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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
GT Interactive Software Corp.
(Name of Issuer)
Common Stock, par value $ .01 per share
(Title of Class of Securities)
36236E109
(CUSIP Number)
Frederic Garnier
Infogrames Entertainment S.A.
82-84, rue du 1er mars 1943
69628 Villeurbanne cedex France
+33 (0) 4 72 65 50 00
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and Communications)
December 17, 1999
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box [ ].
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act.
(Continued on the following pages)
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1) NAME OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Infogrames Entertainment S.A.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP (a) [X]
(b) [ ]
3) SEC USE ONLY
4) SOURCE OF FUNDS
WC
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
OR 2(e) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
France
NUMBER OF 7) SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING 8) SHARED VOTING POWER
PERSON WITH
100,729,801
9) SOLE DISPOSITIVE POWER
-0-
10) SHARED DISPOSITIVE POWER
99,429,801
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100,729,801
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 71.7
14) TYPE OF REPORTING PERSON
CO
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1 NAME OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
California U.S. Holdings, Inc.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP (a) [X]
(b) [ ]
3) SEC USE ONLY
4) SOURCE OF FUNDS
AF
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
OR 2(e) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
California
NUMBER OF 7) SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING 8) SHARED VOTING POWER
PERSON WITH
100,729,801
9) SOLE DISPOSITIVE POWER
-0-
10) SHARED DISPOSITIVE POWER
99,429,801
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100,729,801
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 71.7
14) TYPE OF REPORTING PERSON
CO
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This amendment No. 1 ("Amendment No. 1") to Schedule 13D is filed by
the undersigned to amend and supplement the Schedule 13D, dated December 13,
1999 (the "Original 13D").
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, par value $.01 per share
("GTIS Common Stock"), of GT Interactive Software Corp., a Delaware corporation
("GTIS"). The principal executive offices of GTIS are located at 417 Fifth
Avenue, New York, New York 10016.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c), (f). This Statement is being filed by Infogrames
Entertainment S.A., a corporation organized under the laws of France
("Infogrames"), and California U.S. Holdings, Inc., a California corporation and
wholly owned subsidiary of Infogrames ("Purchaser" and together with Infogrames,
the "Filing Persons"). The address for Infogrames is 82-84, rue du 1er mars
1943, 69628 Villeurbanne cedex France. The address for Purchaser is 5300 Stevens
Creek Blvd., San Jose, CA 95129. The principal business of Infogrames is the
development and distribution of computer software. The principal business of
Purchaser is the development and distribution of computer software. Attached as
Exhibit 1 is a chart setting forth, with respect to each executive officer and
director of the Filing Persons, his, her or its name, business address,
principal occupation or employment, the name and principal business of the
organization in which such employment is conducted, and citizenship.
(d) During the last five years, neither Filing Person nor, to the best
knowledge of the Filing Persons, any executive officer or director of either
Filing Person has been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors).
(e) During the last five years, neither Filing Person nor, to the best
knowledge of the Filing Persons, any executive officer or director of either
Filing Person was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which either Filing Person or any
executive officer or director of either Filing Person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Purchaser made the purchases using funds loaned to it by Infogrames,
its parent company. Infogrames funded these loans from working capital.
ITEM 4. PURPOSE OF TRANSACTION.
On December 17, 1999 (the "Closing"), Purchaser closed the acquisition
from GTIS and certain stockholders of GTIS of 62,129,960 shares of GTIS Common
Stock, a 5% Convertible Subordinated Note of GTIS in the principal amount of
60,587,206.72 (the "5% Note"), warrants to purchase 4.5 million shares of GTIS
Common Stock and a warrant to purchase 50,000 shares of GTIS Common Stock.
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GTIS Purchase Agreement
On December 17, 1999, Purchaser acquired from GTIS (a)
28,571,429 shares of GTIS Common Stock for an aggregate purchase price of $50
million and (b) the 5% Note pursuant to that certain Securities Purchase
Agreement, dated as of November 15, 1999, among the Filing Persons and GTIS (the
"GTIS Purchase Agreement"). The 5% Note is due December 16, 2004 and is
convertible into 32,749,841 shares of GTIS Common Stock at a conversion price of
$1.85 per share, subject to adjustment in certain circumstances. On November 15,
1999, at the time of the execution of the GTIS Purchase Agreement and in
connection with a $25.0 million Note (the "Short Term Note") evidencing a loan
in that amount by Purchaser to GTIS, Purchaser was issued a warrant to purchase
50,000 shares of GTIS Common Stock (the "Purchaser Warrant"). The Short Term
Note was exchanged with GTIS at the Closing in partial payment of the purchase
price for the 5% Note. The GTIS Purchase Agreement, the Short Term Note, the
Purchaser Warrant and the form of 5% Note are attached hereto as Exhibits 3, 4,
5 and 6 respectively, and are incorporated herein by reference.
Pursuant to the GTIS Purchase Agreement, the GTIS Board of Directors
elected Mr. Bruno Bonnell and Mr. