Benefit Plan) which, in the aggregate, would have a Material
Adverse Effect. With respect to any Employee Plan, there has been no prohibited
transaction, breach of fiduciary duty or Internal Revenue Service audit and no
such audit is pending.
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(h) Schedule 2.15(h) of the Company Disclosure Letter sets forth a true
and complete list of each person who holds any outstanding option to purchase
shares of capital stock as of the date hereof, together with: (i) the number of
shares of capital stock subject to each such option; (ii) the exercise
price-per-share of such option; (iii) the vesting schedule of such option; and
(iv) a statement of whether each such option is intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code (an "ISO").
(i) Except as disclosed in Schedule 2.15(i) of the Company Disclosure
Letter, the consummation of the transactions contemplated by this Agreement will
not: (i)(A) result in an increase in the amount of or (B) accelerate the vesting
or timing of payment of, any benefits or compensation payable in respect of any
employee of the Company or any Company Subsidiary; (ii) cause any payment or
other consideration that is owed or may become due to any director, officer,
employee, contractor or agent of the Company to be nondeductible to the Company
or subject to tax under Code Section 280G or 4999; or (iii) cause or permit the
termination of any employment contract or other arrangement with any director,
officer, employee, contractor or agent of the Company.
(j) Schedule 2.15(j) of the Company Disclosure Letter contains a list
of all existing employment agreements with "change of control" provisions to
which the Company is a party.
2.16 Taxes and Returns.
(a) Except as set forth in Schedule 2.16 of the Company Disclosure
Letter:
(i) the Company and each of the Company Subsidiaries has timely filed,
or caused to be timely filed, all Tax Returns (as hereinafter defined)
required to be filed by it, and all such tax returns are true, complete and
correct in all respects, and has timely paid, collected or withheld, or
caused to be paid, collected or withheld, all material amounts of Taxes (as
hereinafter defined) required to be paid, collected or withheld, other than
such Taxes for which adequate reserves in the Company Financial Statements
have been established;
(ii) the Company and each of the Company Subsidiaries have made
adequate provision in the Company Financial Statements for all Taxes payable
by the Company or any Company Subsidiary for which no Tax Return has yet
been filed;
(iii) there are no claims or assessments pending against the Company or
any of the Company Subsidiaries for any alleged deficiency in any Tax, and
the Company has not been notified in writing of any proposed Tax claims or
assessments against the Company or any of the Company Subsidiaries (other
than in each case, claims or assessments for which adequate reserves in the
Company Financial Statements have been established or which are immaterial
in amount);
(iv) neither the Company nor any of the Company Subsidiaries has
executed any waivers or extensions of any applicable statute of limitations
to assess any Taxes; and there are no outstanding requests by the Company or
any of
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the Company Subsidiaries for any extension of time within which to file any
material Tax Return or within which to pay any Taxes shown to be due on any
Tax Return;
(v) the statute of limitations period for assessment of federal income
taxes has expired for all taxable years through February 28, 1995;
(vi) to the best knowledge of the Company, (A) there are no liens for
Taxes on the assets of the Company or any of the Company Subsidiaries except
for statutory liens for current Taxes not yet due and payable and (B)
neither the Company nor any Company Subsidiary is liable for any Tax imposed
on any other person, except as the result of the application of Income Tax
Regulations Section 1.1502-6 (and any comparable provision of any state,
local, foreign or provincial jurisdiction) to the affiliated group of which
the Company is the common parent.
(b) For purposes of this Agreement, the term "Tax" shall mean any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, alternative or
add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Authority. The term "Tax Return" shall mean a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
(c) Except as set forth in the second and third sentences of Schedule
2.16 of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary is currently under examination or audit by any Governmental Authority
with respect to any Tax.
2.17 Intellectual Property.
(a) The Company or the Company Subsidiaries own, license or otherwise
possess legally enforceable rights to use, sell and transfer all material
copyrights developed internally by Company or the Company Subsidiaries, and any
applications therefor, and all material trade secrets that are used in the
respective businesses of the Company and the Company Subsidiaries as currently
conducted, except as disclosed on Schedule 2.17(a)(i) of the Company Disclosure
Letter. To the Company's best knowledge, the Company or the Company Subsidiaries
own, license, or otherwise possess legally enforceable rights to use, sell and
transfer all material patents, trademarks, trade names, service marks and
copyrights developed by third parties, and any applications therefor,
technology, know-how, source code, object code, domain names and tangible or
intangible proprietary information or materials that are used in the respective
businesses of the Company and the Company Subsidiaries as currently conducted,
except as disclosed on Schedule 2.17(a)(ii) of the Company Disclosure Letter.
Schedule 2.17(a)(iii) contains a complete list of each patent, trademark,
service mark and copyright, as to which Company or a Company Subsidiary is the
registered owner, of each application for patent, trademark, service mark and
copyright registration filed by or on behalf of
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the Company or a Company Subsidiary, and of each agreement with a third party
involving an amount in excess of $100,000 that grants the Company or a Company
Subsidiary any rights to make, use, sell, modify, create derivative works of,
sublicense or otherwise distribute the intellectual property of a third party,
true and complete documentation of which has been delivered to Parent. For the
purposes of this Agreement, "Company Intellectual Property Rights" means all
patents, trademarks, trade names, service marks, copyrights, and applications
therefor, technology, know-how, trade secrets, source code, object code, domain
names and tangible or intangible proprietary information or materials that are
used in the respective businesses of the Company and the Company Subsidiaries as
currently conducted.
(b) There are no valid grounds for any bona fide claims (i) that the
business of the Company or any of the Company Subsidiaries infringes on or
otherwise violates any copyright of another based on works developed internally
by the Company or a Company Subsidiary or any trade secret of another; (ii) that
the business of the Company or any of the Company Subsidiaries willfully
infringes on or otherwise willfully violates, or, to the Company's best
knowledge, infringes on or otherwise violates, any patent, trademark or service
mark of another; (iii) against the use by the Company or a Company Subsidiary of
any copyrights internally developed by the Company or a Company Subsidiary or
trade secrets used in the business of the Company or a Company Subsidiary as
currently conducted or as proposed to be conducted; (iv) to the Company's best
knowledge, against the use by the Company or any of the Company Subsidiaries of
any trademarks, trade names, patents, technology, know-how or source code or
object code used in the business of the Company or any of the Company
Subsidiaries as currently conducted or as proposed to be conducted; (v)
challenging the ownership, validity or effectiveness of any of the copyrights in
works internally developed by the Company or the Company Subsidiaries or any
applications therefor or of any material trade secret of the Company or a
Company Subsidiary; (vi) to the Company's best knowledge, challenging the
ownership, validity or effectiveness of any of the patents, registered and
material unregistered trademarks, service marks and trade names, and any
applications therefor or of any material trade secret of the Company or any of
the Company Subsidiaries; or (vii) to the Company's best knowledge, challenging
the license or legally enforceable right to use any patents, trademarks, service
marks, trade secrets or copyrights of a third party by the Company or the
Company's Subsidiaries, except, in the case of each of clauses (i), (ii), (iii),
(iv), (v), (vi) and (vii) above, as disclosed on Schedule 2.17(b) of the Company
Disclosure Letter.
(c) All material patents, registered trademarks, service marks,
copyrights and material trade secrets owned by the Company and used in the
business of the Company are valid and subsisting. To the Company's best
knowledge, all material patents, registered trademarks, service marks,
copyrights and material trade secrets licensed by the Company and used in the
business of the Company are valid and subsisting. Except as set forth in
Schedule 2.17(c), the rights, title and ownership of the Company Intellectual
Property Rights by Company and Company Subsidiaries herein, are not subject to
any encumbrances, charges, liens, indentures, security interests or claims of
any kind.
(d) Except as set forth (i) in the portions identified with specificity
of the specified Company Securities Filings filed prior to the date of this
Agreement listed on Schedule 2.17(d)(i) of the Company Disclosure Letter or (ii)
on 2.17(d)(ii) of the Company Disclosure Letter, to the Company's best
knowledge, there is no material unauthorized use,
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infringement or misappropriation of any of the Company Intellectual Property
Rights or material trade secret of the Company by any third party, including any
employee or former employee of the Company or any of the Company Subsidiaries.
(e) Except as set forth in Schedule 2.17(e) of the Company Disclosure
Letter, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Company Intellectual
Property Rights or material trade secret; will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Company
Intellectual Property Rights or material trade secret of the Company; nor impair
the right of the Surviving Corporation, after the Closing Date, to use, sell or
license any Company Intellectual Property Rights or material trade secret.
(f) The Company and the Company Subsidiaries have taken reasonable and
practicable steps designed to safeguard and maintain their proprietary rights in
all Company Intellectual Property Rights and the secrecy and confidentiality of
their trade secrets. To the Company's best knowledge, no current or prior
officers, employees or consultants of the Company or the Company Subsidiaries
claim or have a right to claim an ownership interest in any Company Intellectual
Property Rights or trade secret as a result of having been involved in the
development or licensing of such Company Intellectual Property Rights or trade
secret while employed by or consulting to Company.
2.18 The Shares and the Notes.
(a) The Shares have been duly authorized and, when issued and paid for
pursuant to the terms of this Agreement, will be duly and validly issued, fully
paid and nonassessable, and will be free and clear of all Liens and
restrictions, other than restrictions on transfer imposed by the Securities Act
and state securities laws, including without limitation "blue sky" laws; the
Notes have been duly authorized and, when issued and delivered and paid for
pursuant to the terms of this Agreement, will be duly and validly issued and
enforceable in accordance with their terms subject to Enforceability Exceptions;
and, upon authorization of additional shares of Common Stock pursuant to Section
4.11 of this Agreement, the Conversion Shares will have been duly authorized and
reserved for issuance upon conversion of the Note by the Company and, when
issued upon conversion in accordance with the terms of the Note, will have been
duly and validly issued, fully paid and nonassessable and will be free and clear
of all Liens and restrictions other than restrictions imposed by the Securities
Act and state securities laws, including without limitation "blue sky" laws.
(b) Subject to the accuracy of Purchaser's representations appearing in
Section 3.8 hereof, the offer, issue and sale of the Securities and the
Conversion Shares are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
2.19 Labor Matters. Except as set forth in Schedule 2.19 of the Company
Disclosure Letter, (a) there are no controversies pending or, to the best
knowledge of the Company, threatened, between the Company and any of its
employees, which controversies
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would have a Material Adverse Effect; (b) neither the Company nor any of the
Company Subsidiaries is a party to any material collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or
the Company Subsidiaries, nor, as of the date of this Agreement, does the
Company or any of the Company Subsidiaries know of any activities or proceedings
of any labor union to organize any such employees; (c) neither the Company nor
any of the Company Subsidiaries has any knowledge of any strikes or material
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of the Company Subsidiaries; (d) there are
no material outstanding or, to the best knowledge of the Company, threatened,
lawsuits, claims or charges in any forum with respect to the Company's
compliance with laws regarding antidiscrimination, wrongful termination,
termination in violation of public policy, unpaid overtime, breach of contract
or any other claimed employee rights; and (e) the Company and the Company
Subsidiaries have complied in all material respects with all reporting,
disclosure and other requirements with respect to safety, affirmative action,
drug and alcohol testing, WARN Act and any other applicable labor and employment
laws or regulations.
2.20 Limitation on Business Conduct. Except as set forth in Schedule
2.20 of the Company Disclosure Letter, neither the Company nor any of the
Company Subsidiaries is a party to, or has any obligation under, any contract or
agreement, written or oral, which contains any covenants currently or
prospectively limiting in any material respect the freedom of the Company or any
of the Company Subsidiaries to engage in any line of business or to compete with
any entity.
2.21 Property. Except as set forth in Schedule 2.21 of the Company
Disclosure Letter, each of the Company and each of the Company Subsidiaries owns
the properties and assets that it purports to own free and clear of all Liens,
except for Liens which arise in the ordinary course of business and do not
materially impair the Company's or the Company Subsidiaries' ownership or use of
such properties or assets, Liens for Taxes not yet due and Liens securing
obligations under that certain credit agreement, dated as of September 11, 1998,
by and among the Company, the lender parties thereto and First Union National
Bank, as Administrative Agent, as such credit agreement has been amended on
April 18, 1999, June 29, 1999 and November 15, 1999 (the "Credit Agreement").
The Company owns no real property. The Company has made available to the
Purchaser true and complete copies of all of its leases of property. With
respect to the property and assets it leases, the Company, the Company
Subsidiaries, and to the best of the Company's knowledge, each of the other
parties thereto, is in material compliance with such leases, and the Company or
the Company Subsidiaries, as the case may be, hold a valid leasehold interest
free of any Liens, except those referred to above. The rights, properties and
assets presently owned, leased or licensed by the Company and the Company
Subsidiaries include all rights, properties and assets necessary to permit the
Company and the Company Subsidiaries to conduct their business in all material
respects in the same manner as their businesses have been conducted prior to the
date hereof. Neither the Company nor any Company Subsidiary is in material
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties, nor, as of the date of this Agreement, has the Company or any
Company Subsidiary received any notice of such a violation with which it has not
complied.
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2.22 Environmental Matters.
(a) Except as set forth in Schedule 2.22(a) of the Company Disclosure
Letter, the Company and the Company Subsidiaries are in material compliance with
the Environmental Laws (as hereinafter defined), which compliance includes the
possession by the Company and the Company Subsidiaries of all material permits
and governmental authorizations required under applicable Environmental Laws,
and compliance in all material respects with the terms and conditions thereof,
except in each case where such non-compliance would not reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of the Company
Subsidiaries has received any written communication from a Governmental
Authority that alleges that the Company or any of the Company Subsidiaries is
not in such material compliance, and there are no circumstances that may prevent
or interfere with such compliance in the future, except where such
non-compliance would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as set forth in Schedule 2.22(b) of the Company Disclosure
Letter, there are no Environmental Claims (as hereinafter defined), including
claims based on "arranger liability," pending or, to the knowledge of the
Company, threatened against the Company or any of the Company Subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of the Company Subsidiaries has retained or assumed either
contractually or by operation of law, except for such Environmental Claims that
would not reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule 2.22(c) of the Company Disclosure
Letter, to the knowledge of the Company and the Company Subsidiaries, there are
no past or present actions, inactions, activities, circumstances, conditions,
events or incidents, including the release, emission, discharge, presence or
disposal of any Material of Environmental Concern (as hereinafter defined) by
the Company and the Company Subsidiaries and, to the knowledge of the Company
and the Company Subsidiaries, by third parties, that would form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of the Company Subsidiaries have retained or assumed either
contractually or by operation of law, except for such Environmental Claims that
would not reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 2.22(d) of the Company Disclosure
Letter, the Company is in compliance in all material respects with Environmental
Laws as they relate to (i) any on-site or off-site locations where the Company
or any of the Company Subsidiaries has stored, disposed or arranged for the
disposal of Materials of Environmental Concern for itself (but not on behalf of
others) or (ii) any underground storage tanks located on property owned or
leased by the Company or any of the Company Subsidiaries. To the knowledge of
Company, there is no asbestos contained in or forming part of any building,
building component, structure or office space owned or leased by the Company or
any of the Company Subsidiaries. To the knowledge of Company, no polychlorinated
biphenyls (PCB's) or PCB-containing items are used or stored at any property
owned or leased by the Company or any of the Company Subsidiaries. The Company
hereby represents that it has occupied properties only for the purpose of office
space or warehousing non -hazardous materials.
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(e) For purposes of this Agreement:
(i) "Environmental Claim" means any written claim, action, cause of
action, investigation or notice by any person or entity alleging potential
liability (including potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (x) the presence, or release into the environment, of any
Material of Environmental Concern at any location, whether or not owned or
operated by the Company or any of the Company Subsidiaries, or (y)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
(ii) "Environmental Laws" means all Federal, state, local and foreign
laws or regulations relating to pollution or protection of human health and
the environment (including ambient air, surface water, ground water, land
surface or sub-surface strata), including laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
(iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous
wastes, toxic substances, petroleum and petroleum products that are
regulated under the Environmental Laws.
2.23 Insurance. The Company maintains insurance that provides adequate
coverage for normal risks incident to the business of the Company and the
Company Subsidiaries and their respective properties and assets and in character
and amount comparable to that carried by persons engaged in similar businesses,
except where the nature of potential liabilities that may reasonably be expected
to arise in the course of the Company's business would, in the exercise of
prudent business judgment, require additional amounts or types of insurance
coverage, in which case the Company maintains such additional coverage. The
insurance polices maintained by the Company are with reputable insurance
carriers, have no premium delinquencies and are in full force and effect. Copies
of all such insurance policies have been made available to Parent.
2.24 Interested Party Transactions. Except as set forth in the 1999
Form 10-K, or Schedule 2.24 of the Company Disclosure Letter, no event has
occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
2.25 Finders and Investment Bankers. Neither the Company nor any of its
officers or directors has employed any broker, finder or financial advisor or
otherwise incurred any liability for any brokerage fees, commissions, or
financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to an agreement with Bear, Stearns &
Co. Inc.
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2.26 Fairness Opinion. The Company's Board of Directors has received
from its financial advisor, Bear, Stearns & Co. Inc., a written opinion
addressed to it relating to the fairness from a financial point of view of the
transaction contemplated hereby. A true and complete copy of such opinion has
been delivered to Parent.
2.27 Takeover Statutes. Assuming Parent and its "associates" and
"affiliates" (as defined in Section 203 of the DGCL) collectively beneficially
"own" (as defined in Section 203 of the DGCL) and have beneficially "owned" at
all times during the three (3) year period prior to the date hereof less than
fifteen percent of the Company Stock outstanding, Section 203 of the DGCL is,
and shall be, inapplicable (a) to the acquisition of the Securities and (b) to
any business combination of the Company with the Parent or any of such
"associates" or "affiliates."
2.28 Full Disclosure. No statement contained in any certificate or
schedule, including, without limitation, the Company Disclosure Letter,
furnished or to be furnished by the Company or the Company Subsidiaries to
Parent or Purchaser in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
2.29 Year 2000. Except as set forth in Schedule 2.29 of the Company
Disclosure Letter and as updated in the Form 10-Q, the disclosure under the
heading "Year 2000 Compliance" contained in the Company's annual report on Form
10-K, as amended, for the period ended March 31, 1999 is accurate and in
compliance with applicable law in all material respects.
2.30 Director Resignations and Election. All of the directors of the
Company other than Thomas A. Heymann and Steven A. Denning will execute and
deliver to the Company irrevocable resignations from the Board of Directors of
the Company on or before November 29, 1999 and effective as of the Closing
("Resignations"), and all of the Resignations will be irrevocably accepted by
the Company, which acceptance may not be rescinded. In addition, the Company's
Board of Directors has elected Bruno Bonnell and Thomas Schmider, as directors
of the Company effective as of the Closing.
2.31 Financial Projections; Liquidity. True and complete copies of all
financial projections provided by the Company to, and all written communications
with, the Company's lenders under the Credit Agreement since October 1, 1999
(the "Projections") are set forth in Schedule 2.31 of the Company Disclosure
Letter (including, without limitation, the Company's projected cash flow and the
forecasted Borrowing Base under the Credit Agreement and the computation
thereof). The Projections were prepared in good faith based on reasonable
assumptions in light of the then current financial condition and operations of
the Company and set forth the Company's projected cash flow over the periods set
forth therein. Since November 12, 1999 (the "November Projections"), there has
been no change, event or other development that would cause any material change
in the Company's cash flow from that shown in the November Projections during
the periods set forth therein. The cash generated by the Company's operations
plus the $25 million to be loaned by Purchaser to the Company to be evidenced by
the Short-Term Note will be sufficient to permit the Company to continue its
operations in the
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ordinary course and to meet the Company's obligations as they come due until at
least February 28, 2000.
2.32 Expenses. The Company has provided Parent with a good faith
estimate of all costs and expenses paid, payable or to be payable by the Company
in connection with the transactions contemplated by the Transaction Documents,
including, without limitation, any amounts that will come due as a result of the
consummation of the transactions contemplated by the Transaction Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company that:
3.1 Organization and Good Standing. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Purchaser is a wholly-owned subsidiary of
Parent.
3.2 Authorization; Binding Agreement. Parent and Purchaser have all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Parent and Purchaser, as appropriate, and no other corporate
proceedings on the part of Parent, Purchaser or any other subsidiary of Parent
are necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Purchaser and
constitutes the legal, valid and binding agreement of Parent and Purchaser,
enforceable against each of Parent and Purchaser in accordance with its terms,
subject to the Enforceability Exceptions.
3.3 Governmental Approvals. No Governmental Consent from or with any
Governmental Authority on the part of Parent or Purchaser is required in
connection with the execution or delivery by Parent and Purchaser of this
Agreement or the consummation by Parent and Purchaser of the transactions
contemplated hereby other than (a) filings with the SEC, (b) filings under the
HSR Act and filings or consents under any applicable foreign antitrust
requirements and (c) filings and mailings under Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder.
3.4 No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Parent or
Purchaser with any of the provisions hereof will not (a) conflict with or result
in any breach of any provision of the governing documents of Parent or any
subsidiary of Parent, (b) require any Consent under or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the
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terms, conditions or provisions of, any material note, bond, mortgage,
indenture, contract, lease, license, agreement or instrument to which Parent or
any subsidiary of Parent is a party or by which Parent or any subsidiary of
Parent or any of their respective assets or property is subject, (c) result in
the creation or imposition of any material Lien upon any of the assets of Parent
or any subsidiary of Parent or (d) subject to obtaining the Consents from
Governmental Authorities referred to in Section 3.3 hereof, violate any Law to
which Parent or any subsidiary of Parent or their respective assets or
properties are subject, except in any such case for any such conflicts,
violations, breaches, defaults or other occurrences that would not prevent or
delay consummation of the transactions contemplated hereby, or otherwise
materially and adversely affect the ability of Parent or Purchaser to perform
their respective obligations under this Agreement.
3.5 Disclosure Documents. None of the information supplied by Parent,
Purchaser or their respective officers, directors, representatives, agents or
employees (the "Parent Information") in writing specifically for inclusion in
the Schedule 14F and Schedule 13D filed in connection with this transaction
will, at the time such documents are filed with the SEC or first mailed to the
Company's stockholders, contain any untrue statement of a material fact, or will
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for such stockholders' meeting which has become
false or misleading.
3.6 Finders and Investment Bankers. Neither Parent, Purchaser nor any
of their respective officers or directors has employed any broker, finder or
financial advisor or otherwise incurred any liability for any brokerage fees,
commissions or financial advisors' or finders' fees in connection with the
transactions contemplated hereby, other than Lazard and Freres & Co. LLC.
3.7 Financing Arrangements. Parent (including for this purpose one or
more of its wholly owned subsidiaries) has funds available to it sufficient to
enable the Purchaser to purchase the Securities in accordance with the terms of
this Agreement and securities of the Company from the Principal Stockholders
pursuant to the Selling Stockholder Agreements.
3.8 Securities Laws.
(a) The Securities are being acquired by Purchaser for its own account
pursuant to this Agreement and not for any other Person, and for investment only
and with no intention of distributing or reselling such Securities or any part
thereof or any interest therein in any transaction that would be in violation of
the securities laws of the United States of America, or any state thereof;
without prejudice, however, to the rights of Purchaser at all times to sell or
otherwise dispose of all or any part of the Securities under an effective
registration statement or applicable exemption from registration under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act") and any applicable state securities law.
(b) Purchaser is an "accredited investor" as that term is defined in
Rule 501 under the Securities Act and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Securities.
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By reason of Purchaser's business or financial experience, it is a sophisticated
investor which has the capacity to protect its interest in connection with the
transactions contemplated under the Transaction Documents and has sufficient
knowledge and experience in financial and business matters to evaluate properly
the merits and risks of the Securities and the related transactions contemplated
by the Transaction Documents.
(c) Purchaser has been provided with copies of the Company Securities
Filings and a copy of the Company Disclosure Letter and has had the opportunity
to request any exhibits filed as part of any such document.
(d) Purchaser hereby acknowledges that the Company has made available
to it the opportunity to ask questions and receive answers from the Company
concerning the terms and conditions under which the Securities will be issued to
it.
(e) Purchaser agrees that, so long as required by law, certificates
evidencing any of the Securities and any securities issued in exchange for or in
respect thereof shall bear a legend substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
OTHER COUNTRY, STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED,
SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND OTHER APPLICABLE LAWS OR PURSUANT TO AN EXEMPTION FROM SUCH ACT OR
OTHER LAWS."
(f) The foregoing representations in this Section 3.8 are made for
purposes of compliance with the exemptions from registration under the
Securities Act and shall not in any way affect the rights of Parent or Purchaser
in connection with this Agreement, including, without limitation, their ability
to rely on the representations and warranties of the Company set forth in this
Agreement.
3.9 Absence of Liens. Upon surrender of the notes purchased pursuant to
the Note Purchase Agreement by the Purchaser to the Company in accordance with
the terms thereof, the Company will obtain all right, title and interest in such
notes obtained by Purchaser from the transferors thereof, without any Liens
having been imposed by Purchaser or by reason of Purchaser's ownership of the
Note.
ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
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4.1 Conduct of Business of the Company and the Company Subsidiaries.
(a) Unless Parent shall otherwise consent in writing and except as
expressly contemplated by this Agreement or in the Company Disclosure Letter,
during the period from the date of this Agreement to the Closing,
(i) the Company shall conduct, and it shall cause the Company
Subsidiaries to conduct, its or their businesses in the ordinary course and
consistent with past practice, and the Company shall, and it shall cause the
Company Subsidiaries to, use its or their reasonable best efforts to
preserve substantially intact its business organization, to keep available
the services of its present officers and employees and to preserve the
present commercial relationships of the Company and the Company Subsidiaries
with persons with whom the Company or the Company Subsidiaries do
significant business and
(ii) without limiting the generality of the foregoing, neither the
Company nor any of the Company Subsidiaries will:
(A) amend or propose to amend its Certificate of Incorporation
or Bylaws;
(B) authorize for issuance, issue, grant, sell, pledge, dispose
of or propose to issue, grant, sell, pledge or dispose of any shares of, or
any options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any of the Company Subsidiaries, including, but not limited to,
any securities convertible into or exchangeable for shares of stock of any
class of the Company or any of the Company Subsidiaries, except for (a) the
issuance of shares pursuant to the exercise of Company Options outstanding
on the date of this Agreement in accordance with their present terms, (b)
the issuance of shares upon the exercise of Company Warrants outstanding on
the date of this Agreement in accordance with their present terms, and (c)
the issuance of shares upon the conversion of Preferred Shares outstanding
on the date of this Agreement in accordance with the present terms of the
Preferred Shares;
(C) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, other than dividends to the holders of Preferred
Shares in accordance with the present terms of the Preferred Shares and
dividends or distributions to the Company or a Company Subsidiary, or
directly or indirectly redeem, purchase or otherwise acquire or offer to
acquire any shares of its capital stock or other securities;
(D) create, incur or assume any indebtedness for borrowed money
or issue any debt securities, except pursuant to the Credit Agree-
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ment as in effect on the date hereof (except as provided in clause (2) of
paragraph (E) below);
(E) (1) assume, guarantee, endorse (other than endorsement for
collection or deposit in the ordinary course of business) or otherwise
become liable or responsible (whether directly, indirectly, contingently or
otherwise) for the obligations of any person (other than the Company or a
Company Subsidiary); (2) make any capital expenditures or make any advances
or capital contributions to, or investments in, any other person (other than
to a Company Subsidiary); (3) voluntarily incur any material liability or
obligation (absolute, accrued, contingent or otherwise); or (4) sell,
transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to
sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any
assets or properties, real, personal or mixed, material to the Company and
the Company Subsidiaries taken as a whole other than (x) to secure debt
permitted under paragraph (D) or (y) the sale of inventory in the ordinary
course of business;
(F) increase in any manner the compensation of any of its
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other
welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect of,
any stockholder, officer, director, employee, consultant or affiliate other
than, in any such case referred to above, as may be required by Law or as
required pursuant to the terms of agreements in effect on the date of this
Agreement and other than arrangements with new employees (other than
employees who will be officers of the Company) hired in the ordinary course
of business and providing for compensation and other benefits consistent
with those provided for similarly situated employees of the Company as of
the date hereof;
(G) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership
of any subsidiary or the Company;
(H) except as may be required as a result of a change in law or
as required by the SEC, and with prior written notice to Purchaser, change
any of the accounting principles or practices used by it;
(I) make any tax election which is inconsistent with past
practice or settle or compromise any Tax liability in excess of $75,000;
(J) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise),
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other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities of less than $25,000 reflected or reserved against
in the financial statements (including the notes thereto) of the Company, or
covered by insurance;
(K) enter into, amend, modify or terminate any contract,
agreement, commitment or other understanding involving: (1) annual payments,
or property with a value, of (x) $75,000 or more, ($100,000 or more in the
case of purchase orders) if the place of performance is the United States,
or (y) $100,000 or more if the place of performance is outside the United
States, (2) a term of more than one (1) year or (3) the assignment,
transfer, sale or exclusive license of copyrights, trademarks or other
intellectual property;
(L) incur expenses in connection with the transactions
contemplated by this Agreement in excess of $4,350,000;
(M) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any of the representations
or warranties of the Company contained in this Agreement untrue or incorrect
in any material respect at or prior to the Closing; and
(N) shall not terminate the Exchange Agreement between the
Company and certain of its stockholders dated of even date herewith.
(b) The Company shall, and the Company shall cause each of the Company
Subsidiaries to, (i) comply with all Laws applicable to it, to any of its
properties, assets or business or to the consummation of the transactions
contemplated hereby, and to maintain in full force and effect all the Company
Permits necessary for its business, (ii) promptly furnish Parent and Purchaser
with copies of all notices and correspondence or other information to or from
any party in connection with matters relating to the Credit Agreement or the
Exchange Agreement and (iii) send a message by email by the opening of business
on November 16, 1999 to all of their respective employees notifying them of the
provisions of this Section 4.1 and directing them not to take any action in
contravention of this Section 4.1.
4.2 Notification of Certain Matters. The Company shall give prompt
notice to Parent if any of the following occur after the date of this Agreement:
(a) receipt of any notice or other communication in writing from any third party
alleging that the Consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, provided that
such Consent would have otherwise been required to have been disclosed in this
Agreement; (b) receipt of any material notice or other communication from any
Governmental Authority (including, but not limited to, the National Association
of Securities Dealers ("NASD"), Nasdaq/NMS or any other securities exchange) in
connection with the transactions contemplated by this Agreement; (c) the
occurrence of an event which would be reasonably likely to have a Material
Adverse Effect; or (d) the commencement or threat of any Litigation involving or
affecting the Company or any of the Company Subsidiaries, or any of their
respec-
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tive properties or assets, or, to the Company's knowledge, any employee, agent,
director or officer, in his or her capacity as such, of the Company or any of
the Company Subsidiaries.
4.3 Access and Information. Between the date of this Agreement and the
Closing, and without intending by this Section 4.3 to limit any of the other
obligations of the parties under this Agreement, the Company will give, and
shall direct its accountants and legal counsel to give, Parent and its
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel), at reasonable times and without undue
disruption to or interference with the normal conduct of the business and
affairs of the Company, access as reasonably required in connection with the
transactions provided for in this Agreement to all offices and other facilities
and to all contracts, agreements, commitments, books and records of or
pertaining to the Company and the Company Subsidiaries and will furnish Parent
with (a) such financial and operating data and other information with respect to
the business and properties of the Company and the Company Subsidiaries as
Parent may from time to time reasonably request in connection with such
transactions and (b) a copy of each material report, schedule and other document
filed or received by the Company or any of the Company Subsidiaries with or from
the SEC, the NASD or Nasdaq/NMS.
4.4 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, the Company agrees to use reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by the Transaction Documents, including, but not
limited to, (a) obtaining all Consents from Governmental Authorities and other
third parties required for the consummation of the transactions contemplated by
the Transaction Documents thereby and (b) timely making all necessary filings
under the HSR Act. Upon the terms and subject to the conditions hereof, the
Company agrees to use reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary to satisfy the
other conditions of the Closing set forth herein. The Company will not take, nor
permit any of its subsidiaries to take, any action or to enter into any
agreement which is inconsistent with the rights granted to the Purchaser in this
Agreement or which may adversely affect the consummation of the transactions
contemplated by the Transaction Documents.
4.5 Public Announcements. So long as this Agreement is in effect, the
Company shall not, and shall use reasonable efforts to cause its affiliates not
to, issue or cause the publication of any press release or any other
announcement with respect to the transactions contemplated hereby without the
consent of Parent (such consent not to be unreasonably withheld or delayed),
except where such release or announcement is required by applicable Law or
pursuant to any applicable listing agreement with, or rules or regulations of,
the NASD or Nasdaq/NMS, in which case the Company, prior to making such
announcement, will consult with Parent regarding the same.
4.6 Indemnification and Insurance.
(a) The Company after the Closing shall indemnify and hold harmless, to
the fullest extent permitted under applicable law, including without limitation,
as provided in the Amended and Restated Certificate of Incorporation of the
Company and the Company's By-
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Laws as in effect on the date hereof, each present and former director or
officer of the Company determined as of the Closing (collectively, the
"Indemnified Parties"), who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, or was
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or officer of the Company or of any of
its subsidiaries, or is or was at any time serving, at the request of the
Company, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against all expense, liability
and loss (including, but not limited to, attorneys' fees, judgments, fines,
excise taxes or penalties with respect to any employee benefit plan or
otherwise, and amounts paid or to be paid in settlement) incurred or suffered by
such director or officer in connection with such proceeding, arising out of or
pertaining to matters existing or occurring at or prior to the Closing,
including, without limitation, matters arising out of or pertaining to the
transactions contemplated by this Agreement (and the Company shall, as provided
under its Amended and Restated Certificate of Incorporation and By-Laws as in
effect on the date hereof and to the fullest extent permitted under applicable
law, advance expenses as incurred by such Indemnified Party; provided, however,
that if and to the extent that Delaware law so requires the payment of such
expense in advance of the final disposition of a proceeding shall be made only
upon delivery to the Company of an undertaking by such Indemnified Party to
repay all such advances if it shall ultimately be determined that such person is
not entitled to indemnification by the Company). The foregoing shall inure to
the benefit of any Indemnified Party's heirs, executors or administrators, and
shall not be in limitation of any rights to indemnification which an Indemnified
Party may have under applicable law and the Company's Amended and Restated
Certificate of Incorporation prior to the Closing.
(b) Commencing promptly after the date hereof, the Company shall use
its reasonable best efforts to obtain a replacement directors and officers
insurance policy (the "Replacement Policy"), to take effect upon the earlier of
(i) December 13, 1999 or (ii) a change of control as defined in Section 12.b. of
the primary policy in effect as the date hereof (National Union policy
857-48-92) (the "Replacement Policy Date"), which Replacement Policy waives any
right to termination as a result of a change of control or similar event arising
out of the transactions contemplated by the Transaction Documents, and provides
coverage for one (1) year from the Replacement Policy Date. In addition,
commencing promptly after the date hereof, the Company shall use its reasonable
best efforts to obtain a "tail" directors and officers insurance policy
providing coverage for a period of six years from the Closing Date for claims
based on alleged wrongful acts occurring at or prior to the Closing (the "Tail
Insurance"). It is the parties' intention that there be no gap in the Company's
director and officers insurance coverage.
(c) For a period of six (6) years after the Closing, the Company will
maintain in effect, if available, directors' and officers' liability insurance
covering those Persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been made available to
Parent) on terms (including the amounts of coverage and the amounts of
deductibles, if any) that are no less favorable to the terms now applicable to
them under the Company's current policies; provided, however, that in no event
shall the Company be required to expend in excess of 200%
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of the annual premium currently paid by the Company for such coverage; and
provided further, that, if the premium for such coverage exceeds such amount,
the Company shall purchase a policy with the greatest coverage available for
such 200% of the annual premium. Notwithstanding the foregoing, the Company
shall not be bound by the foregoing obligation for so long as the Tail Insurance
continues to be in full force and effect; provided, however, that the Company in
all events shall be bound by the foregoing for a period of one year after the
Replacement Policy Date.
(d) This Section 4.6 shall survive the consummation of the transactions
contemplated hereby, is intended to benefit the Indemnified Parties, shall be
binding on all successors and assigns of the Company and shall be enforceable by
the Indemnified Parties.
4.7 SEC and Stockholder Filings. The Company shall send to Parent a
copy of all material public reports and materials as and when it sends the same
to its stockholders, the SEC or any state or foreign securities commission.
4.8 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the DGCL, is or may become
applicable to the transactions contemplated by this Agreement, the Company will
use reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
4.9 Directors of Company; Directors of Company Subsidiaries. The
Company agrees that its Board of Directors shall, at the request of Parent,
elect prior to Closing one additional director designated by Parent to serve as
a director of the Company effective as of the Closing; provided, however, that
such designee shall be reasonably acceptable to the Board of Directors. If
requested by Parent, the Company will secure the resignations of or remove,
effective as of the Closing, any member of the Board of Directors of any Company
Subsidiary. At Purchaser's request, the Company shall exercise reasonable best
efforts to cause Parent's designees to be elected to the Board of Directors of
the Company Subsidiaries effective as of the Closing Date.
4.10 Antidilution Protection. The Company agrees that if there are, as
of the date hereof, (a) any shares of the Company's Common Stock issued and
outstanding other than the number set forth in Section 2.2 as issued and
outstanding at November 12, 1999 (other than as a result of the exercise or
conversion of Purchase Rights (as defined below)), or (b) any warrants, options,
conversion rights or other rights to acquire shares of the Company's Stock
("Purchase Rights") that have not been included in Schedules 2.15(h) to the
Company Disclosure Letter or as to options reflected as granted and outstanding
in Section 2.2, the Company shall, upon demand by Purchaser, immediately issue
to Purchaser at no cost to Purchaser, the number of shares of the Company's
Common Stock that will maintain the percentage of ownership interest of
Purchaser (on a fully-diluted basis) that Purchaser would have had at the
Closing without giving effect to such undisclosed Purchase Rights.
4.11 Amendment of Certificate of Incorporation. The Company's Board of
Directors has authorized and the Company's stockholders have approved an
increase of the Company's authorized capital stock by increasing its authorized
Common Stock by 150 million
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shares to a total of 300 million shares of Common Stock. The Company agrees to
take all action required to effectuate such increases, including filing the
Certificate Amendment with the appropriate governmental authorities in the State
of Delaware (the effectiveness of any such amendment to be conditioned on the
occurrence of the Closing), and taking all other steps necessary and appropriate
to effectuate such increase. The effectiveness of the Certificate Amendment
shall not be a condition to the Closing.
4.12 Registration and Listing. If any shares of Common Stock required
to be reserved for purposes of conversion of the Note require registration with
or approval of any Governmental Authority under any federal or state or other
applicable law before such shares of Common Stock may be issued or delivered
upon conversion, the Company will in good faith and as expeditiously as possible
cause such shares of Common Stock to be duly registered or approved, as the case
may be. So long as the Common Stock is quoted on The Nasdaq Stock Market, Inc.
or listed on any national securities exchange, the Company will, if permitted by
the rules of such system or exchange, quote or list and keep quoted or listed on
such system or exchange, upon official notice of issuance, all shares of Common
Stock issuable or deliverable upon conversion or exchange of the Note.
4.13 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuing or delivering upon conversion of the Note, the
maximum number of shares of Common Stock that may be issuable or deliverable
upon such conversion; provided, however, that to the extent the Company, as of
the date hereof, has an insufficient number of authorized shares of Common Stock
reserved for issuance upon conversion of the Note, the Company shall use
commercially reasonable efforts to take all actions necessary to increase and
reserve for issuance such number of authorized shares of Common Stock as is
equal to the maximum number of shares of Common Stock that may be issuable or
deliverable upon conversion of the Note, which actions shall include (a)
obtaining the written consent of a sufficient number of stockholders of the
Company to an amendment to the Certificate of Incorporation and (b) upon receipt
of such written consent, preparing, filing and mailing an information statement
on Schedule 14C under the Exchange Act as soon as practicable thereafter. The
Company shall issue all such shares of Common Stock in accordance with the terms
of the Amended and Restated Certificate of Incorporation, as amended, and
otherwise comply with the terms hereof and thereof.
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER AND PARENT
Parent and Purchaser covenant and agree as follows:
5.1 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, Parent and Purchaser agree to use reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including, but not
limited to, (a) obtaining all Governmental Consents from Governmental
Authorities and other third parties required for the consummation of the
transactions contemplated by this Agreement and (b) timely making all necessary
filings under the HSR Act. Upon the terms and subject to the conditions hereof,
Parent and Purchaser agree to use reasonable best
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efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary to satisfy the other conditions of the Closing set
forth herein. Notwithstanding the foregoing, neither Parent nor any of its
affiliates shall be required to divest or hold separate or otherwise take or
commit to take any action that materially limits its freedom of action with
respect to, or its ability to retain, any of the businesses or assets of Parent
or any of its affiliates.
5.2 Public Announcements. So long as this Agreement is in effect,
Parent and Purchaser shall not, and shall use reasonable efforts to cause their
affiliates not to, issue or cause the publication of any press release or any
other announcement with respect to the transactions contemplated hereby without
the consent of the Company (such consent not to be unreasonably withheld or
delayed), except where such release or announcement is required by applicable
Law or pursuant to any applicable listing agreement with, or rules or
regulations of, any stock exchange on which shares of Parent's capital stock are
listed or the NASD, or other applicable securities exchange, in which case
Parent, prior to making such announcement, will consult with the Company
regarding the same.
5.3 Compliance. In consummating the transactions contemplated hereby,
Parent and Purchaser shall comply, and cause their subsidiaries to comply or to
be in compliance, in all material respects, with all applicable Laws.
5.4 Employment. As of the Closing Date and thereafter, neither
Purchaser nor Parent shall be under any obligation to continue the employment of
any current or former employee of the Company or the Company Subsidiaries as of
the Closing Date ("Company Employees"). Furthermore, except as may be provided
in an Employee Plan, neither Purchaser nor Parent shall be under any obligation
to continue or maintain any level of compensation or benefits to Company
Employees. Subject to the terms of an Employee Plan, Purchaser and Parent shall
have the right to amend or terminate such Employee Plan and Parent reserves the
right to require that Company terminate prior to the Closing Date any retirement
plan intended to satisfy the requirements of Code Section 401(k).
5.5 Guarantee of Parent. Parent hereby guarantees the payment by
Purchaser of the Stock Purchase Price and the Note Purchase Price, and any other
amounts payable by Purchaser pursuant to this Agreement and will cause Purchaser
to perform all of its other obligations under this Agreement in accordance with
their terms.
5.6 Director Election. After the Closing, Parent agrees that it will
exercise reasonable best efforts to cause the Company's Board of Directors to
elect at least such number of directors as necessary to comply with the
Company's Certificate of Incorporation, as amended, and that at least two
members of the Board of Directors of the Company designated by Parent shall be
independent directors as defined under the rules for inclusion of the Company's
Common Stock on the Nasdaq National Market.
5.7 Section 14(f) Information. Parent will supply the Company and be
solely responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1
under the Exchange Act.
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ARTICLE VI
PURCHASE CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Purchase. The
respective obligations of each party to effect the Purchase and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Closing of the following conditions:
(a) No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Authority
which prohibits or prevents the consummation of the Purchase which has not been
vacated, dismissed or withdrawn prior to the Closing. The Company and Parent
shall use all reasonable efforts to have any of the foregoing vacated, dismissed
or withdrawn by the Closing.
(b) Governmental Approvals. All Governmental Consents of any
Governmental Authority required for the consummation of the Purchase and the
transactions contemplated by this Agreement shall have been obtained.
(c) Exchange Agreement. The transactions contemplated by the Exchange
Agreement shall have closed at or prior to the Closing.
6.2 Conditions to Obligations of Parent and Purchaser. The obligations
of Parent and Purchaser to consummate the Purchase and the other transactions
contemplated by this Agreement are subject to the satisfaction of each of the
following conditions at or prior to the Closing (any or all of which may be
waived by Parent and Purchaser in whole or in part to the extent permitted by
law):
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
(without giving effect to any limitation as to "materiality," "material adverse
effect" or similar qualifying language set forth therein) except to the extent
that any breach (either individually or in the aggregate with all other such
breaches) would not have a Material Adverse Effect on the Company or materially
and adversely affect the ability of the Company to consummate the transactions
contemplated by this Agreement.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(c) Certificates. Purchaser shall have received a certificate (dated
the Closing Date and in form and substance reasonably satisfactory to Parent and
Purchaser) signed by the Chief Executive Officer and the Chief Financial Officer
of the Company to the effect set forth in Sections 6.2(a) and 6.2(b).
(d) Opinion of Counsel. Purchaser shall have received the duly executed
opinion of Kramer Levin Naftalis & Frankel LLP, counsel to the Company, dated
the Closing Date, substantially in the form of Exhibit F hereto.
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(e) Litigation. There shall be no pending suit, action or proceeding by
any person against Purchaser, the Company, or any affiliate, director, officer
or employee of any of the foregoing which has a reasonable likelihood of success
(i)(A) in any way seeking to restrict or modify in any material respect the
transactions contemplated hereby, (B) seeking to obtain any damages against any
person as a result of the transactions contemplated hereby or (C) seeking to
impose any financial burden on any of the foregoing persons or any limitation on
the ability of Parent or Purchaser to hold the Securities or on the business or
operations of the Company or any of its subsidiaries, if the reasonably likely
determination of a matter set forth in this clause (i) would materially reduce
the economic or business benefits Parent expects, as of the date hereof, to
realize from the purchase of the Securities, or (ii) in any way seeking to
prohibit the transactions contemplated by the Transaction Documents.
(f) No Material Adverse Effect. No change, development, effect or
circumstance shall have occurred that would have a Material Adverse Effect with
respect to the Company.
(g) Registration Rights Agreement. The Registration Rights Agreement
shall have been duly executed and delivered to Purchaser by the Company.
(h) Selling Stockholder Agreements. The transactions contemplated by
the Selling Stockholders Agreements shall have closed at or prior to the
Closing.
(i) Replacement Policy. The Replacement Policy shall have been obtained
and shall, upon the Closing, be in full force and effect.
6.3 Documents to be Delivered by the Company. At the Closing, the
Company shall deliver to Purchaser the following:
(a) duly executed certificates representing the Shares, in form
satisfactory to Purchaser;
(b) the duly executed Notes;
(c) the Certificate of Incorporation of the Company, certified by the
Secretary of State of the State of Delaware, and the Bylaws of the Company and
resolutions of the Board of Directors and the stockholders of the Company
approving this Agreement and the transactions contemplated hereby, certified (in
form and substance reasonably satisfactory to Purchaser) by the Secretary of the
Company;
(d) certificates issued by appropriate governmental authorities
evidencing the good standing of the Company in each state where the Company is
doing business, as of a date not more than fourteen (14) days prior to the
Closing Date and where possible a confirming telegram as of the Closing Date;
(e) the certificate referred to in Section 6.2(c); and
(f) such other documents as Parent or Purchaser shall reasonably
request.
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6.4 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Purchase and the other transactions contemplated by
this Agreement are subject to the satisfaction of the following conditions (all
of which may be waived by the Purchaser in whole or in part to the extent
permitted by law):
(a) Representations and Warranties. Each of the representations and
warranties of the Parent and Purchaser contained in this Agreement shall be true
and correct (without giving effect to any limitation as to "materiality,"
"material adverse effect" or similar qualifying language set forth therein)
except to the extent the effect of any breach (either individually or in the
aggregate with all other such breaches) would not have a Material Adverse Effect
on the Parent and Purchaser or materially and adversely affect the ability of
the Parent and Purchaser to consummate the transactions contemplated by this
Agreement.
(b) Performance of Obligations of Parent and Purchaser. Parent and
Purchaser shall have performed in all material respects all obligations required
to be performed by them under this Agreement, Exchange Agreements and
Registration Rights Agreement at or prior to the Closing.
(c) Certificate. The Company shall have received a certificate signed
on behalf of Parent and Purchaser by a duly authorized officer of each to the
effect set forth in Sections 6.4(a) and 6.4(b).
(d) Opinion of Counsel. The Company shall have received the duly
executed opinion of Pillsbury Madison & Sutro LLP, counsel to Parent and
Purchaser dated the Closing Date, substantially in the form of Exhibit G hereto.
(e) Litigation. There shall be no pending suit, action or proceeding by
any person against Purchaser or the Company that has a reasonable likelihood of
imposing material restrictions on the Company's operations and that would have a
Material Adverse Effect on the Company.
(f) No Material Adverse Effect. No change, development, effect or
circumstance shall have occurred that would have a Material Adverse Effect with
respect to Parent.
(g) Replacement Policy. The Replacement Policy shall have been obtained
and shall, upon the Closing, be in full force and effect.
6.5 Documents to be Delivered by Purchaser. At the Closing, Purchaser
shall deliver to the Company the following:
(a) evidence of the wire transfer referred to in Section 1.1(b);
(b) the certificate referred to in Section 6.4(c);
(c) charter and bylaws of Parent and Purchaser;
(d) the notes purchased pursuant to the Note Purchase Agreement for
cancellation; and
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(e) the Short-Term Note for cancellation.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company upon written notice to the other
party:
(i) if any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the
consummation of the Purchase or the Transactions; or
(ii) if the Purchase shall not have been consummated on or before
February 28, 2000, unless the failure to consummate the Purchase by such
date is the result of a breach of, or a delay in fulfilling its obligation
under, this Agreement by the party seeking to terminate this Agreement;
provided, however, that if the Purchase shall not have been consummated by
such date because of a failure by a Principal Stockholder to perform in any
material respect any material obligation under or to comply in any material
respect with Sections 1.1, 4, or 5 of its Selling Stockholder Agreement,
then this Agreement may not be terminated pursuant to this clause (ii) by
the Company prior to June 1, 2000.
(c) by the Company if: (i) as of such time of determination, any of the
representations and warranties of Parent or Purchaser contained in this
Agreement shall not be true and correct (without giving effect to any limitation
as to "materiality," "material adverse effect" or similar qualifying language
set forth therein) except to the extent the effect of such breach (either
individually or in the aggregate with all other such breaches) would not
materially adversely affect the ability of Parent or Purchaser to consummate the
transactions contemplated hereby, or (ii) Parent or Purchaser shall have failed
to perform in any material respect any material obligation or to comply in any
material respect with any material agreement or covenant of Parent or Purchaser
under this Agreement, and, in the case of (i), such untruth or incorrectness is
incapable of being cured or is not cured within fifteen (15) days, and in the
case of (ii), such failure is incapable of being cured or is not cured within
five (5) days, after the giving of written notice by Company to the Parent.
(d) by Parent, if: (i) as of such time of determination, any of the
representations and warranties of the Company contained in this Agreement shall
not be true and correct (without giving effect to any limitation as to
"materiality," "material adverse effect" or similar qualifying language set
forth therein) except to the extent the effect of such breach (either
individually or in the aggregate with all other such breaches) would not have a
Material Adverse Effect on the Company or materially adversely affect the
ability of the Company to consummate the transactions contemplated hereby, or
(ii) (A) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
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agreement or covenant of the Company under this Agreement, or (B) a Principal
Stockholder shall have failed to perform in any material respect any material
obligation or to comply in any material respect with Sections 1.1, 4 or 5 of its
Selling Stockholders Agreement, and, in the case of (i), such untruth or
incorrectness is incapable of being cured or is not cured within fifteen (15)
days, and in the case of (ii), such failure is incapable of being cured or is
not cured within five (5) days, after the giving of written notice by Parent to
the Company and, in the case of (ii)(B), the Principal Stockholders.
7.2 Procedure Upon Termination. In the event of termination by Parent
or the Company, or both, pursuant to Section 7.1 hereof, written notice thereof
shall forthwith be given to the other party and no further action shall be
required of Parent or the Company. If this Agreement is terminated as provided
herein each party shall redeliver all documents, work papers and other material
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same.
7.3 Effect of Termination. In the event that this Agreement is validly
terminated as provided herein, then each of the parties shall be relieved of
their duties and obligations arising under this Agreement after the date of such
termination and such termination shall be without liability to Parent, Purchaser
or the Company; provided, however, that the obligations of the parties set forth
in Sections 9.1 through 9.14 hereof (and Section 5.5 to the extent Purchaser
remains obligated under such sections) shall survive any such termination and
shall be enforceable hereunder; provided, further, however, that nothing in this
Section 7.3 shall relieve Parent, Purchaser or the Company of any liability for
a breach of this Agreement.
ARTICLE VIII
BUSINESS OPPORTUNITIES
8.1 Competition. The Company acknowledges that Parent and its
affiliates engage in the same or similar activities or lines of business as the
Company and have an interest in the same area of business opportunities. The
Company agrees that Parent and its affiliates shall have the right to (a) engage
in the same or similar business activities or lines of business as the Company,
(b) do business with any client or customer of the Company and (c) employ or
otherwise engage any officer or employee of the Company if (i) prior to
employment by the Company such person was an officer, director or employee of
Parent or an affiliate thereof, or (ii) such employment or engagement by Parent
or its affiliate would not harm the Company in any significant manner, and
neither Parent nor any affiliate thereof, nor any officer or director of Parent
or such affiliate, shall be liable to the Company by reason of any such
activities of Parent or its affiliates or of such person's participation
therein.
8.2 Business Opportunities. In the event that (a) Parent or any of its
affiliates, or (b) any officer, director or employee of the Company who is also
an officer, director or employee of Parent or any affiliate thereof, acquires
knowledge of a potential transaction or matter which may be a business
opportunity for both the Company and Parent or any of its affiliates, such
business opportunity shall belong only to Parent and not to the Company, and any
such officer, director or employee of the Company shall treat such business
opportunity as belonging only to Parent and not to the Company, subject to the
following sentence. In the case of clause (b) of the preceding sentence, Parent
shall determine in good faith whether, based on the circum-
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stances under which such person acquired his knowledge, such business
opportunity instead was offered to such person solely in his capacity as an
officer, director or employee of the Company ("Company Capacity"). For purposes
of the foregoing determination, there shall be a presumption that such business
opportunity was offered to such person in his capacity as an officer, director
or employee of Parent or any affiliate thereof. In the event Parent determines
that it was so offered to such person in his Company Capacity, such business
opportunity shall belong only to the Company and not to Parent and such officer,
director or employee shall treat such business opportunity as belonging only to
the Company and not to Parent. With respect to any business opportunity
belonging to Parent pursuant to this Section 8.2, Parent shall decide how to
allocate and pursue such business opportunity based on its sole determination of
what is in the best interests of Parent's stockholders. Parent's good faith
determination of the allocation of business opportunities pursuant to this
Section shall be conclusive and binding for all purposes.
8.3 Exclusive European Arrangement. Parent and the Company agree to
cooperate in good faith to negotiate promptly after the date hereof for
execution at or prior to Closing a definitive distribution and publishing
agreement (the "Distribution Agreement") reflecting the terms and conditions set
forth on Schedule 8.3.
8.4 Business Synergies. The parties intend to explore the potential for
realization of synergies from business initiatives and relationships between the
Company and Parent's United States operations. In furtherance of this objective,
the Company and Parent shall identify and evaluate together mutually
advantageous business initiatives and relationships, which could include
distribution of product and co-production of titles. The parties shall use
commercially reasonable efforts to implement any such business initiatives or
relationships which the parties mutually decide to pursue.
ARTICLE IX
MISCELLANEOUS
9.1 Confidentiality.
(a) Unless (i) otherwise expressly provided in this Agreement, (ii)
required by applicable Law or any listing agreement with, or the rules and
regulations of, Nasdaq/NMS or any other applicable securities exchange or the
NASD, (iii) necessary to secure any required Consents as to which the other
party has been advised or (iv) consented to in writing by Parent and the
Company, all information (whether oral or written) and documents furnished in
connection herewith together with analyses, compilations, studies or other
documents prepared by such party which contain or otherwise reflect such
information shall be kept strictly confidential by the Company, Parent,
Purchaser and their respective officers, directors, employees and agents. Prior
to any disclosure permitted pursuant to the preceding sentence, the party
intending to make such disclosure shall consult with the other party regarding
the nature and extent of the disclosure. Nothing contained herein shall preclude
disclosures to the extent necessary to comply with accounting, SEC and other
disclosure obligations imposed by applicable Law. In the event the transactions
contemplated by this Agreement are not consummated, each party shall return to
the other any documents furnished by the other and all copies thereof that any
of them may have made and will hold in confidence any information obtained from
the other party except to the extent (A) such party is required to disclose such
information by Law or such disclosure is neces-
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sary or desirable in connection with the pursuit or defense of a claim, (B) such
information was known by such party prior to such disclosure (and provided that,
except with respect to information referred to in the following clause (C), such
party shall have advised the other party of such knowledge upon or promptly
after its receipt of such information) or was thereafter developed or obtained
by such party independent of such disclosure or (C) such information is or
becomes generally available to the public other than by breach of this Section
9.1 (or, to such party's knowledge, breach of a confidentiality agreement with
the other party). Prior to any disclosure of information pursuant to the
exception in clause (A) of the preceding sentence, the party intending to
disclose the same shall so notify the party which provided the same in order
that such party may seek a protective order or other appropriate remedy should
it choose to do so.
(b) Parent and the Company further acknowledge that certain of the
business and activities of each of them is competitive with business and
activities of the other party, and each of them therefore agrees that it will
not seek to obtain any competitive or other business advantage over the other
party as a result of the information or documents so received by it in
connection herewith, each party acknowledging that such use would be unfair and
materially detrimental to the other party, provided that the provisions of this
Section 9.1(b) shall not apply to information referred to in clause (C) of
Section 9.1(a) hereof.
9.2 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by a written agreement among the Company, Parent and
Purchaser.
9.3 Waiver of Compliance; Consents. Any failure of the Company on the
one hand, or Parent and Purchaser on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 9.3.
9.4 Survival. The respective representations, warranties, covenants and
agreements of the Company and Parent contained herein or in any certificates or
other documents delivered prior to or at the Closing shall survive the execution
and delivery of this Agreement, notwithstanding any investigation made or
information obtained by the other party, but shall terminate at the Closing,
except for those contained in Sections 4.4, 4.6, 4.10, 4.11, 5.1, 5.4, 5.5, 5.6,
ARTICLE VIII, and 9.1 through 9.14 of ARTICLE IX hereof, which shall survive
beyond the Closing.
9.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
facsimile, receipt confirmed, or on the next business day when sent by overnight
courier or on the second succeeding business day when sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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(i) if to the Company, to:
GT Interactive Software Corp.
417 Fifth Avenue
New York, New York 10016
Attention: Thomas Heymann
Telecopy: (212) 679-3424
Confirm: (212) 726-0749
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: David P. Levin, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(ii) if to Parent or Purchaser, to:
Infogrames Entertainment S.A.
84, rue du 1er Mars 1943
Villeurbanne, 69100
France
Attention: Thomas Schmider
Telecopy: (011 33) 472 655116
Confirm: (011 33) 472 655000
And
Attention: Frederic Garnier
Telecopy: (011 33) 472 655059
Confirm: (011 33) 472 655000
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Nathaniel M. Cartmell, Esq.
Ronald E. Bornstein, Esq.
Telecopy: (415) 983-1200
Confirm: (415) 983-1000
9.6 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or
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obligations hereunder shall be assigned by any of the parties hereto prior to
the Closing without the prior written consent of the Company, in the case of a
proposed assignment by Parent or Purchaser, or by Parent, in the case of a
proposed assignment by the Company, except that Purchaser may assign its rights,
interest and obligations hereunder to any other wholly owned direct or indirect
subsidiary of Parent.
9.7 Expenses.
(a) Except as provided below, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees or expenses, whether or not the
transactions contemplated hereby are consummated.
(b) If Parent terminates this Agreement pursuant to Section 7.1(d)
(other than a termination pursuant to 7.1(d)(ii)(B)), then the Company shall
pay, or cause to be paid to Parent, at the time of termination, an amount equal
to Parent's and Purchaser's actual and documented reasonable out-of-pocket
expenses incurred by Parent or Purchaser in connection with this Agreement and
the consummation of the transactions contemplated hereby, including, without
limitation, the reasonable fees and expenses payable to all attorneys and
accountants (and specifically excluding any fees owed to any investment banker
or other financial institution) (the "Parent Expenses"). The Company also agrees
that, in the event of the Closing, it shall pay the Parent Expenses, but not in
excess of $2,000,000. Any payments required to be made pursuant to this Section
9.7 shall be made by wire transfer of same day funds to an account designated by
Parent on the business day next following the date of termination.
(c) If the Company terminates this Agreement pursuant to Section
7.1(c), then Parent shall pay, or cause to be paid to the Company, at the time
of termination, an amount equal to the Company's actual and documented
reasonable out-of-pocket expenses incurred by the Company in connection with
this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the reasonable fees and expenses payable to all
attorneys and accountants (and specifically excluding any fees owed to any
investment banker or other financial institution). Any payments required to be
made pursuant to this Section 9.7 shall be made by wire transfer of same day
funds to an account designated by the Company on the business day next following
the date of termination.
(d) The expenses provided for in this Section 9.7 are not intended to
be exclusive remedies with respect to any liability for a breach of this
Agreement, and no party hereto shall be precluded from seeking damages or
remedies at law or in equity as a result of any such matter.
9.8 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in Delaware without regard to any principles of
choice of law or conflicts of law of such State. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined in
any state or federal court sitting in the State of Delaware. Each of the parties
hereto (a) consents to submit such party to the personal jurisdiction of the
Federal court located in the State of Delaware or any Delaware state court in
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the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than a
federal court sitting in the State of Delaware or a Delaware state court, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby, and (e) irrevocably appoints CT Corporation each as its
respective agent to receive service of process in respect of any action, suit or
proceeding arising under or relating to this Agreement or any of the
transactions contemplated hereby.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (a) the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an association, an unincorporated organization, a
Governmental Authority and any other entity, (b) unless otherwise specified
herein, the term "affiliate," with respect to any person, shall mean and include
any person controlling, controlled by or under common control with such person
and (c) the term "subsidiary" of any specified person shall mean any corporation
fifty percent (50%) or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity fifty
percent (50%) or more of the total equity interest of which, is directly or
indirectly owned by such specified person.
9.11 Entire Agreement. This Agreement and the documents or instruments
referred to herein including, but not limited to, the Company Disclosure Letter
referred to herein, which Company Disclosure Letter is incorporated herein by
reference, embody the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, representations, warranties, covenants, or undertakings other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings among the parties with respect to such
subject matter, including, without limitation, the July 27, 1999 letter
agreement between the Company and Parent; provided, however, that if this
Agreement is terminated pursuant to Article VII hereof, the portions of such
letter captioned "Disclosure of Evaluation Materials," "Use of Evaluation
Materials," "Compelled Disclosure," (only as to the portions of such letter
surviving pursuant to this Section 9.11) "Legal Remedies," "Return of Documents"
and (if such termination is due to Parent's material breach of this Agreement)
"Non-Solicitation" shall again become effective from the date of such
termination.
9.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall
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not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
9.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
9.14 Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person that is not a party hereto or thereto or
a successor or permitted assign of such a party; provided however, that the
parties hereto specifically acknowledge that the provisions of Section 4.6
hereof are intended to be for the benefit of, and shall be enforceable by, the
Indemnified Parties.
9.15 Disclosure Letter. Parent and Purchaser each acknowledge that the
Company Disclosure Letter (a) relates to certain matters concerning the
disclosures required and transactions contemplated by this Agreement, (b) is
qualified in its entirety by reference to specific provisions of this Agreement,
(c) is not intended to constitute and shall not be construed as indicating that
any such matter is required to be disclosed, nor shall such disclosure be
construed as an admission that such information is material with respect to the
Company, except to the extent required by this Agreement.
9.16 Effect of Investigation. The representations, warranties,
covenants and agreements of each party hereto shall remain operative and in full
force and effect regardless of any investigation made (or knowledge acquired) by
or on behalf of any other party hereto, any person controlling any such party,
or any of their officers, directors or affiliates, whether prior to or after the
execution of this Agreement.
9.17 Material Adverse Effect. When used in connection with the Company
or any Company Subsidiary or Parent or any of its subsidiaries, as the case may
be, the term "Material Adverse Effect" means any change, effect or circumstance
that, individually or when taken together with all other such changes, effects
or circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as the case may be; provided, however, that (a) any change, effect or
circumstance relating to conditions affecting the United States economy
generally or the economy of any nation or region in which such entity or any of
its subsidiaries conducts business that is material to the business of such
entity and its subsidiaries, taken as a whole, shall not be taken into account
in determining whether there has been or would be a "Material Adverse Effect" on
or with respect to such entity; (b) any change, effect or circumstance relating
- -to conditions generally affecting the entertainment software industry, and not
affecting such entity in a materially disproportionate manner, shall not be
taken into account in
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determining whether there has been or would be a "Material Adverse Effect" on or
with respect to such entity; and (c) any change, circumstance or effect caused
by the announcement or pendency of this Agreement, or the transactions
contemplated hereby shall not be taken into account in determining whether there
has been or would be a "Material Adverse Effect" on or with respect to such
entity unless such change, circumstance or effect has resulted, or reasonably
would be expected to result, in a substantial impairment to such entity's
ability to continue to develop, produce, sell or distribute the products that
are material to such entity's business in substantially the same manner as it
has prior to the date of this Agreement.
[Intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
INFOGRAMES ENTERTAINMENT S.A.
By: /s/ BONNELL BRUNO
----------------------------------
Name: Bonnell Bruno
Title: President and Chief Executive
Officer
CALIFORNIA U.S. HOLDINGS, INC.
By: /s/ BONNELL BRUNO
----------------------------------
Name: Bonnell Bruno
Title: President and Chief Executive
Officer
GT INTERACTIVE SOFTWARE CORP.
By: /s/ THOMAS A. HEYMANN
----------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
42
Exhibit 10.2
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT, dated November 15, 1999 (the
"Agreement"), among GT Interactive Software Corp., a Delaware corporation (the
"Company"), General Atlantic Partners 54, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment" and, together with GAP LP, the "Stockholders").
WHEREAS, the Stockholders own (both beneficially and of record) the
number of shares of Series A Convertible Preferred Stock of the Company (the
"Preferred Stock") and the principal amount of the Company's Subordinated Notes
due July 29, 2000 (the "Subordinated Notes," and together with the Preferred
Stock, the "Securities") as set forth on Schedule 1 hereto;
WHEREAS, the Company, Infogrames Entertainment S.A. ("Infogrames") and
California U.S. Holdings, Inc. ("Infogrames US") are entering concurrently into
a Securities Purchase Agreement, dated as of November 15, 1999 (the "Purchase
Agreement"), pursuant to which Infogrames has agreed to make a major capital
investment in the Company; and
WHEREAS, in connection with the Purchase Agreement, and as a condition
to the willingness of Infogrames and Infogrames US to enter into the Purchase
Agreement, the Company has agreed to issue to the Stockholders, and the
Stockholders have agreed to accept, new securities in exchange for the
Securities.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the
Closing Date, as the same may be amended from time to time.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as the same may be amended from time to time.
<PAGE>
"Closing" has the meaning set forth in Section 2.3 of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.3 of
this Agreement.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Company" has the meaning set forth in the recitals to this
Agreement.
"Condition of the Company" means the assets, business,
properties, prospects, operations or financial condition of the Company and its
Subsidiaries, taken as a whole.
"Contractual Obligations" means as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"GAP Coinvestment" has the meaning set forth in the recitals
to this Agreement.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP, and any successor
to such entity.
"GAP LP" has the meaning set forth in the recitals to this
Agreement.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
"Notes" has the meaning set forth in Section 2.1 of this
Agreement,
"Orders" has the meaning set forth in Section 3.2 of this
Agreement.
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"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Purchase Agreement" has the meaning set forth in the recitals
to this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 22, 1999 among the Company and the Stockholders.
"Requirements of Law" means, as to any Person, any law,
statute, treaty, rule, regulation, right, privilege, qualification, license or
franchise or determination of an arbitrator or a court or other Governmental
Authority or stock exchange, in each case applicable or binding upon such Person
or any of its property or to which such Person or any of its property is subject
or pertaining to any or all of the transactions contemplated or referred to
herein.
"SEC Documents" means all registration statements, proxy
statements, reports and other documents required to be filed by the Company
under the Securities Act or the Exchange Act and all amendments or supplements
thereto filed by the Company with the Commission since December 31, 1997.
"Securities" has the meaning set forth in the recitals to this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Stockholders" has the meaning set forth in the recitals to
this Agreement.
"Subsidiary" means, as of the relevant date of determination,
with respect to any Person, a corporation or other Person of which 50% or more
of the voting power of the outstanding voting equity securities is held,
directly or indirectly, by such Person. Unless otherwise qualified, or the
context otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Transaction Documents" means this Agreement and the Notes.
ARTICLE 2
EXCHANGE OF SECURITIES
2.1 Exchange of Securities. Subject to the terms and
conditions herein set forth, the Company agrees to issue to each of the
Stockholders, and each of the Stockholders agrees that it will acquire from the
Company, on the Closing Date, the aggregate principal amount of senior
subordinated convertible notes set forth opposite such Stockholder's name on
Schedule 2.1 hereto (all of such notes being referred to herein as the "Notes"),
in exchange for the Securities, free and clear of all Liens.
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2.2 Notes. The Notes shall be substantially in the form
attached hereto as Exhibit A.
2.3 Closing. Subject to the satisfaction or waiver of the
conditions set forth in Articles 5 and 6 below, the closing of the transactions
contemplated by Section 2.1 (the "Closing") shall take place simultaneously
with, and at the same location as, the closing under the Purchase Agreement (the
"Closing Date"). On the Closing Date, the Company shall deliver to each
Stockholder the Notes being acquired by such Stockholder, against delivery by
such Stockholder to the Company of the certificate or certificates evidencing
the Securities held by such Stockholder, each such certificate being duly
endorsed in blank and accompanied by such stock powers and such other documents
as may reasonably be necessary in the Company's judgment to transfer record
ownership of the Securities.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Stockholders as
follows:
3.1 Corporate Existence and Power. Each of the Company and its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently, or is proposed to be, engaged, as described in the SEC Documents; (c)
is duly qualified as a foreign corporation, licensed and in good standing under
the laws of each jurisdiction in which its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the Condition of the Company; and (d) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party.
3.2 Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and the Notes and the
transactions contemplated hereby and thereby (a) have been duly authorized by
all necessary corporate action of the Company; (b) do not contravene the terms
of the Certificate of Incorporation or the By-laws, or any certificate of
incorporation or by-laws or other organizational documents of any of its
Subsidiaries, except that the Certificate of Incorporation shall be amended to
increase the number of authorized shares of Common Stock to permit the
reservation of Common Stock issuable upon conversion of the Notes; (c) do not
violate, conflict with or result in any breach or contravention of, or the
creation of any Lien under, any Contractual Obligation of the Company or any of
its Subsidiaries, or any Requirement of Law applicable to the Company or any of
its Subsidiaries; and (d) do not violate any judgment, injunction, writ, award,
decree or order of any nature (collectively, "Orders") of any Governmental
Authority against, or binding upon, the Company or any of its Subsidiaries;
except in the case of clauses (c) and (d) for violations, conflicts, breaches,
contraventions or Liens which would not have a material adverse effect on the
Condition of the Company or the ability of the Company to perform its
obligations under this Agreement and each of the other Transaction Documents.
4
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3.3 Governmental Authorization; Third Party Consents. No
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under a Requirement of Law, other than customary
filings with the Commission for transactions of the type contemplated hereby,
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder and the filing of
an amendment to the Certificate of Incorporation with the Secretary of State of
the State of Delaware, is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
this Agreement and the Notes or the transactions contemplated hereby and
thereby, except where the failure to obtain an approval, consent, compliance,
exemption, authorization or other action or to make any filing would not have a
material adverse effect on the Condition of the Company or the ability of the
Company to perform its obligations under this Agreement or the Notes.
3.4 Binding Effect. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery by the Stockholders, constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity). Upon execution and delivery by
the Company of the Notes, the Notes will constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
3.5 Conversion. Subject to Section 7.3 of the Notes, the
Company has reserved an aggregate of 12,500,000 shares of Common Stock for
issuance upon conversion of the Notes. Subject to Section 7.3 of the Notes, the
shares of Common Stock issuable upon conversion of the Notes in accordance with
the terms of the Notes are duly authorized, and when issued to the Stockholders
against payment therefor, will be validly issued, fully paid and non-assessable,
and will be issued pursuant to an exemption from, or in compliance with the
registration and qualification requirements of all applicable federal and state
securities laws.
3.6 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.
5
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each of the Stockholders hereby represents and warrants
(severally as to itself and not jointly) to the Company as follows:
4.1 Existence and Power. Such Stockholder (a) is a partnership
duly organized and validly existing under the laws of the jurisdiction of its
formation and (b) has the requisite partnership power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery
and performance by such Stockholder of this Agreement and the transactions
contemplated hereby (a) have been duly authorized by all necessary partnership
action, (b) do not contravene the terms of such Stockholder's organizational
documents, or any amendment thereof, and (c) do not violate, conflict with or
result in any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of such Stockholder, or any Requirement of Law or Orders
applicable to such Stockholder.
4.3 Title. Such Stockholder is the owner (both beneficially
and of record) of the shares of Preferred Stock and holds the principal amount
of the Subordinated Notes as set forth opposite such Stockholder's name on
Schedule 1. Except to the extent resulting from the Equity Purchase and Voting
Agreement (the "Voting Agreement") among the Stockholders, certain affiliates of
the Stockholders and Infogrames, or for restrictions imposed by applicable
securities laws, such Stockholder owns all of such Securities free and clear of
all Liens. Such Stockholder has sole power of disposition with respect to all of
such Securities. Upon the acquisition of the Securities pursuant to Article 2,
the Company will receive good and valid title to the Securities, free and clear
of all Liens, except for restrictions imposed by the applicable securities laws.
4.4 Governmental Authorization; Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under any Requirement of Law, is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, such Stockholder of this Agreement and each of the other
Transaction Documents to which such Stockholder is a party or the transactions
contemplated hereby and thereby.
4.5 Binding Effect. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
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4.6 Purchase for Own Account. The Notes to be acquired by such
Stockholder pursuant to this Agreement are being or will be acquired for its own
account and with no intention of distributing or reselling such Notes or any
part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to the rights of such Stockholder at all times to sell or otherwise dispose of
all or any part of such Notes under an effective registration statement under
the Securities Act, or under an exemption from such registration available under
the Securities Act, and subject, nevertheless, to the disposition of such
Stockholder's property being at all times within its control. If such
Stockholder should in the future decide to dispose of any of such Notes, such
Stockholder understands and agrees that it may do so only in compliance with the
Securities Act and applicable state securities laws, as then in effect. Such
Stockholder agrees to the imprinting, so long as required by law, of legends on
certificates representing all of its Notes and shares of Common Stock issuable
upon conversion of its Notes to the following effect:
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.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE ENTITLED TO THE
BENEFITS OF A REGISTRATION RIGHTS AGREEMENT AMONG GT INTERACTIVE
SOFTWARE CORP. AND THE ORIGINAL PURCHASERS OF THE NOTES REPRESENTED
HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO
DETERMINE THEIR RIGHTS.
4.7 Restricted Securities. Such Stockholder understands that
the Notes will not be registered at the time of their issuance under the
Securities Act for the reason that the sale provided for in this Agreement is
exempt pursuant to Section 4(2) of the Securities Act and that the reliance of
the Company on such exemption is predicated in part on such Stockholder's
representations set forth herein.
4.8 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the
Stockholders, in connection with the transactions contemplated hereby based on
any agreement, arrangement or understanding with the Stockholders or any action
taken by the Stockholders.
4.9 Accredited Investors. Such Stockholder is an accredited
investor within the meaning of Rule 501(a) under the Securities Act.
4.10 Transfer. On the date hereof, such Stockholder has no
present intention to transfer such Stockholder's Notes to any Person that is not
an affiliate of such Stockholder.
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ARTICLE 5
CONDITIONS TO THE OBLIGATION
OF THE STOCKHOLDERS TO CLOSE
The obligation of the Stockholders to exchange the Securities
for the Notes at the Closing and to perform any obligations hereunder shall be
subject to the satisfaction as determined by, or waiver by, the Stockholders of
the following conditions on or before the Closing Date.
5.1 Purchase Agreement. The consummation of the transactions
contemplated by the Purchase Agreement shall have occurred at or prior to the
Closing.
5.2 Operation of Law. Consummation by the Company of the
acquisition of the Preferred Stock in exchange for the Notes shall not violate
Section 160 of the General Corporation Law of the State of Delaware.
5.3 Notes. The Company shall be prepared to deliver to the
Stockholders the principal amount of Notes set forth opposite such Stockholder's
name on Schedule 2.1 hereto, registered in the name of such Stockholder, as
applicable.
5.4 Subordination. The Stockholders, the Company and
Infogrames US shall have entered into a Subordination Agreement in form and
substance reasonably satisfactory to the Stockholders
5.5 Representations and Warranties. All of the representations
and warranties of the Company contained in Article 3 hereof shall be true and
correct in all material respects on the Closing Date, as if made by the Company
on such date.
ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligation of the Company to issue the Notes and the
obligation of the Company to perform its other obligations hereunder, shall be
subject to the satisfaction as determined by, or waiver by, the Company of the
following conditions on or before the Closing Date:
6.1 Purchase Agreement. The consummation of the transactions
contemplated by the Purchase Agreement shall have occurred at or prior to the
Closing.
6.2 Operation of Law. Consummation by the Company of the
acquisition of the Preferred Stock in exchange for the Notes shall not violate
Section 160 of the General Corporation Law of the State of Delaware.
6.3 Payment of Purchase Price. Each Stockholder shall be
prepared to deliver the Securities.
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6.4 Representations and Warranties. All of the representations
and warranties of the Stockholders contained in Article 4 hereof shall be true
and correct in all material respects on the Closing Date, as if made by the
Stockholders on such date.
ARTICLE 7
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees with the Stockholders
as follows:
7.1 No Disposition or Encumbrance of Securities. Each
Stockholder hereby covenants and agrees that from the date hereof until the
consummation of the transactions contemplated by the Purchase Agreement, except
as contemplated by this Agreement, such Stockholder shall not, and shall not
offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise
dispose of, or create or permit to exist any Lien with respect to, the
Securities, except to the extent resulting from the Voting Agreement.
7.2 Financial Statements and Other Information. The Company
shall deliver to each Stockholder at any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, upon request of such Stockholder,
information of the type that would satisfy the requirements of Rule 144(c)(2)
and Rule 144A(d)(4)(i) (or any similar successor-provisions thereof) under the
Securities Act.
7.3 Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issue or delivery upon conversion of the Notes, the
maximum number of shares of Common Stock that may be issuable or deliverable
upon such conversion; provided, however, that to the extent the Company, as of
the date hereof, has an insufficient number of authorized shares of Common Stock
reserved for issuance upon conversion of the Notes, the Company shall use
commercially reasonable efforts to take all actions necessary to increase and
reserve for issuance such number of authorized shares of Common Stock as is
equal to the maximum number of shares of Common Stock that may be issuable or
deliverable upon conversion of the Notes, which actions shall include preparing,
filing and mailing an information statement on Schedule 14C under the Securities
Exchange Act of 1934 as soon as practicable. The Company shall issue all such
shares of Common Stock in accordance with the terms of the Certificate of
Incorporation, as amended, and otherwise comply with the terms hereof and
thereof.
7.4 Registration and Listing. If any shares of Common Stock
required to be reserved for purposes of conversion of the Notes require
registration with or approval of any Governmental Authority under any Federal or
state or other applicable law before such shares of Common Stock may be issued
or delivered upon conversion, the Company will in good faith and as
expeditiously as possible cause such shares of Common Stock to be duly
registered or approved, as the case may be. The Stockholders will cooperate with
the Company, as necessary, in preparing any documents or making any filings in
connection with such registration or approval. So long as the Common Stock is
quoted on The Nasdaq Stock Market, Inc. or listed on any national securities
exchange, the Company will, if permitted by the rules of such system
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or exchange, quote or list and keep quoted or listed on such system or exchange,
upon official notice of issuance, all shares of Common Stock issuable or
deliverable upon conversion or exchange of the Notes.
7.5 Amendment of Warrant Agreement. The Company and the
Stockholders agree that the Warrant Agreement dated as of June 29, 1999 (the
"Warrant Agreement") among the Company and the holders named therein shall be
amended as follows:
(a) Section 4.3 of the Warrant Agreement shall be amended by
adding the following sentence to the end of the first
paragraph of such Section 4.3:
Notwithstanding any other provision of this Section 4.3,
to the extent any adjustment would arise pursuant to this
Section 4.3 as a result of consummation of the
transactions contemplated by the Securities Purchase
Agreement dated as of November 15, 1999 by and among the
Company, Infogrames Entertainment S.A. and California
U.S. Holdings, Inc., the number of additional shares of
Common Stock purchasable upon exercise of any Warrant due
to such adjustment shall be equal to the product of
1.6610 and the increase in the number of shares of Common
Stock purchasable upon exercise of the Warrants held by
the Administrative Agent and the Lenders issued pursuant
to the Warrant Agreement dated June 29, 1999 among the
Company, the Administrative Agent and the Lenders.
(b) The third sentence of Section 4.4 of the Warrant
Agreement shall be deleted in its entirety and substituting
therefor the following:
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, (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, and (f) to the extent any
adjustment would arise pursuant to this Section 4.4 as a
result of consummation of the transactions contemplated
by the Securities Purchase Agreement dated as of November
15, 1999 by and among the Company, Infogrames
Entertainment S.A. and California U.S. Holdings, Inc.,
the
10
<PAGE>
number of additional shares of Common Stock purchasable
upon exercise of any Warrant due to such adjustment shall
be equal to the product of 1.6610 and the increase in the
number of shares of Common Stock purchasable upon
exercise of the Warrants held by the Administrative Agent
and the Lenders issued pursuant to the Warrant Agreement
dated June 29, 1999 among the Company, the Administrative
Agent and the Lenders.
(c) Except as expressly amended pursuant to this Agreement,
the Warrant Agreement is and shall continue to be in full
force and effect in accordance with its terms.
7.6 Subordination. Each Stockholder agrees that the Short-Term
Note (as defined in the Purchase Agreement) shall be deemed for all purposes of
its respective Subordinated Note to be Senior Debt (as defined in the
Subordinated Note), including without limitation with respect to rights and
remedies of the holders of Senior Debt and the obligations of the Stockholders
as they relate to Senior Debt.
ARTICLE 8
TERMINATION OF AGREEMENT
8.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at any time on or prior to the Closing Date, by mutual
written consent of the Company and the Stockholders; or
(b) upon the termination of the Purchase Agreement; or
(c) at any time after September 30, 2000, by written notice
of either party.
If this Agreement so terminates, it shall become null and void
and have no further force or effect, except as provided in Section 8.2.
8.2 Survival. If this Agreement is terminated and the
transactions contemplated hereby are not consummated as described above, this
Agreement shall become void and of no further force and effect; except for the
provisions of this Section 8.2; provided, that none of the parties hereto shall
have any liability in respect of a termination of this Agreement pursuant to
Section 8.1(a) or Section 8.1(b); and provided, further, that none of the
parties hereto shall have any liability for speculative, indirect, unforeseeable
or consequential damages resulting from any legal action relating to this
Agreement or any termination of this Agreement.
11
<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 Survival of Representations and Warranties. The
representations and warranties made herein shall survive the execution and
delivery of this Agreement, notwithstanding any investigation made or
information obtained by the other party but shall terminate at Closing except
for those contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.3, 4.4 and
4.5 hereof and this Section 9.1 which shall survive beyond the Closing.
9.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Company, to:
GT Interactive Software Corp.
417 Fifth Avenue
New York, NY 10016
Telecopy: (212)
Attention: Chief Executive Officer
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Telecopy: (212) 715-8000
Attention: David P. Levin, Esq.
(b) if to the Stockholders, to:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered; when delivered
by
12
<PAGE>
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied.
9.3 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Stockholders may assign any of its rights, but not its obligations,
under this Agreement to any of its affiliates. The Company may not assign any of
its rights under this Agreement without the written consent of the Stockholders.
No Person other than the parties hereto and their successors and permitted
assigns is intended to be a beneficiary of this Agreement.
9.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the
Stockholders in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the
Company or the Stockholders at law, in equity or
otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision
of this Agreement, and any consent to any departure by the
Company or the Stockholders from the terms of any
provision of this Agreement, shall be effective only if it
is made or given in writing and signed by the Company and
the Stockholders. Except where notice is specifically
required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other
or further notice or demand in similar or other
circumstances.
9.5 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
9.6 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY 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.
9.8 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
13
<PAGE>
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
9.9 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, and the other Transaction Documents, is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits and schedules hereto and the other Transaction Documents,
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
9.10 Fees. Upon the Closing, the Company shall reimburse the
Stockholders for their reasonable fees, disbursements and other charges of
counsel incurred in connection with the transactions contemplated by this
Agreement.
9.11 Publicity. Except as may be required by applicable
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Stockholder
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Notes; and (c) to its attorneys, accountants, consultants and other advisors
to the extent necessary to obtain their services in connection with such
Stockholder's investment in the Company. GAP LLC may disclose on its worldwide
web page, www.gapartners.com, the name of the Company, its address, the identity
of the Chief Executive Officer, a description of the Company's business and the
aggregate dollar amount invested by the Stockholders in the Company; provided,
that GAP LLC shall not disclose any information pertaining to the transactions
contemplated under this Agreement or the Transaction Documents at any time prior
to the publication of a press release by the Company. If any announcement is
required by law to be made by any party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
9.12 Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
9.13 Registrable Securities. The parties hereby agree and
acknowledge that all of the shares of Common Stock issuable upon conversion of
the Notes constitute "Registrable Securities" within the meaning of the
Registration Rights Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Exchange Agreement to be executed and delivered by their respective
officers hereunto duly authorized on the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ THOMAS A. HEYMANN
---------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
GENERAL ATLANTIC PARTNERS 54, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ WILLIAM E. FORD
---------------------------------
Name: William E. Ford
Title: Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ WILLIAM E. FORD
---------------------------------
Name: William E. Ford
Title: General Partner
15
Exhibit 10.3
THIRD AMENDMENT, CONSENT, WAIVER AND AGREEMENT
THIS THIRD AMENDMENT, CONSENT, WAIVER AND AGREEMENT (this
"Amendment") is made and entered into as of this 15th day of November, 1999, by
and among GT Interactive Software Corp., a Delaware corporation, as Borrower,
the Lenders identified on the signature pages hereto, and First Union National
Bank, as Administrative Agent for the Lenders.
Statement of Purpose
Pursuant to the terms of the Credit Agreement dated as of
September 11, 1998 (as heretofore amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), by and among the Borrower, the lenders
parties thereto (the "Lenders") and the Administrative Agent, the Lenders agreed
to make certain Extensions of Credit to the Borrower as more particularly
described therein. Capitalized terms used herein and not otherwise defined shall
have their respective meanings set forth in the Credit Agreement.
The Borrower has requested that the Lenders agree to amend,
waive and consent under certain provisions of the Credit Agreement as set forth
more fully below.
Subject to the terms and conditions hereof, the Lenders are
willing to agree to such requested amendments, consents and waivers.
NOW THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS.
1.1 Amendments to Section 1.1 (Definitions). Section 1.1
of the Credit Agreement is hereby amended by:
(a) deleting in their entirety the definitions of the
following terms: "Acceptable Agreement", "Borrowing Base", "Guaranty Agreement",
"Pledge Agreement", "Security Agreement" and "Subordinated Debt"; and
(b) adding the following new defined terms in their
proper alphabetical order:
""Borrowing Base" means as of any date of determination, an
amount equal to the sum of (a) sixty percent (60%) of the aggregate
actual invoice amount of Eligible Accounts, plus (b) the lesser of (i)
fifty percent (50%) of the aggregate cost of Eligible Inventory and
(ii) $30,000,000, plus (c) during the
<PAGE>
period from the Second Amendment Effective Date through and including
the earlier to occur of (i) the Transaction Closing Date and (ii) the
Transaction Closing Expiration Date, $20,000,000, plus (d) 100% of the
aggregate amount of funds on deposit in the Concentration Account on
such date, less any checks outstanding on such date to be drawn against
such funds; provided that the percentages set forth in clauses (a), (b)
and (d) above may be adjusted, and the Borrowing Base otherwise
amended, supplemented or otherwise modified, in a manner satisfactory
to the Borrower and the Administrative Agent (with the consent of all
Lenders).
"Cayre Purchase Agreement" means the Equity Purchase and
Voting Agreement, dated as of November 15, 1999, among Infogrames,
Infogrames U.S. and the Cayres.
"Cayres" means, collectively, Joseph J. Cayre, Kenneth Cayre,
Stanley Cayre, Jack Cayre and certain trusts formed by the foregoing.
"Extension Event" means any of the following events:
(a) all waiting periods applicable to the Transaction
under the HSR Act shall not have expired or shall not have
been terminated;
(b) there shall be pending or threatened against the
Borrower, any of its Subsidiaries or Infogrames, any suit,
action or proceeding before any court, arbitrator or
administrative, governmental or regulatory authority or body,
domestic or foreign which, individually or in the aggregate,
would (i) reasonably be expected to have the effect of making
illegal or otherwise restraining or prohibiting the
Transaction or (ii) have a Material Adverse Effect; or
(c) a statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether temporary,
preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any United States, foreign, federal
or state court or governmental authority and shall be in
effect which prohibits, restrains, enjoins or restricts the
consummation of the Transaction.
"GAP" means the collective reference to General Atlantic
Partners 54, L.P., a Delaware limited partnership, and GAP Coinvestment
Partners II, L.P., a Delaware limited partnership.
"GAP Purchase Agreement" means the Equity Purchase and Voting
Agreement, dated as of November 15, 1999, among Infogrames, Infogrames
U.S. and GAP.
"GAP Securities Exchange Agreement" means the Securities
Exchange Agreement, dated as of November 15, 1999, among the Borrower
and GAP, in form and substance reasonably satisfactory to the Lenders,
pursuant to which,
<PAGE>
among other things, on the Transaction Closing Date the GAP
Subordinated Debt shall be issued in exchange for the Shareholder
Subordinated Notes in favor of GAP in the aggregate original principal
amount of $20,000,000 and the 600,000 shares of convertible preferred
stock of the Borrower held by GAP.
"GAP Subordinated Debt" means the $50,000,000 of unsecured
Subordinated Debt to be issued by the Borrower to GAP on the
Transaction Closing Date in exchange for 600,000 shares of convertible
preferred stock of the Borrower and $20,000,000 of Shareholder
Subordinated Debt, which issuance and exchange shall be in accordance
with, and subject to all of the terms and conditions contained in, the
GAP Subordinated Debt Notes and the GAP Securities Exchange Agreement.
"GAP Subordinated Debt Notes" means the promissory notes to be
executed by the Borrower on the Transaction Closing Date evidencing the
Borrower's obligations in respect of the GAP Subordinated Debt and
setting forth the terms of the subordination of the GAP Subordinated
Debt to the Obligations, all in form and substance reasonably
satisfactory to the Lenders.
"Guaranty Agreement" means the Amended and Restated
Unconditional Subsidiary Guaranty Agreement executed by the Guarantors
from time to time as required pursuant to Section 8.12, in favor of the
Administrative Agent, for the benefit of the Lenders and the
Administrative Agent, and Infogrames U.S., as amended, modified or
supplemented from time to time, substantially in the form of Exhibit I
attached hereto.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Infogrames" means Infogrames Entertainment SA, a societe
anonyme organized under the laws of France.
"Infogrames Bridge Loan" means the $25,000,000 of term Debt to
be provided to the Borrower by Infogrames U.S. on the Third Amendment
Effective Date in accordance with, and subject to all of the terms and
conditions contained in, the Infogrames Bridge Loan Note, and
guaranteed pursuant to the Guaranty Agreement and secured by Liens
pursuant to the Security Agreement and the Pledge Agreement which shall
be subordinated to the Liens securing the Obligations to the extent set
forth therein.
"Infogrames Bridge Loan Note" means the promissory note to be
executed on the Third Amendment Effective Date by the Borrower
evidencing the Borrower's obligations in respect of the Infogrames
Bridge Loan, all in form and substance reasonably satisfactory to the
Lenders.
"Infogrames Securities Purchase Agreement" means the
Securities Purchase Agreement, dated as of November 15, 1999, by and
among the Borrower, Infogrames and Infogrames U.S., in form and
substance reasonably
<PAGE>
satisfactory to the Lenders, pursuant to which, among other things, on
the Transaction Closing Date the Infogrames Subordinated Debt and
approximately 28,600,000 shares of the Borrower's common stock will be
issued to Infogrames.
"Infogrames Subordinated Debt" means the approximately
$60,500,000 of unsecured Subordinated Debt to be provided to the
Borrower by Infogrames U.S. on the Transaction Closing Date (a portion
of the proceeds of which shall be used on the Transaction Closing Date
to repay the Borrower's obligations in respect of (a) the Infogrames
Bridge Loan and (b) approximately $10,000,000 of the Shareholder
Subordinated Debt), all in accordance with, and subject to all of the
terms and conditions contained in, the Infogrames Subordinated Debt
Note, the Infogrames Bridge Loan Note, the Cayre Purchase Agreement and
the Infogrames Securities Purchase Agreement.
"Infogrames Subordinated Debt Note" means the promissory note
to be executed by the Borrower on the Transaction Closing Date
evidencing the Borrower's obligations in respect of the Infogrames
Subordinated Debt and setting forth the terms of the subordination of
the Infogrames Subordinated Debt to the Obligations, all in form and
substance reasonably satisfactory to the Lenders.
"Infogrames U.S." means California U.S. Holdings, Inc., a
California corporation and a wholly-owned Subsidiary of Infogrames.
"Information Statement" means the Information Statement on
Schedule 14-C under the Securities Exchange Act of 1934, as amended,
with respect to the Shareholder Approval in respect of the shares of
common stock to be issued to Infogrames pursuant to the Transaction,
including any supplements or exhibits thereto and any amendments
thereof.
"Pledge Agreement" means the Second Amended and Restated
Pledge Agreement, dated as of November 15, 1999, executed by the
Borrower and the Guarantors named therein in favor of the
Administrative Agent, for the benefit of the Lenders and the
Administrative Agent, and Infogrames U.S., as amended, modified or
supplemented from time to time.
"Refinancing" means a refinancing or other transaction
pursuant to which the Obligations will be paid in full in cash (and any
outstanding Letters of Credit will be cash collateralized in the manner
set forth in Section 2.5(c)) on the date of closing of such refinancing
or other transaction pursuant to documentation in form and substance
reasonably satisfactory to the Lenders.
"Refinancing Closing Date" means the date on which a
Refinancing shall
<PAGE>
have been consummated.
"Security Agreement" means the Second Amended and Restated
Security Agreement, dated as of November 15, 1999, executed by the
Borrower and the Guarantors in favor of the Administrative Agent, for
the benefit of the Lenders and the Administrative Agent, and Infogrames
U.S., as amended, modified or supplemented from time to time.
"Shareholder Approval" means approval of the Transaction by
the holders of the common stock of the Borrower as required by the
rules promulgated by The Nasdaq Stock Market, Inc.
"Subordinated Debt" means the collective reference to Debt on
Schedule 6.1(t) hereof designated as Subordinated Debt, the Shareholder
Subordinated Debt, the Infogrames Subordinated Debt, the GAP
Subordinated Debt and any other Debt of the Borrower or any Subsidiary
subordinated in right and time of payment to the Obligations and
containing such other terms and conditions, all as reasonably
satisfactory to the Required Lenders.
"Third Amendment" means the Third Amendment, Consent, Waiver
and Agreement, dated as of November 15, 1999, to this Agreement.
"Third Amendment Effective Date" means the Effective Date
under and as defined in the Third Amendment.
"Transaction" means the series of transactions to be
consummated on the Transaction Closing Date pursuant to which, among
other things:
(a) the Borrower shall issue approximately
28,600,000 shares of its common stock to Infogrames U.S. in
exchange for $50,000,000 in cash pursuant to the Infogrames
Securities Purchase Agreement;
(b) Infogrames U.S. shall acquire warrants to
purchase approximately 4,500,000 shares of common stock of the
Borrower from GAP pursuant to the GAP Purchase Agreement;
(c) the Borrower shall receive $50,000,000 from the
proceeds of the Infogrames Subordinated Debt pursuant to the
Infogrames Subordinated Debt Note;
(d) the Borrower's obligations in respect of the
Infogrames Bridge Loan shall be repaid in full from a portion
of the proceeds (or pursuant to an exchange in connection with
the issuance) of the Infogrames Subordinated Debt, and the
Infogrames Bridge Loan Note shall be cancelled, pursuant to
the Infogrames Securities Purchase Agreement and the Liens in
respect of the Infogrames Bridge Loan shall be released;
(e) the Shareholder Subordinated Notes in favor of
GAP in the
<PAGE>
aggregate original principal amount of $20,000,000 and the
600,000 shares of convertible preferred stock of the Borrower
held by GAP shall be exchanged for the GAP Subordinated Notes
pursuant to the GAP Securities Exchange Agreement, and such
Shareholder Subordinated Notes shall be cancelled;
(f) Infogrames U.S. shall acquire approximately
33,500,000 shares of common stock of the Borrower from the
Cayres pursuant to the Cayre Purchase Agreement; and
(g) the Shareholder Subordinated Notes in favor of
each of Joseph J. Cayre, Kenneth Cayre and Stanley Cayre in
the aggregate original principal amount of $10,000,000 shall
be transferred to Infogrames U.S. and exchanged by Infogrames
U.S. for a portion of the Infogrames Subordinated Note
pursuant to the Cayre Purchase Agreement and the Infogrames
Securities Purchase Agreement, and such Shareholder
Subordinated Notes shall be cancelled.
"Transaction Closing Date" means the date on or prior to the
Transaction Closing Expiration Date on which (a) all of the conditions
precedent to the effectiveness of the Transaction Documentation shall
have been satisfied or waived in accordance with their respective
terms, (b) the Transaction shall have been consummated in accordance
with the terms of the Transaction Documentation and (c) the Aggregate
Commitment shall have been reduced to $75,000,000 and any outstanding
Loans or Letters of Credit in excess of the Aggregate Commitment (as so
reduced) shall be repaid or cash collateralized in accordance with
Section 2.5(c).
"Transaction Closing Expiration Date" means (a) January 1,
2000, if no Shareholder Approval is required, provided that if (x) the
Transaction Closing Date shall not have occurred on or prior to January
1, 2000 solely by reason of an Extension Event, (y) the Borrower and
its Subsidiaries shall have complied at all times with Section 8.16 and
(z) all of the conditions to the closing of the Transaction under the
Transaction Documentation shall have been satisfied or waived (other
than with respect to such Extension Event), the Transaction Closing
Expiration Date shall be automatically extended to January 31, 2000 or
(b) January 31, 2000, if Shareholder Approval is required.
"Transaction Documentation" means, collectively, the
Infogrames Securities Purchase Agreement, the Infogrames Subordinated
Note, the GAP Securities Exchange Agreement, the GAP Subordinated Note,
the GAP Purchase Agreement, the Cayre Purchase Agreement and all
schedules, exhibits and annexes to the foregoing and all side letters
and agreements affecting the terms
<PAGE>
of the foregoing or entered into in connection with the foregoing, in
each case as amended, supplemented or otherwise modified from time to
time in accordance with Section 10.13.".
1.2 Amendment to Section 2.3 (Repayment of the Loans). Section
2.3(e) of the Credit Agreement is hereby amended by deleting in its entirety
said Section and substituting therefor a new Section 2.3(e) as follows:
"(e) Concentration Account. The outstanding principal
amount of the Loans shall be prepaid on each Business Day
prior to the occurrence of the Transaction Closing Date, to
the extent that funds on deposit in the Concentration Account
on such Business Day exceed $1,000,000. Amounts prepaid
pursuant to this paragraph (e) may be reborrowed.".
1.3 Amendment to Section 2.5 (Permanent Reduction of the
Aggregate Commitments). Section 2.5(b) of the Credit Agreement is hereby amended
by adding a new sentence at the end of said Section as follows: "On the
Transaction Closing Date, the Aggregate Commitment shall automatically be
permanently reduced to the lesser of $75,000,000 or the Aggregate Commitment on
such date.".
1.4 Amendment to Section 2.6 (Termination of Credit Facility).
Section 2.6 of the Credit Agreement is hereby amended by deleting the reference
to "June 30, 2000" contained in said Section and substituting therefor a
reference to "March 31, 2000".
1.5 Amendment to Section 4.1 (Interest). Section 4.1 of
the Credit Agreement is hereby amended by:
(a) deleting in its entirety the first sentence of
paragraph (a) of said Section and substituting therefor the following:
"Subject to the provisions of this Section 4.1, at the
election of the Borrower at any time prior to the occurrence
of the Transaction Closing Date, the aggregate principal
balance of (i) the Loans or any portion thereof denominated in
Dollars shall bear interest at (A) the Base Rate plus 2.5% or
(B) the LIBOR Rate plus 4% and (ii) the Loans or any portion
thereof denominated in an Alternative Currency shall bear
interest at the LIBOR Rate plus 4%; provided that on and after
the occurrence of the Transaction Closing Date the aggregate
principal balance of (i) the Loans or any portion thereof
denominated in Dollars shall bear interest at (A) the Base
Rate plus 1% or (B) the LIBOR Rate plus 2.5% and (ii) the
Loans or any portion thereof denominated in an Alternative
Currency shall bear interest at the LIBOR Rate plus 2.5%.";
and
(b) amending paragraph (d) of said Section by:
(i) deleting in its entirety the phrase "at the
discretion of the Administrative Agent and Required Lenders,"
contained in the first
<PAGE>
sentence in said paragraph;
(ii) adding immediately after the phrase "rate per
annum" contained in clause (ii) of said paragraph the words
"equal to"; and
(iii) deleting each reference to "two percent (2%)"
contained in said paragraph and substituting therefor the
phrase "(A) two percent (2%), at any time prior to the
occurrence of the Transaction Closing Date, and (B) three and
one-half percent (3 1/2%), at any time on or after the
occurrence of the Transaction Closing Date,".
1.6 Amendment to Section 4.3 (Fees). Section 4.3 of the Credit
Agreement is hereby amended by adding a new paragraph (d) at the end of said
Section as follows:
"(d) On and after the Transaction Closing Date, the
Borrower shall pay to the Administrative Agent, for the
account of the Lenders, an Aggregate Commitment usage fee in
the amount of $100,000 for each month that any Loans or
Letters of Credit remain outstanding. The usage fee shall be
payable in arrears on each monthly anniversary of the
Transaction Closing Date, commencing with the first monthly
anniversary of the Transaction Closing Date, and on the
Refinancing Closing Date, provided that the usage fee payable
on the Refinancing Closing Date shall be pro rated for the
number of days elapsed from the immediately preceding
scheduled payment date of such usage fee.".
1.7 Amendment to Section 7.1 (Financial Statements and
Projections). Section 7.1(e) of the Credit Agreement is hereby amended by
deleting the phrase "to consummate a transaction pursuant to an Acceptable
Agreement" contained in clause (i)(B) of said Section and substituting therefor
the phrase "(y) to pursue and consummate the Refinancing and (z) to consummate
the Transaction pursuant to the Transaction Documentation".
1.8 Amendment to Article VIII (Affirmative Covenants). Article
VIII of the Credit Agreement is hereby amended by deleting in its entirety
Section 8.16 contained in said Article and substituting therefor new Sections
8.16 and 8.17 as follows:
"SECTION 8.16 Pursuit of Closing of Transaction. Each
of the Borrower and its Subsidiaries shall use its reasonable
best efforts to consummate expeditiously the Transaction,
including without limitation, (a) to obtain, and to expedite
the process to obtain, any permits, authorizations, consents
and approvals as may be required under the HSR Act in respect
of the Transaction, and (b) if Shareholder Approval is
necessary, to expedite the preparation and filing of the
Information Statement with the United States Securities and
Exchange Commission, and, in connection therewith, the
Borrower shall provide such information as reasonably
requested by the Administrative Agent or the Lenders to review
and discuss such efforts.
<PAGE>
SECTION 8.17 Pursuit of Refinancing. Each of the
Borrower and its Subsidiaries shall use its reasonable best
efforts to pursue and consummate expeditiously the Refinancing
and, in connection therewith, the Borrower shall provide such
information as reasonably requested by the Administrative
Agent or the Lenders to review and discuss such efforts.".
1.9 Amendment to Article X (Negative Covenants). Article
X of the Credit Agreement is hereby amended by:
(a) deleting in its entirety the proviso contained at the
end of Section 10.1(c) of said Article; and
(b) deleting in its entirety Section 10.13 contained in
said Article and substituting therefor a new Sections 10.13 as follows:
"SECTION 10.13 Amendments; Payments and Prepayments
of Infogrames Bridge Loan. Amend or modify in any material
respect (or permit such modification or amendment of) any of
the terms or provisions of the Infogrames Bridge Loan Note, or
cancel or forgive, make any voluntary or optional payment or
prepayment on, or redeem or acquire for value the Infogrames
Bridge Loan except for payment in full on the Transaction
Closing Date or otherwise in accordance with, and subject to,
the terms of the Security Documents.".
1.10 Amendment to Section 11.1 (Events of Default).
Section 11.1 of the Credit Agreement is hereby amended by:
(a) adding immediately prior to the period at the end of
paragraph (i) of said Section the phrase ", other than any such Change
of Control resulting solely from the consummation of the Transaction on
the Transaction Closing Date"; and
(b) adding new paragraph (p) and (q) at the end of said
Section as follows:
"(p) Any term or provision of the Transaction
Documentation shall have been amended, modified, waived or
changed in any material respect.
(q) (i) On the Transaction Closing Date, the
Infogrames Bridge Loan shall not have been repaid with the
proceeds of the Infogrames Subordinated Debt and the
Infogrames Bridge Loan Note shall not have been cancelled,
(ii) the Transaction Closing Date shall not have occurred
<PAGE>
on or prior to the Transaction Closing Expiration Date or
(iii) prior to the occurrence of the Transaction Closing Date,
any material Transaction Documentation shall be terminated.".
SECTION 2. CONSENTS.
2.1 Consent to Infogrames Bridge Loan. Effective as of the
Effective Date, the Lenders hereby consent under Sections 10.1 (Limitations on
Debt) and 10.3 (Limitations on Liens) of the Credit Agreement solely to the
extent necessary to permit (a) the Borrower (i) to incur the Infogrames Bridge
Loan and (ii) to execute and deliver the Infogrames Bridge Loan Note and (b) to
permit the Guarantors to guarantee the Infogrames Bridge Loan pursuant to the
Guaranty Agreement and to permit the Borrower and its Subsidiaries to grant
Liens in favor of Infogrames U.S. pursuant to the Pledge Agreement and the
Security Agreement; provided that such consent is conditioned upon the
following: (a) after giving effect to this Amendment, no Default or Event of
Default shall then have occurred and be continuing or would result from the
incurrence of the Infogrames Bridge Loan or the execution and delivery of the
Infogrames Bridge Loan Note and the Security Documents and (b) within one
Business Day after receipt of the Net Cash Proceeds of the Infogrames Bridge
Loan, the Borrower shall apply such Net Cash Proceeds to the repayment of the
outstanding Loans (it being understood that, notwithstanding Section 2.5(b) of
the Credit Agreement, any amounts so prepaid may be reborrowed subject to, and
in accordance with, the terms of the Credit Agreement).
2.2 Consent to Transaction. Effective as of the Effective
Date, the Lenders hereby consent under the Credit Agreement solely to the extent
necessary to permit the Borrower to consummate the Transaction in accordance
with the terms of the Transaction Documentation; provided that such consent is
conditioned upon the following: (a) after giving effect to this Amendment, no
Default or Event of Default shall then have occurred and be continuing or would
result from the consummation of the Transaction and (b) the Aggregate Commitment
shall have been reduced to $75,000,000 in accordance with the terms of Section
2.5(b) of the Credit Agreement (as amended by this Amendment) and the Borrower
shall comply on the Transaction Closing Date with the provisions of Section
2.5(c) of the Credit Agreement to the extent the aggregate outstanding
Extensions of the Credit of the Lenders on such date exceeds the Aggregate
Commitment as so reduced.
SECTION 3. WAIVERS.
3.1 Waiver of Section 2.5(b) (Mandatory Permanent Reduction).
Effective as of the Effective Date, the Lenders hereby waive application of
Section 2.5(b) of the Credit Agreement to the Net Cash Proceeds of the
Transaction, but solely to the extent of the Net Cash Proceeds of the
Transaction in excess of the amount required to be applied by the Borrower to
the repayment of the Loans on the Transaction Closing Date in accordance with
Section 2.5(c) of the Credit Agreement as a result of the reduction of the
Aggregate Commitment to $75,000,000 on the Transaction Closing
<PAGE>
Date in accordance with Section 2.5(b) of the Credit Agreement (as amended by
this Amendment); provided that such waiver is conditioned upon the following:
(a) within one Business Day after the Borrower's receipt thereof, such Net Cash
Proceeds are deposited into the Concentration Account and (b) after giving
effect to this Amendment, no Default or Event of Default shall have occurred and
be continuing or would result from the consummation of the Transaction.
3.2 Waiver of Section 9.1 (EBITDA). Effective as of the
Effective Date, the Lenders hereby waive, through the earlier of (a) the
Transaction Closing Expiration Date and (b) the occurrence of the event
described in Section 11.1(q)(iii) of the Credit Agreement (as amended by this
Amendment), any Default or Event of Default that may arise by reason of the
failure of the Borrower to comply with Section 9.1 of the Credit Agreement for
the periods from April 1, 1999 through September 30, 1999 and from April 1, 1999
through October 31, 1999, provided that if the Transaction Closing Date shall
have occurred prior to the Transaction Closing Expiration Date, (y) the
effectiveness of the foregoing waivers shall be automatically extended to the
Revolving Credit Termination Date and (z) the Lenders hereby waive, through the
Revolving Credit Termination Date, any Default or Event of Default that may
arise by reason of the failure of the Borrower to comply with Section 9.1 of the
Credit Agreement for the period from April 1, 1999 through December 31, 1999.
SECTION 4. AGREEMENT.
If the Borrower determines that the Transaction Closing Date
shall not occur on or prior to the Transaction Closing Expiration Date, the
Lenders agree to consider and discuss in good faith any proposal that the
Borrower determines to make to amend or waive Section 11.1(q)(ii) of the Credit
Agreement. The Agreement of the Lenders to consider and discuss in good faith
any proposal set forth in the preceding sentence shall not constitute the
Lenders' consent or indicate their willingness to at any time consent to any
such proposal or any amendment or waiver of Section 11.1(q)(ii) of the Credit
Agreement regardless of whether the Borrower and its Subsidiaries may at all
times have complied with Section 8.16 of the Credit Agreement.
SECTION 5. MISCELLANEOUS.
5.1 Representations and Warranties; No Default. (a) After
giving effect to this Amendment, the Borrower hereby represents and warrants
that (i) all representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct on and as of the Effective
Date (unless stated to relate to a specific earlier date, in which case, such
representations and warranties shall be true and correct as of such earlier
date) and (ii) no Default or Event of Default shall have occurred and be
continuing or would result from the execution and delivery of this
<PAGE>
Amendment.
(b) The Borrower hereby further represents and warrants that
it has duly executed and delivered the Transaction Documentation and that the
representations and warranties of the Borrower and the other parties thereto
contained in the Transaction Documentation are true and correct in all material
respects as of the date hereof.
(c) The Borrower hereby further represents and warrants that
it is truly and justly indebted to the Administrative Agent and the Lenders in
respect of the Obligations, without defense, counterclaim or offset of any kind.
5.2 Payment of Fees and Expenses. (a) The Borrower shall pay
to the Administrative Agent, for the account of the Lenders, a waiver and
amendment fee equal to $500,000 (the "Amendment Fee"), which shall be fully
earned on the Effective Date and payable on the Revolving Credit Termination
Date; provided that (i) if the Transaction Closing Date shall have occurred on
or prior to the Transaction Closing Expiration Date, the Amendment Fee payable
on the Revolving Credit Termination Date shall be reduced to $250,000 and (ii)
if the Amendment Fee has been reduced pursuant to the foregoing clause (i) and
the Refinancing Closing Date shall have occurred within (A) sixty days after the
occurrence of the Transaction Closing Date, if no Shareholder Approval is
required, or (B) forty-five days after the occurrence of the Transaction Closing
Date, if Shareholder Approval is required, the Amendment Fee shall be reduced to
$0. Payment of the Amendment Fee shall be in addition to any and all other fees
and expenses required to be paid from time to time by the Borrower to the
Administrative Agent and/or the Lenders pursuant to this Amendment, the Credit
Agreement or the other Loan Documents.
(b) The Borrower hereby agrees to pay all reasonable costs,
fees and expenses of the Administrative Agent and each Lender, including the
fees and expenses of financial advisors retained by the Administrative Agent and
counsel retained by the Administrative Agent and each Lender, in each case
incurred in connection with the transactions contemplated by this Amendment.
5.3 Conditions to Effectiveness of this Amendment. This
Amendment shall become effective on the date (the " Effective Date") on which
the Administrative Agent shall have received:
(a) counterparts of this Amendment duly executed by the
Borrower and the Lenders;
(b) (i) duly executed copies of (A) the Security Agreement,
the Pledge Agreement and the Guaranty Agreement, (B) the Infogrames Bridge Loan
Note and (C) the other Transaction Documentation, in each case in form and
substance reasonably satisfactory to the Lenders and (ii) any other agreements
and documents reasonably requested by the Lenders;
(c) payment in full of all fees and other amounts due and
payable
<PAGE>
pursuant to the Credit Agreement and this Amendment, including reimbursement or
payment of all reasonable fees and expenses of financial advisors retained by
the Administrative Agent and counsel retained by the Administrative Agent and
each Lender that, in each case, has been invoiced to the Borrower;
(d) a letter, executed by the Borrower, as to the status of
the Borrower's ongoing efforts to obtain a definitive offer for the sale of
Humongous Entertainment, Inc.; and
(e) a letter, executed by Infogrames, as to its commitment to
use its reasonable best efforts to pursue and consummate expeditiously the
Refinancing.
5.4 Continuing Effect; No Other Amendments or Waivers. Except
as expressly amended pursuant to this Amendment, the Credit Agreement is and
shall continue to be in full force and effect in accordance with its terms, and
this Amendment shall not constitute the Lenders' consent or indicate their
willingness to consent to any other amendment, modification or waiver of the
Credit Agreement or the other Loan Documents, including without limitation, any
amendment, modification or waiver of any Section amended or waived pursuant to
this Amendment for any other date or time period or in connection with any other
transaction.
5.5 Counterparts. This Amendment may be executed by the
parties hereto on one or more counterparts, and all of such counterparts shall
be deemed to constitute one and the same instrument. This Amendment may be
delivered by facsimile transmission of the relevant signature pages hereof.
5.6 Governing Law. This Amendment shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ THOMAS A. HEYMANN
--------------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
FIRST UNION NATIONAL BANK, as
Administrative Agent and Lender
By: /s/ JOHN McGOWAN
--------------------------------------
Name: John McGowan
Title: Senior Vice President
BANK OF AMERICA, N.A.
By: /s/ JAY T. WAMPLER
--------------------------------------
Name: Jay T. Wampler
Title: Managing Director
EUROPEAN AMERICAN BANK
By: /s/ JOSEPHINE SAVASTANO
--------------------------------------
Name: Josephine Savastano
Title: Vice President
FLEET BANK, N.A.
By: /s/ VINCENT PITTS
--------------------------------------
Name: Vincent Pitts
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ KAREN A. GREXA
--------------------------------------
Name: Karen A. Grexa
Title: Vice President
By: /s/ TIMOTHY SMITH
--------------------------------------
Name: Timothy Smith
Title: Vice President and Manager
THE BANK OF NOVA SCOTIA
By: /s/ B. S. ALLEN
--------------------------------------
Name: B. S. Allen
Title: Managing Director
Exhibit 10.4
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (as
amended, restated, supplemented or otherwise modified, this "Agreement"), dated
as of November 15, 1999, by and among GT Interactive Software Corp. (the
"Borrower") and certain of its subsidiaries identified on the signature pages
attached hereto (together with the Borrower and each additional subsidiary who
becomes a party hereto pursuant to a Joinder Agreement, the "Grantors", each
individually, a "Grantor"), First Union National Bank, a national banking
association, as administrative agent (the "Administrative Agent"), for the
ratable benefit of the Administrative Agent and the financial institutions who
are or may from time to time become parties to the Credit Agreement referred to
below (the "Lenders") and California U.S. Holdings, Inc. ("Infogrames U.S."), a
wholly-owned Subsidiary of Infogrames Entertainment, SA, a societe anonyme
organized under the laws of France.
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, dated as of
September 11, 1998 (as amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the Lenders and the
Administrative Agent, the Lenders agreed to make certain Extensions of Credit to
the Borrower as more particularly described therein.
In connection with the execution and delivery of the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent a Security Agreement, dated as of September 11, 1998 (as amended,
restated, supplemented or otherwise modified prior to June 29, 1999, the
"Existing Security Agreement"), pursuant to which the Borrower granted to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, security interests in the Collateral to secure the
Obligations (as such terms are defined in the Existing Security Agreement).
In connection with the execution and delivery of the Second
Amendment, Waiver and Agreement, dated as of June 29, 1999, under the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent, for the ratable benefit of the Lenders and the Administrative Agent, an
Amended and Restated Security Agreement, dated as of June 29, 1999 (as
heretofore amended, restated, supplemented or otherwise modified, the "Amended
and Restated Security Agreement"), pursuant to which the Borrower (i) reaffirmed
its previous grant to the Administrative Agent, for the ratable benefit of the
Lenders and the Administrative Agent, of security interests in the Collateral
under, and as defined in, the Existing Security Agreement and (ii) granted to
the Administrative Agent, for the ratable benefit of the Lenders and
<PAGE>
the Administrative Agent, security interests in the Collateral to secure the
Obligations (as such terms are defined in the Amended and Restated Security
Agreement).
The Borrower has advised the Administrative Agent and the
Lenders that Infogrames U.S. has agreed to provide a term loan to the Borrower
in the original principal amount of $25,000,000 (the "Infogrames Bridge Loan"),
as evidenced by, and pursuant to the provisions of, a term note, dated November
15, 1999 (the "Infogrames Bridge Loan Note"), by the Borrower in favor of
Infogrames U.S. and secured by security interests in substantially all of the
assets of the Borrower and the Guarantors, which security interests shall be
junior and subordinate to the extent set forth herein to the security interests
granted to the Administrative Agent, for the ratable benefit of the Lenders and
the Administrative Agent, in the Existing Security Agreement, the Amended and
Restated Security Agreement and this Agreement.
In connection with, among other things, the incurrence of the
Infogrames Bridge Loan and the execution and delivery of the Infogrames Bridge
Loan Note, the Borrower, the Lenders and the Administrative Agent have agreed to
execute a Third Amendment, Consent, Waiver and Agreement, dated as of November
15, 1999 (the "Third Amendment"), under the Credit Agreement to, among other
things, amend and waive certain provisions thereof and consent to the incurrence
of the Infogrames Bridge Loan and the grant of the security interests in favor
of Infogrames U.S. as more fully set forth below.
In connection with the transactions contemplated by the Third
Amendment and the Infogrames Bridge Loan Note and as a condition precedent
thereto, the Borrower and Infogrames U.S. have requested that the Amended and
Restated Security Agreement be further amended and restated, and that each
Grantor execute and deliver this Agreement to the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, and to Infogrames
U.S., and each of the Grantors has agreed to do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
to induce (i) the Administrative Agent and the Lenders to enter into the Third
Amendment and (ii) Infogrames U.S. to make the Infogrames Bridge Loan, each of
the parties hereto hereby agrees as follows:
2
<PAGE>
SECTION 1. Definitions.
(a) Terms defined in the Credit Agreement and not otherwise
defined herein, when used in this Agreement including its preamble and recitals,
shall have the respective meanings provided for in the Credit Agreement, and the
following terms which are defined in the UCC are used herein as so defined:
Chattel Paper, Documents, Equipment, Instruments and Investment Property. The
following additional terms, when used in this Agreement, shall have the
following meanings:
"Account Debtor" means any Person who is or may become
obligated to any Grantor under, with respect to, or on account of, an
Account.
"Accounts" means collectively, all rights to payment for goods
sold or leased or for services rendered or to be rendered, whether or
not earned by performance, and all sums of money or other proceeds due
or becoming due thereon, including, without limitation, "Accounts" as
defined in the UCC, whether secured or unsecured, now existing or
hereafter created, now or hereafter owned or acquired by any Grantor or
in which any Grantor now or hereafter has or acquires any right or
interest.
"Accounts Aging Report" means an aged trial balance of all
Accounts existing as of a specified date, in a form reasonably
satisfactory to the Administrative Agent and Infogrames U.S.,
specifying the names, addresses, face value and dates of invoices of
each Account Debtor obligated on any Accounts so listed.
"Bank Obligations" means the Grantors' obligations under the
Loan Documents in respect of the unpaid principal of and interest on
the Notes (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans, the Letters of Credit or the L/C Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to any
Grantor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and all other obligations and
liabilities of the Grantors to the Administrative Agent, the Issuing
Lender and the Lenders in respect of the Loans, the Notes, the Letters
of Credit, the L/C Obligations, any Hedging Agreements permitted or
required under the Credit Agreement, the
3
<PAGE>
Concentration Account or any cash management arrangements with any
Lender, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit Agreement, the Notes,
the Letters of Credit, the L/C Obligations, any Hedging Agreements
permitted or required under the Credit Agreement, this Agreement, the
other Loan Documents or any other document made, delivered or given in
connection herewith in respect of the Bank Obligations or therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Administrative Agent, the Issuing Lender or the Lenders that are
required to be paid by any Grantor pursuant to the terms of the Credit
Agreement, this Agreement or any other Loan Document).
"Bridge Obligations" means the Grantors' obligations under the
Infogrames Bridge Loan Documents in respect of the unpaid principal of
and interest on the Infogrames Bridge Loan Note (including, without
limitation, interest accruing at the then applicable rate provided in
the Infogrames Bridge Loan Note after the maturity of the Infogrames
Bridge Loan and interest accruing at the then applicable rate provided
in the Infogrames Bridge Loan Note after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Grantor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of the Grantors to Infogrames
U.S. in respect of the Infogrames Bridge Loan or the Infogrames Bridge
Loan Note, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Infogrames Bridge Loan Note
or the other Infogrames Bridge Loan Documents, in each case whether on
account of principal, interest, fees, indemnities, costs, expenses or
otherwise (including, without limitation, (a) the obligations of the
Borrower under the Infogrames Securities Purchase Agreement to pay or
reimburse Infogrames or Infogrames U.S. for costs and expenses
(including without limitation, reasonable fees and disbursements of
counsel to Infogrames or Infogrames U.S.) incurred or paid by
Infogrames or Infogrames U.S. in
4
<PAGE>
connection with the Infogrames Securities Purchase Agreement and (b)
all reasonable fees and disbursements of counsel to Infogrames U.S.
that are required to be paid by any Grantor pursuant to the terms of
the Infogrames Bridge Loan Note or any other Infogrames Bridge Loan
Document).
"Collateral" shall have the meaning given such term in Section
2(a).
"Collateral Account" means any cash collateral account
established by any of the Grantors with the Administrative Agent, in
the name and under the exclusive dominion and control of the
Administrative Agent, pursuant to Section 6 .
"Contracts" means all contracts and agreements listed on
Schedule 1, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (a) all
rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of any Grantor to
damages arising thereunder and (c) all rights of any Grantor to perform
and to exercise all remedies thereunder, in each case, to the extent
the grant by such Grantor of a security interest pursuant to this
Agreement in its right, title and interest in such contract or
agreement is not prohibited thereby.
"Copyright License" means any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed on Schedule 2) granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.
"Copyrights" means (a) all copyrights of any Grantor arising
under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished (including, without limitation, those listed
on Schedule 2) all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
all registrations, recordings and applications in the United States
Copyright Office and (b) the right to obtain all renewals thereof.
"Deposit Accounts" means all "Deposit Accounts" (as defined in
the UCC) established by any Grantor, including, without limitation, the
deposit accounts listed on Schedule 3 hereto and any other deposit
accounts established by any
5
<PAGE>
Grantor after the date hereof.
"Event of Default" means an Event of Default under, and as
defined in, the Credit Agreement or the Infogrames Bridge Loan Note.
"Financing Statements" means the Uniform Commercial Code Form
UCC-1 Financing Statements (or, with respect to any Foreign Subsidiary,
any filing required by the applicable foreign jurisdiction) executed by
the Grantors with respect to the Collateral and filed or to be filed in
the jurisdictions set forth in the Perfection Certificate.
"General Intangibles" means all "General Intangibles" (as
defined in the UCC) of any Grantor, including, without limitation, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (a) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights
of such Grantor to damages arising thereunder and (c) all rights of
such Grantor to perform and to exercise all remedies thereunder, in
each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture is not prohibited by
such contract, agreement, instrument or indenture without the consent
of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall
not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Account or any money or other amounts
due or to become due under any such contract, agreement, instrument or
indenture.
6
<PAGE>
"Infogrames Bridge Loan Documents" means the Infogrames Bridge
Loan Note, the Guaranty Agreement, the Pledge Agreement and this
Agreement.
"Intellectual Property" means all rights, priorities and
privileges of any Grantor relating to intellectual property, whether
arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Inventory" means all "Inventory" (as defined in the UCC) of
any Grantor wherever located, including, without limitation, all goods
manufactured or acquired for sale or lease and all raw materials,
work-in-process and finished goods, and all supplies and goods, used or
consumed in the operation of the business of any Grantor, whether now
or hereafter owned or acquired by any Grantor or in which such Grantor
now or hereafter has or acquires any right or interest.
"Obligations" means, collectively, the Bank Obligations and
the Bridge Obligations.
"Patent License" means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by a
Patent (including, without limitation, any of the foregoing referred to
on Schedule 2).
"Patents" means (a) all of any Grantor's letters patent of the
United States, any other country or any political subdivision thereof,
all reissues and extensions thereof and all goodwill associated
therewith (including, without limitation, any of the foregoing referred
to on Schedule 2), (b) all of any Grantor's applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, including, without
limitation, any of the foregoing referred to on Schedule 2 and (c) all
rights to obtain any reissues or extensions of the foregoing.
"Permitted Liens" means all Liens respecting the Collateral
permitted pursuant to Section 10.3 of the Credit
7
<PAGE>
Agreement.
"Perfection Certificate" means a certificate substantially in
the form of Exhibit A attached hereto, setting forth the corporate or
other names, chief executive office or principal place of business in
each state and other current locations of each Grantor and such other
information as the Administrative Agent or Infogrames U.S., as the case
may be, deems reasonably necessary for the perfection of the security
interests granted to it hereunder, completed and supplemented with the
schedules and attachments contemplated thereby to the reasonable
satisfaction of the Administrative Agent or Infogrames U.S., as the
case may be, and certified by the Chief Executive Officer, President,
any Executive Vice President, Chief Financial Officer or Treasurer of
each Grantor so authorized to act.
"Proceeds" means all "Proceeds" (as defined in the UCC) of any
Grantor and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property of any Grantor,
collections thereon or distributions or payments with respect thereto.
"Schedule of Inventory" means a schedule of Inventory based
upon each Grantor's most recent physical inventory and its perpetual
inventory records, in a form reasonably satisfactory to the
Administrative Agent and Infogrames U.S.
"Security Interests" means (a) the senior security interests
granted hereby to the Administrative Agent, for the ratable benefit of
the Lenders and the Administrative Agent, in respect of the Collateral
and (b) the junior security interests granted hereby to Infogrames U.S.
in respect of the Collateral.
"Standstill Expiration Date" shall have the meaning assigned
thereto in Section 12.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark (including, without limitation, any thereof
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referred to on Schedule 2).
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos, and other source or business identifiers
of any Grantor, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, and all common-law
rights related thereto (including, without limitation, any of the
foregoing referred to on Schedule 2) and (b) the right to obtain all
renewals thereof.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York; provided that, if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of
the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York,
"UCC" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
(b) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. The Security Interests.
(a) With respect to each Grantor, all of such Grantor's
estate, right, title and interest in and to all of the following property,
whether now or hereafter owned or acquired by such Grantor or in which such
Grantor now has or hereafter acquires any estate, right, title or interest, and
wherever located, along with any other property of such Grantor which may from
time to time secure the Obligations pursuant to the terms of this Agreement, is
collectively referred to as the "Collateral":
(i) all Accounts;
(ii) all Chattel Paper;
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(iii) the Collateral Account, all cash deposited
therein from time to time, the investments made
pursuant to Section 6 and other monies and
property of any kind of any Grantor in the
possession or under the control of the
Administrative Agent or any Lender;
(iv) all Contracts;
(v) all Deposit Accounts;
(vi) all Documents;
(vii) all Equipment;
(viii)all General Intangibles;
(ix) all Instruments;
(x) all Intellectual Property;
(xi) all Inventory;
(xii) all Investment Property;
(xiii)all other property not otherwise described
above;
(xiv) all books and records pertaining to any of the
foregoing; and
(xv) all products and Proceeds of all or any of the
foregoing.
(b) Each Grantor hereby confirms and reaffirms its grant of a
security interest in the Collateral (as defined in the Amended and Restated
Security Agreement) pursuant to the Amended and Restated Security Agreement. In
order to secure the payment when due whether at the stated maturity, by
acceleration or otherwise of the Bank Obligations, each Grantor hereby grants to
the Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, a first priority security interest in the Collateral.
(c) In order to secure the payment when due whether at the
stated maturity, by acceleration or otherwise of the Bridge
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Obligations, each Grantor hereby grants to Infogrames U.S. a security interest
in the Collateral junior only to the security interests granted to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, and other Permitted Liens, in each case to the extent
provided herein.
(d) As set forth in the separate granting clauses contained
in subsections (b) and (c) above, it is the intent of the Grantors, the
Administrative Agent, the Lenders and Infogrames U.S. that this Agreement shall
create two separate and distinct Liens, a senior Lien in favor of the
Administrative Agent, for the benefit of the Lenders and the Administrative
Agent, and a separate junior Lien in favor of Infogrames U.S.
(e) The Security Interests are granted as security only and
shall not subject the Administrative Agent, any Lender or Infogrames U.S. to, or
transfer to the Administrative Agent, any Lender or Infogrames U.S., or in any
way affect or modify, any obligation or liability of any Grantor with respect to
any of the Collateral or any transaction in connection therewith.
SECTiON 3. Representations and Warranties. Each Grantor
represents and warrants to the Administrative Agent, each Lender and Infogrames
U.S. as follows:
(a) Such Grantor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the Security Interests in the Collateral owned by it pursuant to, this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Security Interests in
the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of such Grantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) Such Grantor is the sole owner of, and has valid and legal
title to, all of the Collateral owned by it, free and clear of any Liens, other
than the Security Interests and other Permitted Liens.
(d) Other than financing statements or other similar or
equivalent documents or instruments with respect to the Liens securing the
Obligations and other Permitted Liens, no financing
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statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record in
any jurisdiction. No Collateral is in the possession of any Person (other than
the Grantors) asserting any claim thereto or security interest therein, except
that the Administrative Agent or its designee may have possession of Collateral
as contemplated hereby and a bailee, warehouseman, agent or processor may have
possession of the Collateral as contemplated by, and so long as such Grantor has
complied with, Section 4(c)(iii) and Section 4(c)(iv).
(e) All of the information set forth in the Perfection
Certificate relating to such Grantor is true and correct in all material
respects as of the date hereof.
(f) Such Grantor has, previously or contemporaneously
herewith, delivered to the Administrative Agent possession of all originals of
all negotiable Instruments constituting Collateral currently owned or held by
such Grantor, if any (duly endorsed in blank, if requested by the Administrative
Agent).
(g) With respect to any Inventory of such Grantor: (i) all
such Inventory is, and shall be at all times, located at places of business of
such Grantor listed in the Perfection Certificate or as to which such Grantor
has complied with the provisions of Section 4(a)(i), except Inventory in transit
from one such location to another such location; (ii) no Inventory is, nor shall
at any time or times be, subject to any Lien whatsoever, except for Liens
securing the Obligations and other Permitted Liens; (iii) no Inventory in
aggregate value exceeding $1,000,000 at any time is, nor shall at any time or
times be, kept, stored or maintained with a bailee, warehouseman, carrier or
similar party (other than a carrier delivering Inventory to a purchaser in the
ordinary course of such Grantor's business) unless the Administrative Agent and
Infogrames U.S. shall have received prior written notice of such storage and
such Grantor has complied with the provisions of Section 4(c)(iii); and (iv) no
Inventory in aggregate value exceeding $1,000,000 at any time is, nor shall at
any time or times be, kept, stored or maintained with a consignee unless the
Administrative Agent and Infogrames U.S. shall have received prior written
notice of such consignment and such Grantor has complied with the provisions of
Section 4(c)(iii).
(h) The Financing Statements relating to such Grantor
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are in appropriate form and when filed in the offices specified in the
Perfection Certificate, the Security Interests will constitute valid and
perfected security interests in all of the Collateral (to the extent that a
security interest therein may be perfected by filing pursuant to the UCC) in
favor of the Administrative Agent, for the benefit of the Lenders and the
Administrative Agent, prior to all other Liens and rights of others therein
including without limitation, the Liens in favor of Infogrames U.S. hereunder,
other than with respect to Permitted Liens, and in favor of Infogrames U.S.,
prior to all other Liens and rights of others therein, other than with respect
to Permitted Liens and the Liens in favor of the Administrative Agent, for the
benefit of the Lenders and the Administrative Agent.
(i) On the date hereof, such Grantor's jurisdiction of
organization and the location of such Grantor's chief executive office or sole
place of business are specified in the Perfection Certificate.
(j) With respect to any Account of such Grantor: (i) no amount
payable to such Grantor under or in connection with such Account is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent; (ii) none of the obligors on any Account is a Governmental
Authority; and (iii) the amounts represented by such Grantor to the Lenders from
time to time in reports delivered to the Administrative Agent by such Grantor as
owing to such Grantor in respect of the Accounts will at such times be accurate.
(k) With respect to any Contract to which such Grantor is a
party: (i) no consent of any party (other than such Grantor) is required, or
purports to be required, in connection with the execution, delivery and
performance of this Agreement; (ii) each Contract is in full force and effect
and constitutes a valid and legally enforceable obligation of such Grantor and,
to the best of such Grantor's knowledge, the other parties thereto, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing; (iii)
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the execution, delivery or
performance of any of the Contracts by such Grantor other than those which have
been duly obtained, made or performed, are in full force and effect and do not
subject the scope of any such
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Contract to any material adverse limitation, either specific or general in
nature; (iv) neither such Grantor nor, to such Grantor's knowledge (without
independent investigation), any of the other parties to the Contracts is in
default in the performance or observance of any of the material terms thereof;
(v) the right, title and interest of such Grantor in, to and under the Contracts
are not subject to any defenses, offsets, counterclaims or claims; (vi) if a
copy of any such Contract is requested by the Administrative Agent or Infogrames
U.S., such Contract as delivered to the Administrative Agent or Infogrames U.S.,
as the case may be, shall be a complete and correct copy of such Contract,
including all amendments, supplements and other modifications thereto; (vii) to
the best of such Grantor's knowledge, no amount payable to such Grantor under or
in connection with any Contract is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent; and (viii) none of the
parties to any Contract is a Governmental Authority.
(l) With respect to any Intellectual Property of such Grantor:
(i) to the best of such Grantor's knowledge, on the date hereof, all material
Intellectual Property is valid, subsisting, unexpired and enforceable, has not
been abandoned and does not infringe the intellectual property rights of any
other Person; (ii) except as set forth on Schedule 2, on the date hereof, none
of the material Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor; (iii) no holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any material Intellectual Property in any respect that
could reasonably be expected to have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property; and (iv) except as set
forth in Schedule 6.1(u) to the Credit Agreement, no action or proceeding is
pending, or, to the best of such Grantor's knowledge, threatened, on the date
hereof (A) seeking to limit, cancel or question the validity of any material
Intellectual Property or such Grantor's ownership interest therein or (B) which,
if adversely determined, would have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property.
SECTION 4. Further Assurances; Covenants.
(a) General.
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(i) No Grantor will change the location of its chief executive
office or principal place of business in any state unless such Grantor
shall have given the Administrative Agent and Infogrames U.S. thirty
(30) days prior written notice thereof, executed and delivered to the
Administrative Agent and Infogrames U.S. all financing statements and
financing statement amendments which the Administrative Agent or
Infogrames U.S. may request in connection therewith and, if reasonably
requested by the Administrative Agent or Infogrames U.S., delivered an
opinion of counsel with respect thereto in accordance with Section
4(a)(v).
(ii) No Grantor shall change the locations where it keeps or
holds any Collateral or any records relating thereto from the
applicable location described in the Perfection Certificate unless such
Grantor shall have given the Administrative Agent and Infogrames U.S.
thirty (30) days prior written notice of such change of location,
executed and delivered to the Administrative Agent and Infogrames U.S.
all financing statements and financing statement amendments which the
Administrative Agent or Infogrames U.S. may request in connection
therewith and, if reasonably requested by the Administrative Agent or
Infogrames U.S., delivered an opinion of counsel with respect thereto
in accordance with Section 4(a)(v); provided, however, that any Grantor
may keep Inventory or Equipment at, or in transit to, any location
described in the Perfection Certificate. No Grantor shall in any event
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be
perfected.
(iii) No Grantor will change its name, identity or corporate
or other structure in any manner unless it shall have given the
Administrative Agent and Infogrames U.S. thirty (30) days prior written
notice thereof, executed and delivered to the Administrative Agent and
Infogrames U.S. all financing statements and financing statement
amendments which the Administrative Agent or Infogrames U.S. may
request in connection therewith, and, if reasonably requested by the
Administrative Agent or Infogrames U.S., delivered an opinion of
counsel with respect thereto in accordance with Section 4(a)(v).
(iv) Each Grantor will maintain the Security Interests in the
Collateral owned by it as perfected Liens with priority (A) in the case
of the Bank Obligations, over all
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other Liens, including without limitation, the Liens securing the
Bridge Obligations, other than Permitted Liens, and (B) in the case of
Liens securing the Bridge Obligations, other than the Liens securing
the Bank Obligations and other Permitted Liens. Each Grantor will, from
time to time, at its expense, execute, deliver, file and record any
statement, assignment, instrument, document, agreement or other paper
and take any other action (including, without limitation, any filings
of financing or continuation statements under the UCC) that from time
to time may be necessary, or that the Administrative Agent or
Infogrames U.S. may reasonably request, in order to create, preserve,
upgrade in rank (to the extent required hereby), perfect, confirm or
validate the Security Interests or to enable the Administrative Agent
to exercise and enforce any of the rights, powers and remedies
hereunder provided with respect to any of the Collateral. Prior to the
irrevocable payment in full of the Obligations, to the extent required
by the immediately preceding sentence, each Grantor hereby authorizes
the Administrative Agent, upon the failure of any Grantor to so do
within ten (10) Business Days after receipt of notice in writing from
the Administrative Agent, to execute and file financing statements,
financing statement amendments, continuation statements and any other
agreements, instruments, documents and papers reasonably necessary to
perfect the Security Interests in such Grantor's Collateral without
such Grantor's signature appearing thereon. Each Grantor agrees that,
except as otherwise required by law, a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. Each Grantor shall
pay the reasonable costs of, or incidental to, any recording or filing
of the Financing Statements and any other financing statements,
financing statement amendments, continuation statements and any other
agreements, instruments, documents and papers reasonably necessary to
perfect the Security Interests in such Grantor's Collateral.
(v) Each Grantor will, promptly upon request, provide to the
Administrative Agent and Infogrames U.S. all information and evidence
the Administrative Agent or Infogrames U.S. may reasonably request
concerning the Collateral, and in particular the Accounts, to enable
the Administrative Agent to enforce the provisions of this
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Agreement.
(vi) Prior to each date on which any Grantor proposes to take
any action contemplated by Section 4(a)(i) or Section 4(a)(ii), if
reasonably requested by the Administrative Agent or Infogrames U.S.,
such Grantor shall, at its cost and expense, cause to be delivered to
the Administrative Agent (with a copy for each Lender) or Infogrames
U.S., as the case may be, an opinion of counsel, satisfactory to the
Administrative Agent or Infogrames U.S., as the case may be, to the
effect that all of their respective financing statements and amendments
or supplements thereto, continuation statements and other documents
required to be recorded or filed in order to perfect and protect their
respective Security Interests and the respective priorities thereof
against all creditors of and purchasers from such Grantor have been
filed in each filing office necessary or desirable for such purposes
and that all filing fees and taxes, if any, payable in connection with
such filings have been paid in full.
(vii) After the occurrence and during the continuance of an
Event of Default, from time to time upon request by the Administrative
Agent or Infogrames U.S., each Grantor shall, at its cost and expense,
cause to be delivered to the Administrative Agent (with a copy for each
Lender) or Infogrames U.S., as the case may be, an opinion or opinions
of counsel, reasonably satisfactory to the Administrative Agent or
Infogrames U.S., as the case may be, as to the enforceability of the
Loan Documents, the Infogrames Bridge Loan Documents and the Security
Interests, on the Collateral and other property of the Grantors and
such other matters relating to the transactions contemplated hereby as
the Administrative Agent, the Required Lenders or Infogrames U.S. may
reasonably request.
(viii) Each Grantor will comply in all material respects with
all Applicable Laws applicable to the Collateral or any material part
thereof or to the operation of such Grantor's business.
(ix) Each Grantor will pay when due all material taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as
all material claims of any kind (including, without limitation, claims
for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if (A)
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the validity thereof is being contested in good faith by appropriate
proceedings, (B) such proceedings do not involve any danger of the
sale, forfeiture or loss of, or creation of a Lien on, any of the
Collateral or any interest therein and (C) such charge is adequately
reserved against on such Grantor's books in accordance with GAAP.
(x) The Grantors shall not (A) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the Collateral, except
as permitted by the Credit Agreement or hereunder or (B) create or
suffer to exist any Lien or other charge or encumbrance upon or with
respect to any of the Collateral to secure indebtedness of any Person
or entity other than the Security Interests and other Permitted Liens.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to cause to
be collected from its Account Debtors, as and when due, any and all
amounts owing under or on account of each Account (including, without
limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with past practices) and to apply upon receipt
thereof all such amounts as are so collected to the outstanding balance
of such Account. The costs and expenses (including, without limitation,
attorney's fees) of collection of Accounts incurred by such Grantor,
the Administrative Agent or Infogrames U.S. shall be borne by such
Grantor.
(ii) Upon the occurrence and during the continuance of an
Event of Default, upon request of the Administrative Agent, each
Grantor will promptly notify (and each Grantor hereby authorizes the
Administrative Agent so to notify) each Account Debtor in respect of
any Account that such Account has been assigned to the Administrative
Agent hereunder and that any payments due or to become due in respect
of such Account are to be made directly to the Administrative Agent or
its designee.
(iii) Each Grantor will perform and comply in all material
respects with all of its material obligations in respect of its
Accounts and the exercise by the Administrative Agent, for the benefit
of the Lenders, the Administrative Agent and/or Infogrames U.S., of any
of the
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rights hereunder shall not release such Grantor from any of its duties
or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to an Account in any
manner which could reasonably be expected to materially adversely
affect the value of the Collateral, (B) fail to exercise promptly and
diligently each and every material right which it may have under each
agreement giving rise to an Account (other than any right of
termination) which could reasonably be expected to materially adversely
affect the value of the Collateral or (C) fail to deliver to the
Administrative Agent and Infogrames U.S. a copy of each written
material demand, notice or document received by it which could
reasonably be expected to materially adversely affect the value of the
Collateral relating in any way to any material agreement giving rise to
an Account.
(v) Other than in the ordinary course of business as generally
conducted by each Grantor, no Grantor will (A) grant any extension of
the time of payment of any of the Accounts with a face amount in excess
of $500,000 or (B) compromise, compound or settle the same for less
than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount
whatsoever hereon.
(vi) At the times set forth in Section 7.1(d) of the Credit
Agreement or, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent, the Required Lenders or Infogrames U.S., the
Grantors shall deliver to the Administrative Agent (with a copy for
each Lender) or to Infogrames U.S., as the case may be, an Accounts
Aging Report. Unless otherwise indicated thereon or in writing by the
Grantors, each Accounts Aging Report delivered by the Grantors to the
Administrative Agent and to Infogrames U.S. shall constitute a
representation by the Grantors with respect to the Accounts listed
thereon that: (A) such Accounts are genuine, are not evidenced by a
judgment and are evidenced by invoices issued in respect thereof; (B)
such Accounts represent undisputed, bona fide transactions completed in
accordance with the terms and provisions contained in any documents
related thereto or in accordance with past practices; (C) the amounts
of the face value shown, and any invoices and statements delivered to
the Administrative Agent or to Infogrames U.S., as the case may be,
with respect to any Account are owing to the applicable
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Grantor and are not contingent for any reason; (D) there are no
material setoffs, counterclaims or disputes existing or asserted with
respect to such Accounts, and such Grantor has not made any agreement
with any Account Debtor thereunder for any deduction therefrom; (E) no
Grantor has knowledge of any facts, events, or occurrences which in any
way impair in any material respect the validity or enforceability of
any such Account or tend to reduce the amount payable thereunder from
the amount of the invoice face value shown on any Accounts Aging Report
and on all contracts, invoices and statements delivered to the
Administrative Agent or to Infogrames U.S., as the case may be, with
respect thereto; (F) no Grantor has knowledge that any Account Debtor
under any such Account did not have the capacity to contract at the
time any contract or other document giving rise to the Account was
executed; (G) the goods giving rise to such Accounts are not, and were
not at the time of the sale thereof, subject to any Lien, except the
Security Interests and other Permitted Liens; (H) no Grantor has
knowledge of any fact or circumstance which would materially impair the
validity or collectability of any such Account; (I) to the applicable
Grantor's knowledge, there are no proceedings or actions which are
pending or, threatened against any Account Debtor under such Accounts
which could result in any material adverse change in such Account
Debtor's financial condition; (J) no security interest in such Accounts
has been granted to any Person other than the Security Interests and
other Permitted Liens; and (K) each invoice or other evidence of
payment obligation furnished to Account Debtors with respect to such
Accounts is issued in the applicable Grantor's corporate name.
(c) Inventory, Equipment, Etc.
(i) At the times set forth in Section 7.1(d) of the Credit
Agreement and, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent, the Required Lenders or Infogrames U.S., the
Grantors shall deliver to the Administrative Agent (with a copy for
each Lender) or Infogrames U.S., as the case may be, a Schedule of
Inventory. Unless otherwise indicated thereon or in writing by the
Grantors, each Schedule of Inventory delivered by the Grantors to the
Administrative Agent and to Infogrames U.S. shall constitute a
representation by each Grantor with
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respect to the Inventory listed thereon or referred to therein that:
(A) all such Inventory is located at places of business listed in the
Perfection Certificate or as to which the applicable Grantor has
complied with the provisions of Section 4(a)(i) or on the premises
identified on the then current Schedule of Inventory or is Inventory in
transit from one such location to another such location; (B) no such
Inventory is subject to any Lien whatsoever, except for the Security
Interests and other Permitted Liens; (C) no such Inventory in aggregate
value exceeding $1,000,000 at any time is, nor shall at any time or
times be, kept, stored or maintained with a bailee, warehouseman,
carrier or similar party (other than a carrier delivering Inventory to
a purchaser in the ordinary course of such Grantor's business) unless
the Administrative Agent has given its consent and the applicable
Grantor has complied with the provisions of Section 4(c)(iii); and (D)
no such Inventory in aggregate value exceeding $1,000,000 is, nor shall
at any time or times be, kept, stored or maintained with a consignee
unless the Administrative Agent has given its consent and the
applicable Grantor has complied with the provisions of Section
4(c)(iii).
(ii) Each Grantor will cause the Administrative Agent, for the
ratable benefit of the Administrative Agent, the Lenders and Infogrames
U.S., to be named as loss payee on each insurance policy covering risks
relating to any of its Inventory or Equipment, as reasonably requested
by the Administrative Agent. Each Grantor will deliver to the
Administrative Agent or Infogrames U.S., upon request of the
Administrative Agent or Infogrames U.S., as the case may be, copies of
the insurance policies for such insurance. Each such insurance policy
shall provide that all insurance proceeds shall be adjusted with and
payable to the Administrative Agent, and provide that no cancellation
or termination thereof shall be effective until at least thirty (30)
days have elapsed after receipt by the Administrative Agent and
Infogrames U.S. of written notice thereof. The Administrative Agent and
Infogrames U.S. agree that, as long as no Default or Event of Default
has occurred and is continuing, any such net cash proceeds received by
it in an aggregate amount of (i) less than $2,000,000 shall be promptly
paid over to the Grantors and (ii) greater than or equal to $2,000,000
shall be promptly paid over to the Grantors who hereby agree to use
such net cash proceeds in a diligent manner to replace or restore the
damaged property to which such insurance proceeds relate within three
hundred and sixty-five (365) days of receipt of such proceeds.
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All such loss proceeds not so utilized within such three hundred and
sixty-five (365) day period shall be applied to the Obligations in
accordance with Section 2.5(b)(ii) of the Credit Agreement, subject to
the provisions of Section 11. Any surplus shall be paid by the
Administrative Agent to such Grantor or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by such Grantor
to the Administrative Agent, on behalf of the Administrative Agent, the
Lenders and Infogrames U.S. on demand.
(iii) If any Inventory or Equipment exceeding in value
$1,000,000 in the aggregate is at any time in the possession or control
of any warehouseman, bailee (other than a carrier transporting
Inventory to a purchaser in the ordinary course of business), or any of
any Grantor's agents or processors, such Grantor shall notify in
writing such warehouseman, bailee, agent or processor of the Security
Interests created hereby, shall obtain such warehouseman's, bailee's,
agent's or processor's agreement in writing to hold all such Inventory
or Equipment for the Administrative Agent's and Infogrames U.S.'s
account subject to the Administrative Agent's instructions, and shall
cause such warehouseman, bailee, agent or processor to issue and
deliver to the Administrative Agent warehouse receipts, bills of lading
or any similar documents relating to such Inventory in the
Administrative Agent's name and in form and substance reasonably
acceptable to the Administrative Agent.
(iv) If at any time during the term of this Agreement, any
Inventory or Equipment exceeding in value $1,000,000 is placed by any
Grantor on consignment with any consignee, such Grantor shall, prior to
the delivery of any such consigned Inventory or Equipment: (A) provide
the Administrative Agent and Infogrames U.S. with a copy of all
consignment agreements and other instruments and documentation to be
used in connection with such consignment, all of which agreements,
instruments and documentation shall be reasonably acceptable in form
and substance to the Administrative Agent or Infogrames U.S.; (B)
prepare, execute and file appropriate financing statements with respect
to any consigned Inventory or Equipment showing the consignee as
debtor, such Grantor as secured party and each of the Administrative
Agent and Infogrames U.S. as assignee of secured party; (C) prepare,
execute and file appropriate financing statements with
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respect to any consigned Inventory or Equipment showing such Grantor as
debtor and each of the Administrative Agent and Infogrames U.S. as
secured party; (D) after all financing statements referred to in
clauses (B) and (C) above shall have been filed, conduct a search of
all filings made against the consignee in all jurisdictions in which
the Inventory or Equipment to be consigned is to be located while on
consignment, and deliver to the Administrative Agent and Infogrames
U.S. copies of the results of all such searches; (E) notify, in
writing, all creditors of the consignee which would be holders of
security interests in the Inventory or Equipment to be consigned that
such Grantor expects to deliver certain Inventory to the consignee, all
of which Inventory shall be described in such notice by item or type;
and (F) if reasonably requested by the Administrative Agent or
Infogrames U.S., deliver an opinion of counsel to the effect that all
financing statements and amendments or supplements thereto,
continuation statements and other documents required to be recorded or
filed in order to perfect and protect the Security Interests and
priority thereof against all creditors of and purchasers of such
Grantor and such consignee have been filed in each filing office
necessary or desirable for such purposes and that all filing fees and
taxes, if any, payable in connection with such filings have been paid
in full.
(d) Contracts, Etc.
(i) Each Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(ii) No Grantor will amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be
expected to materially adversely affect the value of such Contract,
except for such amendments, modifications, terminations or waivers in
the ordinary course of such Grantor's business.
(iii) Each Grantor will exercise promptly and diligently each
and every material right which it may have under the Contracts (other
than any right of termination).
(iv) Each Grantor will deliver to the Administrative Agent and
Infogrames U.S. a copy of each material demand, notice or document
received by it relating in any way to any Contract that questions the
validity or enforceability of such Contract.
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(e) Intellectual Property, Etc.
(i) Each Grantor (either itself or through licensees) will (A)
continue to use each material Trademark on each and every trademark
class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use,
(B) maintain as in the past the quality of products and services
offered under such Trademark, (C) use such Trademark with the
appropriate notice of registration and all other notices and legends
required by applicable Requirements of Law, (D) not adopt or use any
mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent, for the ratable benefit of
the Lenders and the Administrative Agent, and Infogrames U.S. shall
obtain a perfected security interest in such mark pursuant to this
Agreement, and (E) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way.
(ii) No Grantor (either itself or through licensees) will do
any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(iii) Each Grantor (either itself or through licensees) (A)
will employ each material Copyright and (B) will not (and will not
permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material portion of the Copyrights may
become invalidated or otherwise impaired. No Grantor will (either
itself or through licensees) do any act whereby any material portion of
the Copyrights may fall into the public domain.
(iv) No Grantor (either itself or through licensees) will do
any act that knowingly uses any material Intellectual Property to
infringe the intellectual property rights of any other Person.
(v) Each Grantor will notify the Administrative Agent and
Infogrames U.S. immediately if it knows, or has reason to know, that
any application or registration relating to
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any material Intellectual Property may become forfeited, abandoned or
dedicated to the public, or of any material adverse determination or
development (including, without limitation, the institution of, or any
such material adverse determination or development in, any proceeding
in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding
such Grantor's ownership of, or the validity of, any material
Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(vi) Whenever a Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for
the registration of any Intellectual Property with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political
subdivision thereof, such Grantor shall report such filing to the
Administrative Agent and Infogrames U.S. within five (5) Business Days
after the last day of the fiscal quarter in which such filing occurs.
Upon request of the Administrative Agent or Infogrames U.S., such
Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Administrative
Agent or Infogrames U.S. may request to evidence the Security Interests
in any Copyright, Patent or Trademark and the goodwill and General
Intangibles of such Grantor relating thereto or represented thereby.
(vii) Each Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in any other country or any
political subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(viii) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, the applicable
Grantor shall (A) take such actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such Intellectual
Property and (B) if such Intellectual Property is of material economic
value, promptly notify the Administrative Agent and Infogrames U.S.
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after it learns thereof and sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover
any and all damages for such infringement, misappropriation or
dilution.
(f) Indemnification. Each Grantor agrees to pay, and to save
each of the Administrative Agent, the Lenders and Infogrames U.S. harmless from,
any and all liabilities, reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) incurred by the Administrative
Agent, any Lender or Infogrames U.S. (i) with respect to, or resulting from, any
and all excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, complying with any Applicable Law applicable to any of the
Collateral or (iii) in connection with any of the transactions contemplated by
this Agreement (except to the extent any such liabilities, costs and expenses
result from the gross negligence or willful misconduct of the Administrative
Agent, such Lender or Infogrames U.S., respectively). In any suit, proceeding or
action brought by the Administrative Agent under any Account for any sum owing
thereunder, or to enforce any provisions of any Account, each Grantor will save,
indemnify and keep each of the Administrative Agent, each Lender and Infogrames
U.S. harmless from and against all expense, loss or damage suffered by the
Administrative Agent, any Lender or Infogrames U.S. by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever of the
Account Debtor or any other obligor thereunder, arising out of a breach by any
Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such Account
Debtor or obligor or its successors from any Grantor (except to the extent any
such expense, loss or damage results from the gross negligence or willful
misconduct of the Administrative Agent, such Lender or Infogrames U.S.,
respectively). The obligations of the Grantors under this Section 4(f) shall
survive the termination of the other provisions of this Agreement.
SECTION 5. Reporting and Recordkeeping. Each Grantor
respectively covenants and agrees with the Administrative Agent, the Lenders and
Infogrames U.S. that from and after the date of this Agreement and until the
Aggregate Commitment is terminated and all Obligations have been fully
satisfied:
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(a) Maintenance of Records Generally. Each Grantor will keep
and maintain at its own cost and expense adequate records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral in accordance with past practices. All Chattel Paper given to such
Grantor with respect to any Accounts will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject to the
security interests of First Union National Bank, as Administrative Agent". For
the Administrative Agent's, the Lenders' and Infogrames U.S.'s further security,
each Grantor agrees that upon the occurrence and during the continuance of any
Event of Default, upon the request of the Administrative Agent, the Required
Lenders or Infogrames U.S., such Grantor shall deliver and turn over any such
books and records directly to the Administrative Agent, Infogrames or their
respective designee. Each Grantor shall permit any representative of the
Administrative Agent to inspect such books and records in accordance with
Section 8.11 of the Credit Agreement and will provide photocopies thereof to the
Administrative Agent upon its reasonable request.
(b) Certain Provisions Regarding Maintenance of Records and
Reporting Re: Accounts.
(i) In the event any amounts due and owing in excess of
$500,000 individually or $1,000,000 in the aggregate are in dispute
between any Account Debtor and any Grantor, such Grantor shall provide
the Administrative Agent and Infogrames U.S. with written notice
thereof promptly after such Grantor's learning thereof, explaining the
reason for the dispute, all claims related thereto and the amount in
controversy.
(ii) Each Grantor will promptly notify the Administrative
Agent and Infogrames U.S. in writing if any Account or Accounts, the
face value of which exceeds $500,000 individually or $1,000,000 in the
aggregate, arises or arise out of a contract with the United States of
America, or any department, agency, subdivision or instrumentality
thereof, or of any state (or department, agency, subdivision or
instrumentality thereof) where such state has a state assignment of
claims act or other law comparable to the Federal Assignment of Claims
Act. Each Grantor will take any action required or requested by the
Administrative Agent or Infogrames U.S. or give notice of the Security
Interest in such Accounts under the provisions of the Federal
Assignment of Claims Act or any comparable
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law or act enacted by any state or local Governmental Authority. Any
notifications or other documents executed and delivered to the
Administrative Agent and Infogrames U.S. in connection with the Federal
Assignment of Claims Act or any comparable state law may be promptly
filed with the appropriate Governmental Authority by the Administrative
Agent or Infogrames U.S. or held by the Administrative Agent or
Infogrames U.S. until the Administrative Agent, the Required Lenders or
Infogrames U.S. decide in their respective sole discretion to make any
such filing.
(iii) Each Grantor will promptly upon, but in no event later
than ten (10) Business Days after: (A) such Grantor's learning thereof,
inform the Administrative Agent and Infogrames U.S., in writing, of any
material delay in such Grantor's performance of any of its obligations
to any Account Debtor and of any assertion of any claims, offsets or
counterclaims by any Account Debtor and of any allowances, credits
and/or other monies granted by such Grantor to any Account Debtor, in
each case involving amounts in excess of $500,000 for any single
Account or Account Debtor or in excess of $1,000,000 in the aggregate
for all Accounts and Account Debtors; and (B) such Grantor's receipt or
learning thereof, furnish to and inform the Administrative Agent and
Infogrames U.S. of any adverse information that, to the knowledge of
such Grantor, could reasonably be expected to materially adversely
affect the financial condition of any Account Debtor with respect to
Accounts exceeding $500,000 individually or $1,000,000 in the
aggregate.
(c) Further Identification of Collateral. Each Grantor will,
if so reasonably requested by the Administrative Agent or Infogrames U.S.,
furnish to the Administrative Agent or Infogrames U.S., as the case may be,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
or Infogrames U.S. may reasonably request, all in reasonable detail.
(d) Notices. In addition to the notices required by Section
5(b), each Grantor will advise the Administrative Agent and Infogrames U.S.
promptly, in reasonable detail, (i) of any material Lien or claim made or
asserted against any of the Collateral, (ii) of any material adverse change in
the
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composition of the Collateral and (iii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
Collateral or on the validity, perfection or priority of the Security Interests.
SECTION 6. Collateral Account.
(a) There is hereby established with the Administrative Agent
a Collateral Account in the name and under the exclusive dominion and control of
the Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to Section 6(b) or any other provision of this
Agreement. Any income received by the Administrative Agent with respect to the
balance from time to time on deposit in the Collateral Account, including any
interest or capital gains on investments of amounts on deposit in the Collateral
Account, shall remain, or be deposited, in the Collateral Account together with
any investments from time to time made pursuant to Section 6(c), shall vest in
the Administrative Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Obligations until applied thereto as
hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event
of Default, if requested by the Administrative Agent, each Grantor shall
instruct all Account Debtors and other Persons obligated in respect of all
Accounts to make all payments in respect of the Accounts either (i) directly to
the Administrative Agent (by instructing that such payments be remitted to a
post office box which shall be in the name and under the exclusive dominion and
control of the Administrative Agent) or (ii) to one or more banks in any state
in the United States (by instructing that such payments be remitted to a post
office box which shall be in the name and under the exclusive dominion and
control of any such bank) under a Lockbox Letter substantially in the form of
Annex I hereto duly executed by each Grantor and any such bank or under other
arrangements, in form and substance reasonably satisfactory to the
Administrative Agent, pursuant to which such Grantor shall have irrevocably
instructed such bank (and such bank shall have agreed) to remit all proceeds of
such payments directly to the Administrative Agent for deposit into the
Collateral Account or as the Administrative Agent may otherwise instruct such
bank, and thereafter if the proceeds of any Collateral shall be received by any
of the Grantors, such Grantor will promptly deposit such proceeds into the
Collateral Account and until so deposited, all such proceeds shall be held in
trust by such Grantor for and as the property of the Administrative
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Agent, for the benefit of the Lenders, the Administrative Agent and Infogrames
U.S., and shall not be commingled with any other funds or property of such
Grantor. At any time after the occurrence and during the continuance of an Event
of Default, the Administrative Agent may itself so instruct each Grantor's
Account Debtors. All such payments made to the Administrative Agent shall be
deposited in the Collateral Account.
(c) Amounts on deposit in the Collateral Account shall be
promptly liquidated and applied to the payment of the Obligations in the manner
specified in Section 11.
SECTION 7. General Authority.
(a) Each Grantor hereby irrevocably appoints the
Administrative Agent their true and lawful attorney, with full power of
substitution, in the name of each Grantor, the Administrative Agent, the
Lenders, Infogrames U.S. or otherwise, for the sole use and benefit of the
Administrative Agent, the Lenders and Infogrames U.S., but at the Grantors'
expense, to exercise, at any time from time to time all or any of the following
powers:
(i) to file any financing statements, financing statement
amendments, continuation statements and any other agreements,
instruments, documents and papers to evidence the Security Interests in
the Collateral;
(ii) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due with respect to any
Collateral or by virtue thereof;
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral and the Proceeds thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof;
(v) to do all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the Collateral and
the Security Interests therein and to effect the intent of this
Agreement, all as fully and
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effectively as if the Administrative Agent were the absolute owner
thereof; and
(vi) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference to the
Collateral;
provided that the Administrative Agent shall not take any of the actions
described in this Section 7(a), except those described in clause (i) above,
unless an Event of Default shall have occurred and be continuing. The
Administrative Agent shall give the Grantors not less than ten (10) Business
Days' prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantors agree that any such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC (to
the extent such Section is applicable).
(b) Ratification. The Grantors hereby ratify all that said
attorney shall lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to Section 7(a) is a power coupled with an interest
and shall be irrevocable.
(c) Other Powers. The Grantors also authorize the
Administrative Agent, after the occurrence and during the continuance of an
Event of Default, at any time and from time to time, to execute, in connection
with any sale provided for in Section 8, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
(a) If any Event of Default has occurred and is continuing,
the Administrative Agent may, upon the request of the Required Lenders or
Infogrames U.S., as the case may be, exercise on behalf of the Administrative
Agent, the Lenders and Infogrames U.S. all rights of a secured party under the
UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Administrative Agent may, upon the request of
the Required Lenders, or Infogrames U.S., as the case may be, (i) withdraw all
cash, if any, in the Collateral Account and investments made with amounts on
deposit in the Collateral Account, and apply such monies, investments and other
cash, if any, then held by it as Collateral as specified in Section 11 and (ii)
if there shall be no such monies, investments or cash or if such monies,
investments or cash shall be insufficient to pay the
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Obligations then outstanding in full, sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future delivery, and at
such price or prices as the Administrative Agent may deem satisfactory. The
Administrative Agent, any Lender, Infogrames U.S. or any Affiliate of any
thereof may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard price
quotations or if otherwise permitted under applicable law, at any private sale)
and thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. Each Grantor will execute and deliver such documents and take
such other action as the Administrative Agent deems reasonably necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold (without warranty).
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Grantor. To the extent permitted by law,
each Grantor hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice of such sale shall be given to the Grantors ten (10)
Business Days prior to such sale and (A) in case of a public sale, state the
time and place fixed for such sale, and (B) in the case of a private sale, state
the day after which sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Administrative Agent may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in separate parcels, as
the Administrative Agent may determine. The Administrative Agent shall not be
obligated to make any such sale pursuant to any such notice. The Administrative
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Administrative Agent until the selling price is paid by the
purchaser thereof, but the Administrative Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such
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failure, such Collateral may again be sold upon like notice. The Administrative
Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction. The Grantors shall remain
liable for any deficiency.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement, the Administrative Agent may (i) require each
Grantor to, and each Grantor agrees that it will, at its expense and upon the
request of the Administrative Agent, forthwith assemble all or any part of the
Collateral as directed by the Administrative Agent and make it available at a
place designated by the Administrative Agent which is, in the Administrative
Agent's opinion, reasonably convenient to the Administrative Agent and such
Grantor, whether at the premises of such Grantor or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premises where any of the Collateral is or may
be located and, without charge or liability to the Administrative Agent, seize
and remove such Collateral from such premises, (iii) have access to and use such
Grantor's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer such Collateral without charge
in or by means of any storage or transportation facility owned or leased by such
Grantor, process, repair or recondition such Collateral or otherwise prepare it
for disposition in any manner and to the extent the Administrative Agent deems
appropriate.
SECTION 9. Limitation on Duty of administrative Agent in
Reppect of Collateral. The Administrative Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar property
for its own account. None of the Administrative Agent, any Lender, Infogrames
U.S. or any of their respective officers, directors, employees or agents shall
be liable for failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any Grantor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.
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The powers conferred on the Administrative Agent, the Lenders and Infogrames
U.S. hereunder are solely to protect the Security Interests in the Collateral
and shall not impose any duty upon the Administrative Agent, any Lender or
Infogrames U.S. to exercise any such powers. The Administrative Agent, the
Lenders and Infogrames U.S. shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct. The Administrative Agent shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Administrative Agent in good faith.
SECTION 10. Priorities Regarding Collateral. (a)
Notwithstanding any statement or provision to the contrary contained in any Loan
Document or any Infogrames Bridge Loan Document, any failure to file or record
any financing statement or any continuations thereof under the UCC or other law
of any applicable jurisdiction with respect to the Collateral, and irrespective
of the time, place, order or method of attachment or perfection of any Lien
granted to the Administrative Agent, for the ratable benefit of the Lenders and
the Administrative Agent, under this Agreement or any other Loan Document or any
Lien granted to Infogrames U.S. under this Agreement or any other Infogrames
Bridge Loan Document, or the time or order of filing or recording of financing
statements or other notices of Liens granted pursuant hereto or thereto, and
irrespective of anything contained in any filing or agreement to which the
Borrower, any other Grantor, the Administrative Agent, the Lenders or Infogrames
U.S. may now or hereafter be a party, and irrespective of the ordinary rules of
priority under the UCC or under any other law governing the relative priorities
of secured creditors, any Lien in the Collateral granted by the Borrower or any
other Grantor to the Administrative Agent, for the ratable benefit of the
Lenders and the Administrative Agent, pursuant to this Agreement or any other
Loan Document shall at all times (whether before, after or during the pendency
of any bankruptcy, reorganization or other insolvency proceedings) have priority
over and be senior to any Lien in the Collateral granted by the Borrower or any
other Grantor to Infogrames U.S. pursuant to this Agreement or any other
Infogrames Bridge Loan Document.
(b) Without notice to or further assent by Infogrames U.S. and
without modifying or limiting in any way the
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subordination of the Liens granted in the Collateral to Infogrames U.S. to
secure the Bridge Obligations to the Liens granted in the Collateral to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, to secure the Bank Obligations:
(i) any demand for payment of any Bank Obligations made by the
Administrative Agent or the Lenders may be rescinded in whole or in
part by such Lenders, and any Bank Obligations may be continued, and
the Bank Obligations, or the liability of the Borrower or any other
Grantor for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, or any obligation or
liability of the Borrower or any other Grantor with respect to such
Bank Obligations under the Credit Agreement or any other Loan Document
may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived, surrendered, or released by
the Administrative Agent, acting at the direction of the Lenders
pursuant to the Credit Agreement; and
(ii) the Credit Agreement and any other Loan Document may be
amended, modified, supplemented or terminated, in whole or in part, in
each case in respect of the Bank Obligations, and any Collateral may be
exchanged, waived, surrendered or released, in each case in respect of
the Bank Obligations.
(c) The terms of this Section 10 and the subordination of the
Liens granted in the Collateral to Infogrames U.S. pursuant to this Agreement to
secure the Bridge Obligations to the Liens granted in the Collateral to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, to secure the Bank Obligations in the manner and to the
extent set forth herein, shall not be affected by any exercise of, or failure to
exercise, any right, power or remedy, or any waiver, consent release, increase,
extension, renewal, modification, delay or non-perfection under or in respect of
the Bank Obligations, this Agreement, the other Loan Documents, the Bridge
Obligations, the other Infogrames Bridge Loan Documents or the Collateral. The
Bank Obligations shall be deemed conclusively to have been created, contracted
or incurred in reliance upon this Agreement, and all dealings among the
Administrative Agent and the Lenders on the one hand, and Infogrames U.S. on the
other hand, shall be deemed to have been consummated in reliance upon this
Agreement.
SECTION 11. Application of Proceeds. In order to implement the
subordination established pursuant to this
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Agreement of the Liens securing the Bridge Obligations to the Liens securing the
Bank Obligations, and in order to implement the agreement of the Administrative
Agent, on behalf of the Lenders and the Administrative Agent, and Infogrames
U.S. with respect to the application of the proceeds of the Collateral, the
Administrative Agent, Infogrames U.S. and each Grantor agree that upon the
occurrence and during the continuance of an Event of Default on or after the
date of termination of the Transaction Documentation, any money, property,
securities or other distributions received by any Grantor, the Administrative
Agent, any Lender or Infogrames U.S. from the sale, disposition or other
realization upon all or any part of the Collateral shall be delivered to the
Administrative Agent in the form received, duly indorsed to the Administrative
Agent, if required, and applied as follows:
(a) First, to the payment in full of all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements) paid or incurred by the Administrative Agent, or any
Lender, or paid or incurred by Infogrames U.S. at any time after the
Standstill Expiration Date, in connection with the realization on the
Collateral or the protection of the rights and interests of the
Administrative Agent, the Lenders or Infogrames U.S. therein, as the
case may be;
(b) Second, to the Administrative Agent, for the ratable
benefit of the Lenders and the Administrative Agent, until an aggregate
of $75,000,000 of the Bank Obligations have been paid in full, such
amounts to be applied to the Bank Obligations in accordance with
Section 4.5 of the Credit Agreement;
(c) Third, on a pro rata basis (based upon the then
outstanding aggregate amount of the Bank Obligations and the then
outstanding aggregate amount of the Bridge Obligations other than the
Bridge Obligations referenced in clause (d) below) to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent (such amounts to be applied to the Bank
Obligations in accordance with Section 4.5 of the Credit Agreement),
and to Infogrames U.S. (for application to the Bridge Obligations)
until all of the Bank Obligations and all such Bridge Obligations have
been paid in full;
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(d) Fourth, to Infogrames U.S. all Bridge Obligations
constituting obligations of the Borrower under the Infogrames
Securities Purchase Agreement to pay or reimburse Infogrames or
Infogrames U.S. for costs and expenses (including without limitation,
reasonable fees and disbursements of counsel to Infogrames or
Infogrames U.S.) incurred or paid by Infogrames or Infogrames U.S. in
connection with the Infogrames Securities Purchase Agreement other than
any such costs and expenses relating to the Infogrames Bridge Loan; and
(e) Fifth, after the indefeasible payment in full of the
Obligations, to the Borrower or the applicable Grantor, or its
representative or as a court of competent jurisdiction may direct, any
surplus then remaining.
SECTION 12. Standstill Period in Respect of Bridge
Obligations. (a) Notwithstanding anything to the contrary contained in this
Agreement, any other Loan Document or any other Infogrames Bridge Loan Document,
Infogrames U.S. agrees and acknowledges that prior to the earlier of September
30, 2000 or the nine (9) month anniversary of the date upon which the
Transaction Documentation is terminated (such earlier date, the "Standstill
Expiration Date"):
(i) other than (A) the right to receive payment in full of the
Bridge Obligations on the Transaction Closing Date and (B) any right to
receive payments on account of the Bridge Obligations in accordance
with Section 11 (and the corresponding provisions of the other Loan
Documents and Infogrames Bridge Loan Documents), Infogrames U.S. shall
not, nor shall it seek to, exercise or enforce any right or remedy
under this Agreement, any other Infogrames Bridge Loan Document or
applicable law with respect to the Collateral or the Bridge
Obligations, including without limitation, any of the following: (1)
exercise any rights or remedies with respect to any Collateral; or (2)
seek to notify Account Debtors or other obligors of any security
interest in all or any of the Collateral; or (3) institute any action
or proceeding with respect to such rights or remedies with respect to
any Collateral, including without limitation, any action of
foreclosure; or (4) contest, protest or object to any exercise of
rights or enforcement of remedies by the Administrative Agent;
(ii) Infogrames U.S. will not interfere with, seek to enjoin
or invoke or utilize any provision of any document, law or equitable
principle which might prevent, delay or impede the enforcement (in the
discretion of the Administrative Agent, acting at the direction of the
Required Lenders) of the rights of the Administrative Agent under this
37
<PAGE>
Agreement or any other Loan Document or applicable law with respect to
the Collateral, including without limitation, to pursue foreclosure or
to seek to lift the automatic stay in any bankruptcy, reorganization or
other insolvency proceedings involving the Borrower or any other
Grantor;
(iii) the Lenders shall have the sole right to consent to any
proposed sale or other disposition of the Collateral and to release any
or all of the Collateral from any Lien granted herein, whether such
sale or disposition is made by the Borrower or any other Grantor,
whether at private sale or pursuant to foreclosure, bankruptcy or other
judicial or non-judicial proceedings and regardless of whether the
proceeds of any such disposition would be sufficient to pay in full the
Bank Obligations and the Bridge Obligations, and upon any such sale or
other disposition, Infogrames U.S.'s junior Lien on the portion of the
Collateral sold or disposed of shall, subject to clause (i) above, be
automatically extinguished and discharged; and
(iv) in exercising rights and remedies with respect to the
Collateral, the Administrative Agent and the Lenders may enforce the
provisions of this Agreement and exercise remedies hereunder and under
any other Loan Document or applicable law (or refrain from enforcing
such rights and exercising such remedies), all in such order and in
such manner as they may determine in the exercise of their sole
discretion, and such exercise and enforcement of rights and remedies
with respect to the Collateral shall include, without limitation, the
rights to collect, sell, dispose of or otherwise realize upon all or
any part of the Collateral, to incur expenses in connection with such
collection, sale, disposition or other realization and to exercise all
the rights and remedies of a secured lender under the UCC of any
applicable jurisdiction.
(b) On and after the Standstill Expiration Date, the
provisions of Section 12(a) above shall no longer apply and Infogrames U.S. may
at any time after the occurrence and during the continuance of an Event of
Default under, and as defined in, the Infogrames Bridge Loan Documents, but
subject to Section 11 with respect to the application of payments and proceeds
in respect of the Collateral, (a) exercise or enforce any right or remedy under
applicable law in respect of the Bridge Obligations and (b) instruct the
Administrative Agent to immediately commence the exercise of rights and remedies
under this Agreement in respect of the Collateral (and the manner in which to
commence such exercise of rights and remedies) unless the Administrative Agent
has already commenced the exercise thereof, provided that, subject to Infogrames
U.S.'s right to exercise any other rights and remedies under applicable law in
respect of the Bridge Obligations, and subject to Section 11 with respect to the
application of payments and proceeds in respect of the Collateral, the exercise
of rights and remedies with respect to the Collateral shall solely be exercised
by the Administrative Agent (acting at the direction of Infogrames U.S. if such
rights and remedies were not already exercised or being exercised by the
38
<PAGE>
Administrative Agent as of the Standstill Expiration Date).
SECTION 13. Appointment of Administrative Agent as Agent for
Infogrames U.S. In order to further perfect and protect the Liens on the
Collateral granted to Infogrames U.S. pursuant to this Agreement to secure the
Bridge Obligations, Infogrames U.S. hereby authorizes and appoints the
Administrative Agent to hold on Infogrames U.S.'s behalf and as its agent all
Collateral granted hereunder for purposes of possession and control under the
UCC or other applicable law and to act on its behalf as otherwise set forth
herein. The Administrative Agent, for itself and its successors, hereby accepts
such authorization and appointment and Infogrames U.S. hereby releases the
Administrative Agent from any liability whatsoever (other than liability
resulting from the Administrative Agent's willful misconduct or gross
negligence) in connection with such authorization and appointment. This
authorization and appointment are a power coupled with an interest and are
irrevocable. It is understood and agreed that the Administrative Agent may also
hold Collateral for the benefit of the Lenders and the Administrative Agent.
SECTION 14. Termination of Bridge Obligations. Upon payment in
full of the Bridge Obligations on the Transaction Closing Date, all of the Liens
on the Collateral granted by the Borrower and any other Grantor to Infogrames
U.S. pursuant to this Agreement and the other Infogrames Bridge Loan Documents
to secure the Bridge Obligations shall be automatically terminated and released,
Infogrames U.S. shall cease to be a party to this Agreement and Infogrames U.S.
will, at the Administrative Agent's request and at the expense of the Borrower,
execute and deliver to the Administrative Agent such documents as the
Administrative Agent shall reasonably request to evidence the termination and
release of all such Liens on the Collateral.
SECTION 15. Concerning the Administrative Agent. The
provisions of Article XII of the Credit Agreement shall inure to the benefit of
the Administrative Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. Subject to the
provisions of Section 12, as to any matters not expressly provided for
herein, the Administrative Agent may request instructions from the
Lenders and from Infogrames U.S. and shall act or refrain from acting
in accordance with written instructions from the Required Lenders (or,
when expressly required by this Agreement or the Credit Agreement, all
the Lenders) or Infogrames U.S. or, in the absence of such
instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by
39
<PAGE>
reason of any action or omission to act on its part (other than any
such action or inaction constituting gross negligence or willful
misconduct). The Administrative Agent shall have no duty to ascertain
or inquire as to the performance or observance of any of the terms of
this Agreement by any Grantor.
SECTION 16. Appointment of Administrative Agent. At any time
or times, with, so long as no Default or Event of Default has occurred and is
continuing, the consent of the Grantors (which consent shall not be unreasonably
withheld), in order to comply with any legal requirement in any jurisdiction or
in order to effectuate any provision of the Loan Documents, the Administrative
Agent may appoint a bank or trust company or one or more other Persons, either
to act as collateral agent or agents, jointly with the Administrative Agent or
separately, on behalf of the Administrative Agent, the Lenders and Infogrames
U.S. with such power and authority as may be necessary for the effectual
operation of the provisions hereof and specified in the instrument of
appointment (which may, in the discretion of the Administrative Agent, include
provisions for the protection of such collateral agent similar to the provisions
of Section 15).
SECTION 17. Expenses. In the event that the Grantors fail to
comply with the provisions of the Credit Agreement, this Agreement, any other
Loan Document, the Infogrames Bridge Loan Note or any other Infogrames Bridge
Loan Document, such that the value of any Collateral or the validity,
perfection, rank or value of the Security Interests are thereby diminished or
potentially diminished or put at risk, the Administrative Agent if requested by
the Required Lenders may, but shall not be required to, effect such compliance
on behalf of the Grantors, and the Grantors shall reimburse the Administrative
Agent for the reasonable costs thereof on demand. All insurance expenses and all
reasonable expenses of protecting, storing, warehousing, appraising, insuring,
handling, maintaining and shipping the Collateral, any and all excise, stamp,
intangibles, transfer, property, sales, and use taxes imposed by any state,
federal, or local authority or any other Governmental Authority on any of the
Collateral, or in respect of the sale or other disposition thereof, shall be
borne and paid by the Grantors, and if the Grantors fail promptly to pay any
portion thereof when due, the Administrative Agent, any Lender or Infogrames
U.S. may, at its option, but shall not be required to, pay the same and, and in
the case of the Administrative Agent or any Lender, charge the Grantors' account
therefor, and the Grantors agree to reimburse the Administrative Agent, such
Lender or Infogrames U.S. therefor on demand. All sums so paid or incurred by
the Administrative Agent, any Lender or Infogrames U.S. for any of the foregoing
and any and all other sums for which the Grantors may become liable hereunder
and all reasonable costs and expenses (including reasonable attorneys' fees,
legal expenses and court costs) incurred by the Administrative Agent, any Lender
or Infogrames U.S. in enforcing or protecting the Security Interests or any of
their rights or remedies hereunder shall be payable by the Grantors on demand
and shall bear interest (after as well as before judgment) until paid at the
rate then applicable to Base Rate Loans under the Credit Agreement or, in the
case of Infogrames U.S., the rate applicable to loans incurring interest based
upon the Base Rate under, and as defined in, the Infogrames Bridge Loan Note,
and shall be additional Bank Obligations and Bridge Obligations, respectively,
hereunder.
40
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SECTION 18. Notices. All notices and communications to the
Administrative Agent, a Lender or a Grantor shall be made in accordance with
Section 13.1 of the Credit Agreement and given to the addresses or transmission
numbers for notices set forth in the Credit Agreement, in the case of the
Administrative Agent or a Lender, or under its signature below, in the case of a
Grantor. All notices and communications to Infogrames U.S. shall be made in
accordance with the Infogrames Bridge Loan Note and given to the address or
transmission number for notices set forth therein.
SECTION 19. Release and Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral by any Grantor in accordance with the terms of the Loan
Documents (other than sales of Collateral in the ordinary course of business
consistent with past practices), the Administrative Agent and Infogrames U.S.
will, at such Grantor's expense, execute and deliver to such Grantor such
documents as such Grantor shall request to evidence the release of such item of
Collateral from the assignment and security interests granted hereby.
(b) This Agreement shall remain in effect from the date hereof
through and including the date upon which all Obligations shall have been
indefeasibly and irrevocably paid and satisfied in full and the Aggregate
Commitment is terminated and upon such date the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantors. Upon any such termination, (i) the Administrative Agent and Infogrames
U.S. shall promptly assign, release, transfer and deliver to the Grantors the
Collateral held by it hereunder, all instruments of assignment executed in
connection therewith, together with all monies held by the Administrative Agent,
Infogrames U.S. or any of their respective agents hereunder, free and clear of
the Liens hereof and (ii) the Administrative Agent, the Lenders and Infogrames
U.S. will promptly execute and deliver to the Grantors such documents and
instruments (including but not limited to appropriate UCC termination
statements) as the Grantors shall request to evidence such termination in each
such case at the expense of the Grantors.
SECTION 20. Waivers, Non-Exclusive Remedies. No failure on the
part of the Administrative Agent, any Lender or Infogrames U.S. to exercise, and
no delay in exercising and no course of dealing with respect to, any right under
the Credit Agreement, this Agreement, any other Loan Document, the Infogrames
Bridge Loan Note or any other Infogrames Bridge Loan Document shall operate as a
waiver thereof or hereof; nor shall any single or partial exercise by the
Administrative Agent, any Lender or Infogrames U.S. of any right under the
Credit Agreement, this Agreement, any other Loan Document, the Infogrames Bridge
Loan Note or any other Infogrames Bridge Loan Documents preclude any other or
further exercise thereof, and the exercise of any rights under this Agreement,
the Credit Agreement, the other Loan Documents, the Infogrames Bridge Loan Note
or any other Infogrames Bridge Loan Document are cumulative and are not
exclusive of any other remedies provided by law. This Agreement is (a) a Loan
Document executed pursuant to the Credit Agreement and (b) an Infogrames Bridge
Loan Document executed pursuant to the Infogrames Bridge Loan Note.
41
<PAGE>
SECTION 21. Successors and Assigns. This Agreement is for the
benefit of the Administrative Agent, the Lenders, and Infogrames U.S. and their
successors and assigns (as permitted by the Credit Agreement and the Infogrames
Bridge Loan Note, as the case may be), and in the event of an assignment of all
or any of the Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Grantors and their successors and assigns;
provided, that the Grantors may not assign any of their rights or obligations
hereunder without the prior written consent of the Administrative Agent, the
Lenders and Infogrames U.S..
SECTION 22. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Grantors, and the Administrative Agent with the
consent of the Required Lenders (or, when expressly required by this Agreement
or the Credit Agreement, all of the Lenders) and, to the extent affecting the
Security Interests in favor of Infogrames U.S., Infogrames U.S.
SECTION 23. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 24. Consent to Jurisdiction. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, the other Loan Documents, the
other Infogrames Bridge Loan Note and the other Infogrames Bridge Loan
Documents to which it is a party, or for recognition and enforcement of
any judgement in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address set forth under its signature
below;
(d) agrees that nothing herein shall affect the right to
effect service of process in
42
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any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
SECTION 25. Waiver of Jur Trial. EACH GRANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER
INFOGRAMES BRIDGE LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 26. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the
Administrative Agent, the Lenders and Infogrames U.S. in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (b) the
invalidity or unenforceability of any provisions hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 27. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
SECTION 28. Counterparts. This Agreement may be executed by
the parties hereto in several counterparts (including by telecopy), each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
[Signature Pages Follow]
43
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IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Thomas A. Heymann
---------------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO
Telephone: 212-726-6500
Telecopy: 212-726-6590
HUMONGOUS ENTERTAINMENT, INC.
By: /s/ Thomas A. Heymann
-------------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
WIZARDWORKS GROUP, INC.
By: /s/ Thomas A. Heymann
------------------------------------
Name: Thomas A. Heymann
Title: President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
SINGLETRAC ENTERTAINMENT TECHNOLOGIES, INC.
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
SWAN ACQUISITION CORP.
By: /s/ Thomas A. Heymann
------------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
CANDEL INC.
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
FORMGEN, INC.
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
GOLD MEDALLION SOFTWARE INC.
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
<PAGE>
MEDIATECHNICS, LTD.
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
LEGEND ENTERTAINMENT COMPANY LLC
By: /s/ Thomas A. Heymann
-----------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT Interactive
Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ John McGowan
-----------------------------------
Name: John McGowan
Title: Senior Vice President
CALIFORNIA U.S. HOLDINGS, INC.
By: /s/ Bonnell Bruno
-----------------------------------
Name: Bonnell Bruno
Title: President and Chief Executive
Officer
Exhibit 10.5
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (as amended,
restated, supplemented, or otherwise modified, this "Pledge Agreement"), dated
as of November 15, 1999, is made by GT Interactive Software Corp. (the
"Borrower") and certain of its subsidiaries identified on the signature pages
attached hereto (together with the Borrower and each additional subsidiary who
becomes party hereto pursuant to a Joinder Agreement, the "Pledgors", each
individually, a "Pledgor") in favor of First Union National Bank, a national
banking association, as administrative agent (the "Administrative Agent"), for
the ratable benefit of the Administrative Agent and the financial institutions
who are or may from time to time become parties to the Credit Agreement referred
to below (the "Lenders") and California U.S. Holdings, Inc. ("Infogrames U.S."),
a wholly-owned Subsidiary of Infogrames Entertainment, SA, a societe anonyme
organized under the laws of France.
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, dated as of
September 11, 1998 (as amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the Lenders and the
Administrative Agent, the Lenders agreed to make certain Extensions of Credit to
the Borrower as more particularly described therein.
In connection with the execution and delivery of the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent a Pledge Agreement, dated as of September 11, 1998 (as amended, restated,
supplemented or otherwise modified prior to June 29, 1999, the "Existing Pledge
Agreement"), pursuant to which the Borrower pledged to the Administrative Agent,
for the ratable benefit of the Lenders and the Administrative Agent, security
interests in the Collateral to secure the Obligations (as such terms are defined
in the Existing Pledge Agreement).
In connection with the execution and delivery of the Second
Amendment, Waiver and Agreement, dated as of June 29, 1999, under the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent, for the ratable benefit of the Lenders and the Administrative Agent, an
Amended and Restated Pledge Agreement, dated as of June 29, 1999 (as heretofore
amended, restated, supplemented or otherwise modified, the "Amended and Restated
Pledge Agreement"), pursuant to which the Borrower (i) reaffirmed its previous
grant to the
<PAGE>
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, of security interests in the Collateral under, and as
defined in, the Existing Pledge Agreement and (ii) granted to the Administrative
Agent, for the ratable benefit of the Lenders and the Administrative Agent,
security interests in the Collateral to secure the Obligations (as such terms
are defined in the Amended and Restated Pledge Agreement).
The Borrower has advised the Administrative Agent and the
Lenders that Infogrames U.S. has agreed to provide a term loan to the Borrower
in the original principal amount of $25,000,000 (the "Infogrames Bridge Loan"),
as evidenced by, and pursuant to the provisions of, a term note, dated November
15, 1999 (the "Infogrames Bridge Loan Note"), by the Borrower in favor of
Infogrames U.S. and secured by security interests in substantially all of the
assets of the Borrower and the Guarantors, which security interests shall be
junior and subordinate to the extent set forth herein to the security interests
granted to the Administrative Agent, for the ratable benefit of the Lenders and
the Administrative Agent, in the Existing Pledge Agreement, the Amended and
Restated Pledge Agreement and this Pledge Agreement.
In connection with, among other things, the incurrence of the
Infogrames Bridge Loan and the execution and delivery of the Infogrames Bridge
Loan Note, the Borrower, the Lenders and the Administrative Agent have agreed to
execute a Third Amendment, Consent, Waiver and Agreement, dated as of November
15, 1999 (the "Third Amendment"), under the Credit Agreement to, among other
things, amend and waive certain provisions thereof and consent to the incurrence
of the Infogrames Bridge Loan and the grant of the security interests in favor
of Infogrames U.S. as more fully set forth below.
The Pledgors are the record and beneficial owner of (i) the
shares of Pledged Stock (as hereinafter defined) issued by certain corporations
as specified on Schedule I attached hereto and incorporated herein by reference
(collectively, the "Issuers") and (ii) the Partnership/LLC Interests (as
hereinafter defined) in the partnerships and limited liability companies listed
on Schedule I hereto (collectively, the "Partnerships/LLCs").
In connection with the transactions contemplated by the Third
Amendment and the Infogrames Bridge Loan Note and as a condition precedent
thereto, the Borrower and Infogrames U.S. have requested that the Amended and
Restated Pledge Agreement be further amended and restated, and that each Pledgor
execute and deliver this Pledge Agreement together with, the Pledged Stock,
2
<PAGE>
to the extent not previously delivered to the Administrative Agent, and the
Partnership/LLC Interests to the Administrative Agent, for the ratable benefit
of the Administrative Agent, the Lenders, and Infogrames U.S., and each of the
Pledgors has agreed to do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
to induce (i) the Administrative Agent and the Lenders to enter into the Third
Amendment and (ii) Infogrames U.S. to make the Infogrames Bridge Loan, each of
the parties hereto hereby agrees as follows:
1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are used as so defined, and
the following terms shall have the following meanings:
"Bank Obligations" means the Pledgors' obligations under the
Loan Documents in respect of the unpaid principal of and interest on
the Notes (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to any Pledgor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) and all other
obligations and liabilities of the Pledgors to the Administrative
Agent, the Issuing Lender and the Lenders in respect of the Loans, the
Notes, the Letters of Credit, the L/C Obligations, any Hedging
Agreements permitted or required under the Credit Agreement, the
Concentration Account or any cash management arrangements with any
Lender, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit Agreement, the Notes,
the Letters of Credit, the L/C Obligations, any Hedging Agreements
permitted or required under the Credit Agreement, this Pledge
Agreement, the other Loan Documents or any other document made,
delivered or given in connection herewith in respect of the Bank
Obligations or therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent, the Issuing Lender or the
Lenders that are required to be paid by any Pledgor pursuant to the
terms of the Credit Agreement, this Pledge Agreement or any
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other Loan Document).
"Bridge Obligations" means the Pledgors' obligations under the
Infogrames Bridge Loan Documents in respect of the unpaid principal of
and interest on the Infogrames Bridge Loan Note (including, without
limitation, interest accruing at the then applicable rate provided in
the Infogrames Bridge Loan Note after the maturity of the Infogrames
Bridge Loan and interest accruing at the then applicable rate provided
in the Infogrames Bridge Loan Note after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Pledgor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of the Pledgors to Infogrames
U.S. in respect of the Infogrames Bridge Loan or the Infogrames Bridge
Loan Note, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Infogrames Bridge Loan Note
or the other Infogrames Bridge Loan Documents, in each case whether on
account of principal, interest, fees, indemnities, costs, expenses or
otherwise (including, without limitation, (a) the obligations of the
Borrower under the Infogrames Securities Purchase Agreement to pay or
reimburse Infogrames or Infogrames U.S. for costs and expenses
(including without limitation, reasonable fees and disbursements of
counsel to Infogrames or Infogrames U.S.) incurred or paid by
Infogrames or Infogrames U.S. in connection with the Infogrames
Securities Purchase Agreement and (b) all reasonable fees and
disbursements of counsel to Infogrames U.S. that are required to be
paid by any Pledgor pursuant to the terms of the Infogrames Bridge Loan
Note or any other Infogrames Bridge Loan Document).
"Code" means the Uniform Commercial Code as in effect in the
State of New York; provided that if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of
the security interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York,
"Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
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"Collateral" means, with respect to each Pledgor, the Stock
Collateral and the Partnership/LLC Collateral.
"Event of Default" means an Event of Default under, and as
defined in, the Credit Agreement or the Infogrames Bridge Loan Note.
"Infogrames Bridge Loan Documents" means the Infogrames Bridge
Loan Note, the Guaranty Agreement, the Security Agreement and this
Pledge Agreement.
"Obligations" means, collectively, the Bank Obligations and
the Bridge Obligations.
"Partnership/LLC Collateral" means, with respect to each
Pledgor, all of the Partnership/LLC Interests of such Pledgor in the
Partnerships/LLCs and all Proceeds therefrom.
"Partnership/LLC Interests" means, with respect to each
Pledgor, the entire partnership or membership interest of such Pledgor
in each Partnership/LLC listed under such Pledgor's name on Schedule I
hereto, including, without limitation, such Pledgor's capital account,
such Pledgor's interest as a partner or member in the net cash flow,
net profit and net loss, and items of income, gain, loss, deduction and
credit of the Partnerships/LLCs, such Pledgor's interest in all
distributions made or to be made by the Partnerships/LLCs to such
Pledgor and all of the other economic rights, titles and interests of
such Pledgor as a partner or member of the Partnerships/LLCs, whether
set forth in the partnership agreement or membership agreement of the
Partnerships/LLCs, by separate agreement or otherwise.
"Permitted Liens" means all Liens respecting the Collateral
permitted pursuant to Section 10.3 of the Credit Agreement.
"Pledged Stock" means, with respect to each Pledgor, the
shares of capital stock of each Issuer listed under such Pledgor's name
on Schedule I hereto, together with all stock certificates, options or
rights of any nature whatsoever that may be issued or granted by any
Issuer to such Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock and the
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Partnership/LLC Interests, collections thereon, proceeds of sale
thereof or distributions with respect thereto.
"Standstill Expiration Date" shall have the meaning assigned
thereto in Paragraph 16.
"Stock Collateral" means, with respect to each Pledgor, the
Pledged Stock owned by such Pledgor and all Proceeds therefrom.
2. Pledge and Grant of Security Interest.
(a) Each Pledgor hereby delivers to the Administrative Agent,
for the benefit of the Administrative Agent, the Lenders and Infogrames
U.S., all of the Pledged Stock of such Pledgor, to the extent not
previously delivered to the Administrative Agent.
(b) Each Pledgor hereby confirms and reaffirms its grant of a
security interest in the Collateral (as defined in the Amended and
Restated Pledge Agreement) pursuant to the Amended and Restated Pledge
Agreement. In order to secure the payment when due whether at the
stated maturity, by acceleration or otherwise of the Bank Obligations,
each Pledgor hereby grants to the Administrative Agent, for the ratable
benefit of the Lenders and the Administrative Agent, a first priority
security interest in the Pledged Stock listed under such Pledgor's name
on Schedule I and all of such Pledgor's other Collateral.
(c) In order to secure the payment when due whether at the
stated maturity, by acceleration or otherwise of the Bridge
Obligations, each Pledgor hereby grants to Infogrames U.S. a security
interest in the Pledged Stock listed under such Pledgor's name on
Schedule I and all of such Pledgor's other Collateral junior only to
the security interests granted to the Administrative Agent, for the
ratable benefit of the Lenders and the Administrative Agent, and other
Permitted Liens, in each case to the extent provided herein.
(d) As set forth in the separate granting clauses contained in
subsections (b) and (c) above, it is the intent of the Pledgor, the
Administrative Agent, the Lenders and Infogrames U.S. that this Pledge
Agreement shall create two separate and distinct Liens, a senior Lien
in favor of the Administrative Agent, for the benefit of the Lenders
and the
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Administrative Agent, and a separate junior Lien in favor of Infogrames
U.S.
3. Stock Powers; Register of Pledge. Concurrently with the
delivery to the Administrative Agent of each certificate representing one or
more shares of Pledged Stock (with respect to each Domestic Subsidiary, and,
where applicable, with respect to each Foreign Subsidiary), each Pledgor shall
have delivered, or to the extent not previously delivered to the Administrative
Agent shall deliver, an undated stock power covering such certificate, duly
executed in blank by such Pledgor with, if the Administrative Agent so requests,
signature guaranteed.
4. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) none of each Pledgor shall remain liable to perform all of
its duties and obligations as a partner or member of the Partnerships/LLCs to
the same extent as if this Pledge Agreement had not been executed, (b) the
exercise by the Administrative Agent or, of any of the rights hereunder shall
not release any Pledgor from any of its duties or obligations as a partner or
member of the Partnerships/LLCs and (c) none of the Administrative Agent, any
Lender or Infogrames U.S. shall have any obligation or liability as a partner or
member of the Partnerships/LLCs by reason of this Pledge Agreement.
5. Representations and Warranties. Each Pledgor hereby
represents and warrants to the Administrative Agent, each Lender and Infogrames
U.S. that:
(a) such Pledgor is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to execute and
deliver, to perform its obligations under, and to grant the Lien on its
Collateral pursuant to, this Pledge Agreement and has taken all
necessary corporate action to authorize its execution, delivery and
performance of, and grant of the Lien on its Collateral pursuant to,
this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of such Pledgor enforceable against such Pledgor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) the execution, delivery and performance by such Pledgor of
this Pledge Agreement will not violate any
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provision of any (i) Applicable Law relating to such Pledgor or (ii)
material contractual obligation of the Pledgor, the violation of which
could reasonably be expected to have a Material Adverse Effect, and
will not result in the creation or imposition of any Lien on any of the
properties or the revenues of such Pledgor pursuant to any Applicable
Law or such contractual obligation, except as contemplated hereby and
by the Credit Agreement;
(d) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of such Pledgor or any Issuer or any general or
limited partner or member of any Partnership/LLC), is required in
connection with the execution, delivery or performance by, or validity
or enforceability against, such Pledgor of this Pledge Agreement,
except (i) as may be required in connection with the disposition of the
Pledged Stock and the Partnership/LLC Interests by laws affecting the
offering and sale of securities generally and (ii) filings under the
Code;
(e) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of such Pledgor, threatened by or against such Pledgor or
against any of its properties or revenues, in each case with respect to
this Pledge Agreement or any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed under such Pledgor's
name on Schedule I constitute all of the issued and outstanding shares
of all classes of the capital stock of each Issuer that is a Domestic
Subsidiary and constitute sixty-five percent (65%) of all of the issued
and outstanding shares of all classes of capital stock of each Issuer
that is a Foreign Sub-sidiary, in each case owned by such Pledgor, and
Schedule I accurately reflects such Pledgor's Partnership/LLC Interest
in each of the Partnerships/LLCs listed under such Pledgor's name on
Schedule I and the Partnership/LLC Interests pledged by such Pledgor
constitute all of the outstanding ownership interests in which such
Pledgor has any right, title or interest in each Partnership/LLC which
is a Domestic Subsidiary and constitutes sixty-five percent (65%) of
the outstanding ownership interests in which such Pledgor has
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any right, title and interest in each Partnership/LLC which is a
Foreign Subsidiary;
(g) the shares of Pledged Stock listed under such Pledgor's
name on Schedule I have been duly and validly issued and are fully paid
and nonassessable and all of the Partnership/LLC Interests listed under
such Pledgor's name on Schedule I have been duly and validly issued;
(h) such Pledgor is the record and beneficial owner of, and
has good and marketable title to the Pledged Stock and Partnership/LLC
Interests listed under such Pledgor's name on Schedule I, free of any
and all Liens or options in favor of, or claims of, any other Person,
except the Liens created by this Pledge Agreement or Permitted Liens;
(i) the jurisdiction in which such Pledgor is located for
purposes of Section 9-103 and Section 9-401 of the Code is listed
opposite such Pledgor's name on Schedule II hereto;
(j) upon delivery to the Administrative Agent of the stock
certificates evidencing such Pledgor's Pledged Stock and the filing of
appropriate financing statements (or, with respect to any Foreign
Subsidiary, any filing required by the applicable foreign jurisdiction)
in the jurisdictions listed opposite such Pledgor's name on Schedule II
, the Liens granted by such Pledgor pursuant to this Pledge Agreement
will constitute valid, perfected first priority Liens in respect of the
Bank Obligations and Liens in respect of the Bridge Obligations, which
are junior only to the security interests in respect of the Bank
Obligations and the Permitted Liens, on the Collateral, enforceable as
such against all creditors of such Pledgor and any Persons purporting
to purchase any of such Collateral from such Pledgor; and
(k) such Pledgor has delivered to the Administrative Agent
true and complete copies of the partnership agreements and operating
agreements, as applicable, for each of the Partnerships/LLCs listed
under such Pledgor's name on Schedule I, which partnership agreements
and operating agreements are currently in full force and effect and
have not been amended or modified except as disclosed to the
Administrative Agent in writing.
6. Certain Covenants. Each Pledgor hereby covenants and agrees
with the Administrative Agent, the Lenders and Infogrames U.S., that, from and
after the date of this Pledge
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Agreement until the Obligations are paid in full and the Aggregate Commitment is
terminated:
(a) As a partner or member in the Partnerships/LLCs listed
under such Pledgor's name on Schedule I, it will abide by, perform and
discharge each and every material obligation, covenant and agreement to
be abided by, performed or discharged by such Pledgor as and when
required under the terms of the partnership agreements and operating
agreements, as applicable, of such Partnerships/LLCs, at no cost or
expense to the Administrative Agent, the Lenders or Infogrames U.S.
(b) If such Pledgor shall, as a result of its ownership of the
Collateral, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any of the Collateral, or otherwise in respect thereof,
such Pledgor shall accept the same as the agent of the Administrative
Agent and Infogrames U.S., hold the same in trust for the
Administrative Agent and Infogrames U.S. and deliver the same forthwith
to the Administrative Agent in the exact form received, duly indorsed
by such Pledgor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in blank
by such Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the
Obligations; provided, that at no time shall the Pledged Stock or
Partnership/LLC Interests of any Issuer or Partnership/LLC that is a
Foreign Subsidiary exceed sixty-five percent (65%) of the issued and
outstanding shares of all classes of capital stock of such Subsidiary
or Partnership/LLC Interests of such Subsidiary owned by such Pledgor.
In addition, any sums paid to such Pledgor upon or in respect of such
Collateral upon the liquidation or dissolution of any Issuer or
Partnership/LLC shall be held by the Administrative Agent as additional
collateral security for the Obligations.
(c) Without the prior written consent of the Administrative
Agent, such Pledgor will not (i) vote to
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enable, or take any other action to permit, any Issuer or
Partnership/LLC listed under such Pledgor's name on Schedule I to issue
any stock, partnership interests, limited liability company interests
or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or
exchange for any stock, partnership interests, limited liability
company interests or other equity securities of any nature of such
Issuer or Partnership/LLC, (ii) except as expressly provided to the
contrary herein, consent to any modification, extension or alteration
of the material terms of any partnership agreement or operating
agreement of any such Partnerships/LLCs, (iii) accept a surrender of
any partnership agreement or operating agreement of any such
Partnerships/LLCs or waive any material breach of or default under any
partnership agreement or operating agreement of any such
Partnerships/LLCs by any other party thereto, (iv) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with
respect to the Collateral, except as permitted by the Loan Documents or
the Infogrames Bridge Loan Documents, or (v) create, incur or permit to
exist any Lien on or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except
for the Liens provided for by this Pledge Agreement or Permitted Liens.
Such Pledgor will defend the right, title and interest of the
Administrative Agent and Infogrames U.S. in and to the Collateral
against the claims and demands of all Persons whomsoever.
(d) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such
Pledgor, such Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner reasonably satisfactory
to the Administrative Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(e) Such Pledgor agrees to pay when due, and to save each of
the Administrative Agent, the Lenders and Infogrames U.S. harmless
from, any and all liabilities with respect to, or resulting from any
delay in paying (except due to any
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delay caused by the gross negligence or willful misconduct of the
Administrative Agent, any such Lender or Infogrames U.S.,
respectively), any and all applicable stamp, excise, sales or other
similar taxes which may be payable or determined to be payable with
respect to the Collateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
(f) On or prior to the formation or acquisition of any
Subsidiary by such Pledgor, such Pledgor agrees to execute the Joinder
Agreement, attached to the Credit Agreement (which among other things,
supplements this Pledge Agreement), and such other documents and
instruments as required pursuant to Section 8.12 of the Credit
Agreement.
7. Cash Dividends and Distributons; Voting Rights. Unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the Pledgors of the Administrative Agent's
intent to exercise its rights pursuant to Paragraph 8 below, the Pledgor shall
be permitted to receive all cash dividends and shareholder, partnership and
membership distributions paid in accordance with the terms of the Credit
Agreement and the Infogrames Bridge Loan Note in respect of the Collateral and
to exercise all voting and corporate, partnership or membership rights, as
applicable, with respect to the Collateral; provided, that no vote shall be cast
or corporate, partnership or membership right exercised or other action taken
which, in the Administrative Agent's reasonable judgment, would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Credit Agreement, the Notes, any other Loan Document, the
Infogrames Bridge Loan Note, any other Infogrames Bridge Loan Document or this
Pledge Agreement. The Administrative Agent shall execute and deliver all proxies
and other instruments as any Pledgor may reasonably request from time to time
for the purpose of enabling such Pledgor to exercise the voting and other rights
that it is entitled to exercise and to receive the dividends and distributions
that it is authorized to receive and retain pursuant to this Paragraph 7, in
each case at the sole cost and expense of such Pledgor.
8. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise
such rights to the Pledgors, (i) the Administrative Agent shall have
the right to receive any and
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all cash dividends paid in respect of the Pledged Stock or partnership
and membership distributions in respect of the Partnership/LLC
Interests and make application thereof to the Obligations in accordance
with Paragraph 15 hereof and (ii) all shares of the Pledged Stock and
the Partnership/LLC Interests represented by instruments shall be
registered in the name of the Administrative Agent or its nominee, and
the Administrative Agent or its nominee may thereafter exercise (A) all
voting, corporate, partnership, membership and other rights pertaining
to such Collateral at any meeting of shareholders, partners or members
of the applicable entity or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or
options pertaining to such Collateral as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its
discretion any and all of the Collateral upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of the applicable entity, or upon the
exercise by the relevant Pledgor or the Administrative Agent of any
right, privilege or option pertaining to such Collateral, and in
connection therewith, the right to deposit and deliver any and all of
the Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine), all without liability except to account for property
actually received by it, but the Administrative Agent shall have no
duty to any Pledgor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent, the Lenders and
Infogrames U.S. hereunder shall not be conditioned or contingent upon
the pursuit by the Administrative Agent, any Lender or Infogrames U.S.
of any right or remedy against any Pledgor or against any other Person
which may be or become liable in respect of all or any part of the
Obligations, or against any collateral security therefor, guarantee
thereof or right of offset with respect thereto. None of the
Administrative Agent, any Lender or Infogrames U.S. shall be liable for
any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall the Administrative
Agent be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Pledgor or any other Person or to
take any other action whatsoever with regard to the Collateral or any
part thereof.
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9. Remedies.
(a) If an Event of Default shall occur and be continuing, the
Administrative Agent may, upon the request of the Required Lenders or
Infogrames U.S., as the case may be, exercise, on behalf of itself, the
Lenders and Infogrames U.S. all rights and remedies granted in this
Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, and in addition thereto, all
rights and remedies of a secured party under the Code. Without limiting
the generality of the foregoing with regard to the scope of the
Administrative Agent's remedies, the Administrative Agent without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by
Applicable Law referred to below) to or upon any Pledgor, any Issuer,
any Partnership/LLC or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, assign,
give option or options to purchase or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales,
in the over-the-counter market, at any exchange, broker's board or
office of the Administrative Agent, any Lender or Infogrames U.S. or
elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Administrative
Agent, any Lender, Infogrames U.S. or any Affiliate of any thereof
shall have the right upon any such public sale or sales, and, to the
extent permitted by Applicable Law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in any Pledgor, which right
or equity is hereby waived or released. The Administrative Agent shall
apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the
rights of the Administrative Agent, the Lenders and Infogrames U.S.
hereunder, including, without
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limitation, reasonable attorneys' fees and disbursements of counsel
thereto, to the payment in whole or in part of the Obligations then
outstanding, in accordance with Paragraph 15 hereof, and only after
such application and after the payment by the Administrative Agent of
any other amount required by any provision of Applicable Law,
including, without limitation, Section 9-504(1)(c) of the Code, need
the Administrative Agent account for the surplus, if any, to the
relevant Pledgor. To the extent permitted by Applicable Law, the
Pledgors waive all claims, damages and demands they may acquire against
the Administrative Agent, any Lender or Infogrames U.S. arising out of
the exercise by them of any rights hereunder. Written notice of a
proposed sale or other disposition of Collateral shall be given to the
appropriate Pledgors at least ten (10) Business Days before such sale
or other disposition and shall be deemed reasonable and proper if so
given. To the extent permitted by applicable law, the Pledgors further
waive and agree not to assert any rights or privileges which they may
acquire under Section 9-112 of the Code. Nothing in this Paragraph 9 or
otherwise in this Pledge Agreement shall be construed to require the
Administrative Agent to give any notice of an action not otherwise
required by Applicable Law and the express provisions of this Pledge
Agreement, the Credit Agreement, any other Loan Document, the
Infogrames Bridge Loan Note or any other Infogrames Bridge Loan
Document.
(b) Effective upon the occurrence and during the continuance
of an Event of Default, each Pledgor hereby constitutes and appoints
the Administrative Agent as its true and lawful attorney-in-fact, with
full power of substitution and full power to do any and all things
which the Administrative Agent deems advisable or necessary to be done
hereunder as fully and effectively as such Pledgor might or could do
but for this appointment and hereby ratifies all that said
attorney-in-fact shall lawfully do or cause to be done by virtue
hereof. Neither the Administrative Agent nor any of its agents shall be
liable for any acts or omissions or for any error in judgment or
mistake of fact or law in its capacity as such attorney-in-fact, except
due to its gross negligence or willful misconduct. This power of
attorney is coupled with an interest and shall be irrevocable so long
as any Obligations shall remain outstanding or the Aggregate Commitment
shall remain in effect.
10. Indemnity and Expenses. Each Pledgor hereby,
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jointly and severally, agrees to pay to the Administrative Agent or Infogrames
U.S., as the case may be, upon demand, the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Administrative Agent or
Infogrames U.S., as the case may be may incur in connection with (i) the
administration of this Pledge Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon the Collateral, (iii)
the exercise or enforcement of any of the rights of the Administrative Agent,
the Lenders and Infogrames U.S. hereunder or (iv) the failure by any Pledgor to
perform or observe any of the provisions hereof.
11. Registration Rights: Private Sales.
(a) If the Administrative Agent shall determine to exercise
its right to sell any or all of the Pledged Stock pursuant to Paragraph
8, and if in the opinion of the Administrative Agent or Infogrames U.S.
it is necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), each relevant Pledgor
will use its best efforts to cause the applicable Issuer to (i) execute
and deliver, and cause the directors and officers of the applicable
Issuer to execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts as may be, in the reasonable
opinion of the Administrative Agent or Infogrames U.S., necessary or
advisable to register the Pledged Stock, or that portion thereof to be
sold, under the provisions of the Securities Act, (ii) to use its best
efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Stock, or that portion
thereof to be sold, or until all such Pledged Stock is sold and (iii)
to make all amendments thereto and/or to the related prospectus which,
in the reasonable opinion of the Administrative Agent or Infogrames
U.S., are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission appli-cable thereto. Each Pledgor
agrees to use its best efforts to cause the applicable Issuer to comply
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdic-tions which the Administrative Agent or Infogrames U.S. shall
designate and to make available to its security holders, as soon as
prac-ticable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
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(b) Each Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Pledgor
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay
a sale of any of the Pledged Stock for the period of time necessary to
permit the applicable Issuer to register such securities for public
sale under the Securities Act, or under applicable state securities
laws, even if the applicable Issuer would agree to do so.
(c) Each Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to
this Paragraph 11 valid and binding and in compliance with any and all
other Applicable Laws. Each Pledgor further agrees that a breach of any
of the covenants contained in this Paragraph 11 will cause irreparable
injury to the Administrative Agent, the Lenders and Infogrames U.S. not
compensable in damages, that the Administrative Agent, the Lenders and
Infogrames U.S. have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in
this Paragraph 11 shall be specifically enforceable against such
Pledgor, and such Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred and is
continuing.
12. Amendments, etc. With Respect to the Obligations. Each
Pledgor shall remain obligated hereunder, and the Collateral shall remain
subject to the Liens granted hereby, notwithstanding that, without any
reservation of rights against such Pledgor, and without notice to or further
assent by such Pledgor, any demand
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for payment of any of the Obligations made by the Administrative Agent, any
Lender or Infogrames U.S., as the case may be, may be rescinded by the
Administrative Agent, such Lender or Infogrames U.S., as the case may be, and
any of the Obligations continued, and the Obligations, or the liability of such
Pledgor or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered, or released by the Administrative
Agent, any Lender or Infogrames U.S., as the case may be, and the Credit
Agreement, the Notes, any other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or part, as the Lenders (or the Required Lenders, as the
case may be), or, with respect to the Infogrames Bridge Loan Note and Infogrames
Bridge Loan Documents, as Infogrames U.S., may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time held
by the Administrative Agent, any Lender or Infogrames U.S. for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. None of
the Administrative Agent, any Lender or Infogrames U.S. shall have any
obligation to protect, secure, perfect or insure any other Lien at any time held
by it as security for their respective Obligations or any property subject
thereto. Each Pledgor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Administrative Agent, any Lender or Infogrames U.S. upon this
Pledge Agreement; the Obligations, and any of them, shall conclusively be deemed
to have been created, contracted or incurred in reliance upon this Pledge
Agreement; and all dealings between any Pledgor, on the one hand, and the
Administrative Agent, the Lenders and Infogrames U.S., on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Pledge Agreement. To the extent permitted by Applicable Law, each
Pledgor waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon such Pledgor with respect to the Obligations.
13. No Subrogation. Notwithstanding any payment or payments
made by any Pledgor hereunder, or any setoff or application of funds of any
Pledgor by the Administrative Agent, or the receipt of any amounts by the
Administrative Agent with respect to any of the Collateral, no Pledgor shall be
entitled to be subrogated to any of the rights of the Administrative Agent
against any guarantor or against any other collateral security held by the
Administrative Agent for the payment of the Obligations, nor shall any Pledgor
seek any reimbursement from any guarantor in respect of payments made by any
Pledgor in
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connection with the Collateral, or amounts realized by the Administrative Agent
in connection with the Collateral, until all amounts owing to the Administrative
Agent, the Lenders and Infogrames U.S. on account of the Obligations are paid in
full and the Credit Agreement and the Infogrames Bridge Loan Note are
terminated. If any amount shall be paid to a Pledgor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Pledgor in trust for the
Administrative Agent and Infogrames U.S., segregated from other funds of such
Pledgor, and shall, forthwith upon receipt by such Pledgor, be turned over to
the Administrative Agent in the exact form received by such Pledgor (duly
endorsed by such Pledgor, if required) to be applied against the Obligations,
whether matured or unmatured, in accordance with Paragraph 14 hereof.
14. Priorities Regarding Collateral. (a) Notwithstanding any
statement or provision to the contrary contained in any Loan Document or any
Infogrames Bridge Loan Document, any failure to file or record any financing
statement or any continuations thereof under the Code or other law of any
applicable jurisdiction with respect to the Collateral, and irrespective of the
time, place, order or method of attachment or perfection of any Lien granted to
the Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, under this Pledge Agreement or any other Loan Document or
any Lien granted to Infogrames U.S. under this Pledge Agreement or any other
Infogrames Bridge Loan Document, or the time or order of filing or recording of
financing statements or other notices of Liens granted pursuant hereto or
thereto, and irrespective of anything contained in any filing or agreement to
which the Borrower, any other Pledgor, the Administrative Agent, the Lenders or
Infogrames U.S. may now or hereafter be a party, and irrespective of the
ordinary rules of priority under the Code or under any other law governing the
relative priorities of secured creditors, any Lien in the Collateral granted by
the Borrower or any other Pledgor to the Administrative Agent, for the ratable
benefit of the Lenders and the Administrative Agent, pursuant to this Pledge
Agreement or any other Loan Document shall at all times (whether before, after
or during the pendency of any bankruptcy, reorganization or other insolvency
proceedings) have priority over and be senior to any Lien in the Collateral
granted by the Borrower or any other Pledgor to Infogrames U.S. pursuant to this
Pledge Agreement or any other Infogrames Bridge Loan Document.
(b) Without notice to or further assent by Infogrames U.S. and
without modifying or limiting in any way the
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subordination of the Liens granted in the Collateral to Infogrames U.S. to
secure the Bridge Obligations to the Liens granted in the Collateral to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, to secure the Bank Obligations:
(i) any demand for payment of any Bank Obligations made by the
Administrative Agent or the Lenders may be rescinded in whole or in
part by such Lenders, and any Bank Obligations may be continued, and
the Bank Obligations, or the liability of the Borrower or any other
Pledgor for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, or any obligation or
liability of the Borrower or any other Pledgor with respect to such
Bank Obligations under the Credit Agreement or any other Loan Document
may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived, surrendered, or released by
the Administrative Agent, acting at the direction of the Lenders
pursuant to the Credit Agreement; and
(ii) the Credit Agreement and any other Loan Document may be
amended, modified, supplemented or terminated, in whole or in part, in
each case in respect of the Bank Obligations, and any Collateral may be
exchanged, waived, surrendered or released, in each case in respect of
the Bank Obligations.
(c) The terms of this Paragraph 14 and the subordination of
the Liens granted in the Collateral to Infogrames U.S. pursuant to this Pledge
Agreement to secure the Bridge Obligations to the Liens granted in the
Collateral to the Administrative Agent, for the ratable benefit of the Lenders
and the Administrative Agent, to secure the Bank Obligations in the manner and
to the extent set forth herein, shall not be affected by any exercise of, or
failure to exercise, any right, power or remedy, or any waiver, consent release,
increase, extension, renewal, modification, delay or non-perfection under or in
respect of the Bank Obligations, this Pledge Agreement, the other Loan
Documents, the Bridge Obligations, the other Infogrames Bridge Loan Documents or
the Collateral. The Bank Obligations shall be deemed conclusively to have been
created, contracted or incurred in reliance upon this Pledge Agreement, and all
dealings among the Administrative Agent and the Lenders on the one hand, and
Infogrames U.S. on the other hand, shall be deemed to have been consummated in
reliance upon this Pledge Agreement.
15. Application of Proceeds. In order to implement the
subordination established pursuant to this Pledge Agreement
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of the Liens securing the Bridge Obligations to the Liens securing the Bank
Obligations, and in order to implement the agreement of the Administrative
Agent, on behalf of the Lenders and the Administrative Agent, and Infogrames
U.S. with respect to the application of the proceeds of the Collateral, the
Administrative Agent, Infogrames U.S. and each Pledgor agree that upon the
occurrence and during the continuance of an Event of Default on or after the
date of termination of the Transaction Documentation, any money, property,
securities or other distributions received by any Pledgor, the Administrative
Agent, any Lender or Infogrames U.S. from the sale, disposition or other
realization upon all or any part of the Collateral shall be delivered to the
Administrative Agent in the form received, duly indorsed to the Administrative
Agent, if required, and applied as follows:
(a) First, to the payment in full of all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements) paid or incurred by the Administrative Agent, or any
Lender, or paid or incurred by Infogrames U.S. at any time after the
Standstill Expiration Date, in connection with the realization on the
Collateral or the protection of the rights and interests of the
Administrative Agent, the Lenders or Infogrames U.S. therein, as the
case may be;
(b) Second, to the Administrative Agent, for the ratable
benefit of the Lenders and the Administrative Agent, until an aggregate
of $75,000,000 of the Bank Obligations have been paid in full, such
amounts to be applied to the Bank Obligations in accordance with
Section 4.5 of the Credit Agreement;
(c) Third, on a pro rata basis (based upon the then
outstanding aggregate amount of the Bank Obligations and the then
outstanding aggregate amount of the Bridge Obligations other than the
Bridge Obligations referenced in clause (d) below) to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent (such amounts to be applied to the Bank
Obligations in accordance with Section 4.5 of the Credit Agreement),
and to Infogrames U.S. (for application to the Bridge Obligations)
until all of the Bank Obligations and all such Bridge Obligations have
been paid in full;
(d) Fourth, to Infogrames U.S., all Bridge Obligations
constituting obligations of the Borrower under the Infogrames
Securities Purchase Agreement to pay or reimburse Infogrames or
Infogrames U.S. for costs and expenses
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(including without limitation, reasonable fees and disbursements of
counsel to Infogrames or Infogrames U.S.) incurred or paid by
Infogrames or Infogrames U.S. in connection with the Infogrames
Securities Purchase Agreement other than any such costs and expenses
relating to the Infogrames Bridge Loan; and
(e) Fifth, after the indefeasible payment in full of the
Obligations, to the Borrower or the applicable Pledgor, or its
representative or as a court of competent jurisdiction may direct, any
surplus then remaining.
16. Standstill Period in Respect of Bridge Obligations. (a)
Notwithstanding anything to the contrary contained in this Pledge Agreement, any
other Loan Document or any other Infogrames Bridge Loan Document, Infogrames
U.S. agrees and acknowledges that prior to the earlier of September 30, 2000 or
the nine (9) month anniversary of the date upon which the Transaction
Documentation is terminated (such earlier date, the "Standstill Expiration
Date"):
(i) other than (A) the right to receive payment in
full of the Bridge Obligations on the Transaction Closing Date and (B)
any right to receive payments on account of the Bridge Obligations in
accordance with Paragraph 15 (and the corresponding provisions of the
other Loan Documents and Infogrames Bridge Loan Documents), Infogrames
U.S. shall not, nor shall it seek to, exercise or enforce any right or
remedy under this Pledge Agreement, any other Infogrames Bridge Loan
Document or applicable law with respect to the Collateral or the Bridge
Obligations, including without limitation, any of the following: (1)
exercise any rights or remedies with respect to any Collateral; or (2)
seek to notify obligors of any security interest in all or any of the
Collateral; or (3) institute any action or proceeding with respect to
such rights or remedies with respect to any Collateral, including
without limitation, any action of foreclosure; or (4) contest, protest
or object to any exercise of rights or enforcement of remedies by the
Administrative Agent;
(ii) Infogrames U.S. will not interfere with, seek to
enjoin or invoke or utilize any provision of any document, law or
equitable principle which might prevent, delay or impede the
enforcement (in the discretion of the Administrative Agent, acting at
the direction of the Required Lenders) of the rights of the
Administrative Agent under this Pledge Agreement or any other Loan
Document or applicable law with respect to the Collateral, including
without limitation, to pursue foreclosure or to seek to lift the
automatic stay in any bankruptcy, reorganization or other insolvency
proceedings
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involving the Borrower or any other Pledgor;
(iii) the Lenders shall have the sole right to
consent to any proposed sale or other disposition of the Collateral and
to release any or all of the Collateral from any Lien granted herein,
whether such sale or disposition is made by the Borrower or any other
Pledgor, whether at private sale or pursuant to foreclosure, bankruptcy
or other judicial or non-judicial proceedings and regardless of whether
the proceeds of any such disposition would be sufficient to pay in full
the Bank Obligations and the Bridge Obligations, and upon any such sale
or other disposition, Infogrames U.S.'s junior Lien on the portion of
the Collateral sold or disposed of shall, subject to clause (i) above,
be automatically extinguished and discharged; and
(iv) in exercising rights and remedies with respect
to the Collateral, the Administrative Agent and the Lenders may enforce
the provisions of this Pledge Agreement and exercise remedies hereunder
and under any other Loan Document or applicable law (or refrain from
enforcing such rights and exercising such remedies), all in such order
and in such manner as they may determine in the exercise of their sole
discretion, and such exercise and enforcement of rights and remedies
with respect to the Collateral shall include, without limitation, the
rights to collect, sell, dispose of or otherwise realize upon all or
any part of the Collateral, to incur expenses in connection with such
collection, sale, disposition or other realization and to exercise all
the rights and remedies of a secured lender under the Code of any
applicable jurisdiction.
(b) On and after the Standstill Expiration Date, the
provisions of Paragraph 16(a) above shall no longer apply and Infogrames U.S.
may at any time after the occurrence and during the continuance of an Event of
Default under the Infogrames Bridge Loan Documents, but subject to Paragraph 15
with respect to the application of payments and proceeds in respect of the
Collateral, (a) exercise or enforce any right or remedy under applicable law in
respect of the Bridge Obligations and (b) instruct the Administrative Agent to
immediately commence the exercise of rights and remedies under this Pledge
Agreement in respect of the Collateral (and the manner in which to commence such
exercise of rights and remedies) unless the Administrative Agent has already
commenced the exercise thereof, provided that, subject to Infogrames U.S.'s
right to exercise any other rights and remedies under applicable law in respect
of the Bridge Obligations, and subject to Paragraph 15 with respect to the
application of payments and proceeds in respect of the Collateral, the exercise
of rights and remedies with respect to the Collateral shall be exercised solely
by the Administrative Agent (acting at the direction of Infogrames U.S. if such
rights and remedies were not already exercised or being exercised by the
Administrative Agent as of the Standstill Expiration Date).
17. Appointment of Administrative Agent as Agent for
Infogrames U.S. In order to further perfect and protect the Liens on the
Collateral granted to Infogrames U.S. pursuant to this Pledge Agreement to
secure the Bridge Obligations, Infogrames U.S. hereby authorizes and appoints
the Administrative Agent to hold on Infogrames U.S.'s behalf and as its agent
all Collateral granted hereunder for purposes of possession and control under
the Code or other
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applicable law and to act on its behalf as otherwise set forth herein. The
Administrative Agent, for itself and its successors, hereby accepts such
authorization and appointment and Infogrames U.S. hereby releases the
Administrative Agent from any liability whatsoever (other than liability
resulting from the Administrative Agent's willful misconduct or gross
negligence) in connection with such authorization and appointment. This
authorization and appointment are a power coupled with an interest and are
irrevocable. It is understood and agreed that the Administrative Agent may also
hold Collateral for the benefit of the Lenders and the Administrative Agent.
18. Termination of Bridge Obligations. Upon payment in full of
the Bridge Obligations on the Transaction Closing Date, all of the Liens on the
Collateral granted by the Borrower and any other Pledgor to Infogrames U.S.
pursuant to this Pledge Agreement and the other Infogrames Bridge Loan Documents
to secure the Bridge Obligations shall be automatically terminated and released,
Infogrames U.S. shall cease to be a party to this Pledge Agreement and
Infogrames U.S. will, at the Administrative Agent's request and at the expense
of the Borrower, execute and deliver to the Administrative Agent such documents
as the Administrative Agent shall reasonably request to evidence the termination
and release of all such Liens on the Collateral.
19. Limitation on Duties Regarding Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. None of the Administrative Agent, any Lender, Infogrames U.S. or any of
their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Pledgor or otherwise.
20. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral constitute irrevocable
powers coupled with an interest.
21. Severability. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
22. Paragraph Headings. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
23. No Waiver; Cumulative Remedies. None the Administrative
Agent, any
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Lender, or Infogrames U.S. shall by any act (except by a written instrument
pursuant to Paragraph 24) be deemed to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any Lender or Infogrames
U.S., any right, power or privilege hereunder shall operate as a waiver thereof.
No single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent, any Lender or
Infogrames U.S. of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Administrative Agent,
such Lender or Infogrames U.S. would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
24. Waivers and Amnendments; Successors and Assigns. None of
the terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by the Pledgors and
the Administrative Agent and, to the extent affecting the security interests in
favor of Infogrames U.S., Infogrames U.S.; provided that any consent by the
Administrative Agent to any waiver, amendment, supplement or modification hereto
shall be subject to approval thereof by the Lenders or Required Lenders, as
applicable, in accordance with Section 13.11 of the Credit Agreement. This
Pledge Agreement shall be binding upon the successors and assigns of the
Pledgors and shall inure to the benefit of the Administrative Agent, the
Lenders, Infogrames U.S. and their respective permitted successors and assigns.
25. Notices. All notices and communications to the
Administrative Agent, a Lender or a Pledgor shall be made in accordance with
Section 13.1 of the Credit Agreement and given to the addresses or transmission
numbers for notices set forth in the Credit Agreement, in the case of the
Administrative Agent or a Lender, or under its signature below, in the case of a
Pledgor. All notices and communications to Infogrames U.S. shall be made in
accordance with the Infogrames Bridge Loan Note and given to the address or
transmission number for notices set forth therein.
26. Control Agreement; Acknowledgment by Issuers and
Partnership/LLC.
(a) Each Pledgor hereby authorizes and instructs each
applicable Issuer and Partnership/LLC to comply, and each Issuer and
Partnership/LLC hereby agrees to so comply, with any instruction
received thereby from the Administrative Agent in accordance with the
terms of this Pledge Agreement with respect to the Collateral, without
any consent or further instructions from such Pledgor (or other
registered owner), and such Pledgor agrees that such Issuer and
Partnership/LLC shall be fully protected in so complying. Each
Partnership/LLC agrees that its agreement set forth in the preceding
sentence shall be sufficient to create in favor of the Administrative
Agent, for the benefit of the Lenders, the Administrative Agent and
Infogrames U.S. "control" of the Partnership/LLC Interests within the
meaning of such term under Section 8-106(c) of the
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Code. Notwithstanding the foregoing, nothing in this Pledge Agreement
is intended or shall be construed to mean or imply that the
Partnership/LLC Interests constitute "securities" within the meaning of
such term under Section 8-102(a)(15) of the Code or otherwise to limit
or modify the application of Section 8-103(c) of the Code. Rather, the
Administrative Agent and Infogrames U.S. have requested that this
provision be included in this Pledge Agreement solely out of an
abundance of caution in the event the Partnership/LLC Interests are,
nevertheless, deemed to constitute "securities" under the Code.
(b) Each Issuer and Partnership/LLC acknowledges receipt of a
copy of this Pledge Agreement and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to
it. Each Issuer and Partnership/LLC agrees to notify the Administrative
Agent and Infogrames U.S. promptly in writing of the occurrence of any
of the events described in Paragraph 6(c). Each Issuer and
Partnership/LLC further agrees that the terms of Paragraph 11 shall
apply to it with respect to all actions that may be required of it
under or pursuant to or arising out of Paragraph 9.
27. Authority of Administrative Agent. Each Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Pledge Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Pledge Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, and as between the Administrative Agent and Infogrames
U.S. be governed by Paragraph 17 herein, but, as between the Administrative
Agent and such Pledgor, the Administrative Agent shall be conclusively presumed
to be acting as agent for itself, the Lenders and Infogrames U.S., with full and
valid authority so to act or refrain from acting, and neither such Pledgor nor
any Issuer or Partnership/LLC shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.
28. Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
29. Consent to Jurisdiction. Each Pledgor hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Pledge Agreement, the other Loan Documents
and the other Infogrames Bridge Loan Documents to which it is a party,
or for recognition and enforcement of any judgement in respect thereof,
to the non-exclusive general jurisdiction of the courts of the State of
New York,
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the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Pledgor at its address set forth under its signature
below;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
30. Waiver of Jury Trial. EACH PLEDGOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS PLEDGE AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER INFOGRAMES BRIDGE
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
31. Entire Agreement. This Pledge Agreement, together with the
other Loan Documents and the other Infogrames Bridge Loan Documents, constitutes
the entire agreement with respect to the subject matter hereof and supersedes
all prior agreements with respect to the subject matter hereof.
32. Release and Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral permitted in accordance with the terms of the Loan
Documents, the Administrative Agent and Infogrames U.S. will, at the
relevant Pledgor's expense, execute and deliver to such Pledgor such
documents as such Pledgor shall reasonably request to evidence the
release of such item of Collateral from the assignment and security
interest granted hereby.
(b) This Pledge Agreement shall remain in effect from the date
hereof through and including the date upon which all Obligations shall
have been indefeasibly and
27
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irrevocably paid and satisfied in full and the Aggregate Commitment is
terminated and upon such date the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the
Pledgors. Upon any such termination, (i) the Administrative Agent and
Infogrames U.S. shall promptly assign, release, transfer and deliver to
the appropriate Pledgors the Collateral pledged hereunder, all
instruments of assignment executed in connection therewith, and all
stock certificates or other certificates or instruments held by the
Administrative Agent or Infogrames U.S. in connection therewith,
together with all monies held by the Administrative Agent, Infogrames
U.S. or any of their respective agents hereunder, free and clear of the
Liens hereof and (ii) the Administrative Agent, the Lenders and
Infogrames U.S. will promptly execute and deliver to the appropriate
Pledgors such documents and instruments (including but not limited to
appropriate UCC termination statements) as such Pledgors shall
reasonably request to evidence such termination in each such case at
the cost and expense of such Pledgors.
[Signature Pages Follow]
28
<PAGE>
IN WITNESS WHEREOF, each Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its duly authorized officer as of the date first
above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Thomas A. Heymann
----------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO
Telephone: 212-726-6500
Telecopy: 212-726-6590
HUMONGOUS ENTERTAINMENT, INC.
By: /s/ Thomas A. Heymann
----------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
WIZARDWORKS GROUP, INC.
By: /s/ Thomas A. Heymann
----------------------------------
Name: Thomas A. Heymann
Title: President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
29
<PAGE>
SINGLETRAC ENTERTAINMENT TECHNOLOGIES, INC.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
SWAN ACQUISITION CORP.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
President
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
CANDEL INC.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
FORMGEN, INC.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
30
<PAGE>
GOLD MEDALLION SOFTWARE INC.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
MEDIATECHNICS LTD.
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chairman of the Board and
Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software
Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
LEGEND ENTERTAINMENT COMPANY LLC
By: /s/ Thomas A. Heymann
---------------------------------
Name: Thomas A. Heymann
Title: Chief Executive Officer
Address for notices:
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman & CEO of GT
Interactive Software Corp.
Telephone: 212-726-6500
Telecopy: 212-726-6590
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ John McGowan
---------------------------------
Name: John McGowan
Title: Senior Vice President
CALIFORNIA U.S. HOLDINGS, INC.
By: /s/ Bonnell Bruno
---------------------------------
Name: Bonnell Bruno
Title: President and Chief Executive
Officer
31
Exhibit 10.6
NOTE
$25,000,000.00 November 15, 1999
GT INTERACTIVE SOFTWARE CORP., a Delaware corporation (the "Borrower"),
for value received, hereby promises to pay twenty-five million dollars
($25,000,000) plus interest as provided below to the order of CALIFORNIA U.S.
HOLDINGS, INC., a California corporation (the "Lender"), at the office of the
Lender, at 5300 Stevens Creek Boulevard, Suite 500, San Jose, California 95129,
Attention: Chief Operating Officer, on the earliest (the "Maturity Date") of (a)
March 31, 2000, (b) the "Closing Date" as defined in the Securities Purchase
Agreement, dated as of November 15, 1999 (the "Purchase Agreement") among the
Lender, Infogrames Entertainment S.A. and GT Interactive Software Corp. or (c)
the date (the "Acceleration Date") on which the maturity date for payment of
this promissory note (this "Note") is otherwise accelerated pursuant to the
terms hereof.
If the Maturity Date is (a) either March 31, 2000 or the Acceleration
Date, the Borrower shall pay the outstanding principal amount of, and the
accrued interest on, this Note in immediately available funds to an account
designated by the Lender or (b) the Closing Date, the Borrower shall pay the
outstanding principal amount of, and the accrued interest on, this Note by
delivery to the Lender or its designee of a Convertible Subordinated Note,
substantially in the form of Exhibit B to the Purchase Agreement.
At the election of the Borrower, the principal amount of this Note
shall bear interest at the per annum rate of (a) the Base Rate (as defined
herein) plus two and one-half percent (2.5%) or (b) the LIBOR Rate (as defined
herein) plus four percent (4.0%). The Borrower shall select, by written notice
to the Lender, the rate of interest applicable to this Note on the date hereof
and thereafter (i) no later than two Business Days before the last day of an
Interest Period (as defined herein), if this Note shall bear interest at the
LIBOR Rate plus four percent (4.0%) or (ii) at any time if this Note shall bear
interest at the Base Rate plus two and one-half percent (2.5%). If the Borrower
does not specify an interest rate as provided in this paragraph, this Note shall
bear interest at the Base Rate plus two and one-half percent (2.5%).
"Base Rate" means, at any time, the higher of (a) the Prime Rate and
(b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in New York, New York, are open for the conduct of their domestic or
international commercial banking business, as applicable and (b) with respect to
all notices and determinations in connection with the LIBOR Rate any day (i)
that is a Business Day described in clause (a) and that is also a day for
trading by and between banks in deposits in U.S. dollars in the London interbank
market and (ii) on
1
<PAGE>
which banks are open for the conduct of their domestic and international banking
business in the place where the Lender shall have its chief executive office.
"Dollars" shall mean the lawful currency of the United States of
America.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the First Union National Bank and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the First Union National Bank. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean a daily
rate which is determined, in the opinion of the Lender, to be the rate at which
federal funds are being offered for sale in the national federal funds market at
9:00 a.m. (New York time). Rates for weekends or holidays shall be the same as
the rate for the most immediate preceding Business Day.
"Guaranty Agreement" means the Amended and Restated Unconditional
Subsidiary Guaranty Agreement, dated as of November 15, 1999, by certain
subsidiaries of the Borrower in favor of First Union National Bank, as
Administrative Agent and the Lender.
"LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum amounts of at least $25,000,000 for
a period equal to the applicable Interest Period which appears on the Dow Jones
Markets screen 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period (rounded upward,
if necessary, to the nearest one-hundredth of one percent (1/100%)). If, for any
reason, such rate does not appear on Dow Jones Markets screen 3750, then "LIBOR"
shall be determined by First Union National Bank to be the arithmetic average
(rounded upward, if necessary, to the nearest one-hundredth of one percent
(1/100%)) of the rate per annum at which deposits in Dollars would be offered by
first class banks in the London interbank market to First Union National Bank
(or its correspondent) at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period and in an amount of $25,000,000. Each
calculation by the First Union National Bank of the LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the First Union National Bank
pursuant to the following formula:
LIBOR Rate = LIBOR
----------------------------------
1.00-Eurodollar Reserve Percentage
2
<PAGE>
"Loan Documents" means this Note and each Security Document.
"Pledge Agreement" means the Second Amended and Restated Pledge
Agreement, dated as of November 15, 1999, by the Borrower and certain
subsidiaries of the Borrower in favor of First Union National Bank, as
Administrative Agent, and the Lender.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union National Bank as its prime
rate. Each change in the Prime Rate shall be effective as of the opening of
business on the day such change in the Prime Rate occurs. The parties hereto
acknowledge that the rate announced publicly by First Union National Bank as its
Prime Rate is an index or base rate and shall not necessarily be its lowest or
best rate charged to its customers or other banks.
"Security Agreement" means the Second Amended and Restated Security
Agreement, dated as of November 15, 1999, by the Borrower, and certain
subsidiaries of the Borrower in favor of First Union National Bank, as
Administrative Agent, and the Lender.
"Security Documents" means each of the Security Agreement, the Pledge
Agreement and the Guaranty Agreement.
Each "Interest Period" shall (a) be one month; (b) commence on the date
designated in the notice from the Borrower to the Lender, which shall be (i) the
date hereof in the case of an election to have this Note bear interest at the
LIBOR Rate plus four percent (4.0%) from the date hereof; (ii) except as
provided in preceding clause (i), the date no earlier than two Business Days
after the date on which notice is given to the Lender; and (iii), in the case of
immediately successive Interest Periods, on the date on which the next preceding
Interest Period expires; (c) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period would otherwise
expire on a day that is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such interest Period shall expire
on the next preceding Business Day; (d) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar month at the
end of such Interest Period; and (e) no Interest Period shall extend beyond the
Maturity Date.
Upon the occurrence and during the continuance of an Event of Default,
(i) the Borrower shall no longer have the option to request that this Note bear
interest at the LIBOR Rate plus four percent (4.0%), (ii) if this Note shall at
such time, as a result of an election by the Borrower prior to that time, bear
interest at the LIBOR Rate plus four percent (4.0%), this Note shall bear
interest at the LIBOR Rate plus six percent (6.0%) until the end of the
applicable Interest Period and thereafter at a rate equal to the Base Rate plus
four and one-half percent (4.5%), and (iii) if this Note shall at such time, as
a result of an election by the Borrower (or the failure by the Borrower to make
an election) prior to that time, bear interest at the Base Rate plus two and
one-
3
<PAGE>
half percent (2.5%), this Note shall bear interest at the Base Rate plus
four and one-half percent (4.5%). Interest shall continue to accrue on this Note
after the filing by or against the Borrower of any petition seeking any relief
in bankruptcy or under any act or law pertaining to insolvency or debtor relief,
whether state, federal or foreign.
Interest on this Note shall be payable in arrears on the Maturity Date
and shall be computed on the basis of (a) a 365/366-day year and assessed for
the actual number of days elapsed for the periods during which this Note bears
interest at the Base Rate plus two and one-half percent (2.5%) or four and
one-half percent (4.5%) (as applicable) and (b) a 360-day year and assessed for
the actual number of days elapsed for the periods during which this Note bears
interest at the LIBOR Rate plus four percent (4.0%) or six percent (6.0%) (as
applicable).
In no contingency or event whatsoever shall the aggregate of all
amounts deemed interest under this Note charged or collected exceed the highest
rate permissible under any applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that amounts that the Lender has charged or
received that are deemed to be interest hereunder exceed the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by applicable law and the Lender shall at the Lender's option (i)
promptly refund to the Borrower any amounts that are deemed to be interest and
received by the Lender in excess of the maximum lawful rate or (ii) shall apply
such excess to the principal balance of this Note. It is the intent hereof that
the Borrower not pay or contract to pay, and that the Lender not receive or
contract to receive, directly or indirectly in any manner whatsoever, any
amounts that are deemed to be interest in excess of that which may be paid by
the Borrower under applicable law.
Any and all payments by the Borrower under this Note shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholding, and all liabilities with
respect thereto excluding, (i) income and franchise taxes imposed by the
jurisdiction under the laws of which the Lender is organized or is or should be
qualified to do business or any political subdivision thereof and (ii) in the
case of the Lender, income and franchise taxes imposed by the jurisdiction of
such Lender's chief executive office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable under
this Note, (A) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this paragraph) the Lender receives an amount
equal to the amount it would have received had no such deductions been made, (B)
the Borrower shall make such deductions, (C) the Borrower shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (D) the Borrower shall deliver to the Lender
evidence of such payment to the relevant taxing authority or other authority.
In addition to the payments made under the preceding paragraph, the
Borrower shall pay any present or future stamp, registration, recordation or
documentary taxes or any other similar fees or charges or excise or property
taxes, levies of the United States or any state or political subdivision thereof
or any applicable foreign jurisdiction which arise from any payment made
4
<PAGE>
hereunder or from the execution, delivery or registration of, or otherwise with
respect to the Loan Documents or the perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes").
The Borrower shall indemnify the Lender for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes and Other Taxes
imposed by any jurisdiction on amounts payable under this paragraph and the two
preceding paragraphs and this paragraph) paid by the Lender and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Such indemnification shall be made within thirty (30) days from the
date the Lender makes written demand therefor.
Within thirty (30) days after the date of any payment of Taxes or Other
Taxes, the Borrower shall furnish to the Lender, at its address below, the
original or a certified copy of a receipt evidencing payment thereof or other
evidence of payment satisfactory to the Lender.
The Lender shall deliver to (i) two United States Internal Revenue
Service Forms 4224 or Forms 1001, as applicable (or successor forms) properly
completed and certifying in each case that such Lender is entitled to a complete
exemption from withholding or deduction for or on account of any United States
federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding taxes. The Lender further agrees to deliver to
the Borrower a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable
forms or manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrower, certifying in the case of a Form 1001 or 4224 that the Lender is
entitled to receive payments under this Note without deduction or withholding of
any United States federal income taxes (unless in any such case an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders such forms inapplicable or the exemption to which such
forms relate unavailable and the Lender notifies the Borrower that it is not
entitled to receive payments without deduction or withholding of United States
federal income taxes) and, in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
the immediately preceding five paragraphs shall survive the payment in full of
this Note.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental authority or otherwise: (a)
default in payment of principal, interest or other amount under this Note when
and as due (whether at maturity, by reason of acceleration or otherwise); and
(b) an "Event of Default" shall have occurred and be continuing under the Credit
Agreement dated as of September 11, 1998 (as amended by amendments thereto dated
as of April 18, 1999,
5
<PAGE>
June 29, 1999 and November 15, 1999, the "Credit Agreement") between the
Borrower, the lenders referred therein, NationsBanc Montgomery Securities, LLC,
as syndication agent, Fleet Bank, N.A., as documentation agent, and First Union
National Bank, as administrative agent.
Subject to the terms of the Security Documents, upon the occurrence of
an Event of Default, the Lender may, by notice to the Borrower, declare the
principal of and interest on this Note at the time outstanding, and all other
amounts owed to the Lender under this Note or any of the other Loan Documents to
be forthwith due and payable, whereupon the same shall immediately become due
and payable without presentment, demand, protest or other notice of any kind,
all of which are expressly waived, anything in this Note or the other Loan
Documents to the contrary notwithstanding, and provided, that upon the
occurrence of an Event of Default specified in Section 11.1(j) or (k) of the
Credit Agreement all principal of and interest on this Note at the time
outstanding, and all other amounts owed to the Lender under this Note or any of
the other Loan Documents, shall automatically become due and payable.
Subject to the terms of the Security Documents, the enumeration of the
rights and remedies of the Lender set forth in this Note is not intended to be
exhaustive and the exercise by the Lender of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Lender in exercising any right, power or privilege shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver of any
Event of Default. No course of dealing between the Borrower, the Lender or its
agents or employees shall be effective to change, modify or discharge any
provision of this Note or any of the other Loan Documents or to constitute a
waiver of any Event of Default.
All notices and communications hereunder shall be in writing, 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 received by a the Borrower or the Lender, as the case may be,
(a) on the date of delivery if delivered by hand or overnight courier or sent by
telecopy and received before the close of business on a business day at the
place received ("Local Business Day"), (b) on the next Local Business Day if
delivered by hand or overnight courier or sent by telecopy and received after
the close of business on a Local Business Day or on a day that is not a Local
Business Day at the place received and (c) on the seventh Local Business Day
following the date sent by certified mail, return receipt requested.
Notices to any party shall be sent to it at the following addresses, or
any other address as to which all the other parties are notified in writing in
the manner set forth in the immediately preceding paragraph.
If to the Borrower: GT Interactive Software Corp.
417 Fifth Avenue, 8th Floor
New York, New York 10016
Attention: Chairman and Chief Executive Officer
Telephone No.: (212) 726-6500
Telecopy No.: (212) 726-6590
6
<PAGE>
With copies to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022-3903
Attention: David P. Levin, Esq.
Telephone No.: (212) 715-9217
Telecopy No.: (212) 715-8000
If to the Lender: California U.S. Holdings, Inc.
5300 Stevens Creek Boulevard, Suite 500
San Jose, California 95129
Attention: Chief Operating Officer
Telephone No.: (408) 289-1200
Telecopy No.: (408) 246-0898
With Copies to: Infogrames Entertainment S.A.
84, rue du 1er Mars 1943
Villeurbanne, 69100
France
Attention: Thomas Schmider
Telephone No.:(011 33) 472 655116
Telecopy No.: (011 33) 472 655000
And
Attention: Frederic Garnier
Telephone No.: (011 33) 472 655059
Telecopy No.: (011 33) 472 655000
And
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Nathaniel M. Cartmell
Ronald E. Bornstein
Telephone:(415) 983-1000
Telecopy: (415) 983-1200
The Borrower will (a) pay all reasonable out-of-pocket expenses of the
Lender in connection with (i) the preparation, execution and delivery of this
Note and each of the other Loan Documents, whenever the same shall be executed
and delivered, including without limitation all reasonable fees and
disbursements of counsel for the Lender and (ii) the preparation, execution and
delivery of any waiver, amendment or consent by the Lender relating
7
<PAGE>
to this Note or any other Loan Document, including without limitation reasonable
fees and disbursements of counsel for the Lender, (b) pay all reasonable
out-of-pocket expenses of the Lender actually incurred in connection with the
administration and enforcement of any rights and remedies of the Lender under
the Loan Documents, including consulting with appraisers, accountants,
engineers, attorneys and other persons concerning the nature, scope or value of
any right or remedy of the Lender hereunder or under any other Loan Document or
any factual matters in connection therewith, which expenses shall include
without limitation the reasonable fees and disbursements of such persons, and
(c) defend, indemnify and hold harmless the Lender, and their respective
parents, subsidiaries, affiliates, employees, officers and directors, from and
against any losses, penalties, fines, liabilities, judgments, settlements,
damages, costs and expenses, suffered by any such person in connection with any
claim, investigation, litigation or other proceeding (whether or not the Lender
is a party thereto) and the prosecution and defense thereof, arising out of or
in any way connected with this Note or any other Loan Document, including
without limitation reasonable attorney's and consultant's fees, except to the
extent that any of the foregoing directly result from the gross negligence or
willful misconduct of the party seeking indemnification therefor.
Subject to the terms of the Security Documents, in addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon and after the occurrence of any Event of
Default and during the continuance thereof, the Lender and any assignee or
participant of a Lender are hereby authorized by the Borrower at any time or
from time to time, without notice to the Borrower or to any other person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, time or demand, including, but
not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Lender, or any such assignee or participant to or for the credit or the
account of the Borrower against and on account of the obligations hereunder and
under the other Loan Documents irrespective of whether or not (a) the Lender
shall have made any demand under this Note or any of the other Loan Documents or
(b) the Lender shall have declared any or all of the obligations hereunder and
under the other Loan Documents to be due and payable and although such
obligations shall be contingent or unmatured.
This Note and the other Loan Documents, unless otherwise expressly set
forth therein, shall be governed by, construed and enforced in accordance with
the laws of the State of New York, without reference to the conflicts or choice
of law principles thereof.
To the extent the Borrower makes a payment or payments to the Lender or
the Lender receives any payment or proceeds of the collateral which payments or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
repaid, the obligations hereunder or under the other Loan Documents or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by the Lender.
8
<PAGE>
The Borrower may not assign any of its rights or obligations under this
Note or the Loan Documents. The Lender may, with the consent of the Borrower (so
long as no Event of Default or event, which with the passing of time or giving
of notice, or both, would be an Event of Default has occurred and is
continuing), which consent shall not be unreasonably withheld (provided, that no
such consent shall be required in connection with an assignment to an affiliate
of a Lender), assign all or a portion of its interests, rights and obligations
under this Note.
Any provision of this Note or any other Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
This Note is entitled to the benefits of, and is secured and the
exercise of rights and remedies hereunder is limited, to the extent set forth
therein, by the Security Documents.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ John T. Baker IV
---------------------------------
Name: John T. Baker IV
Title: President and Chief Operating
Officer
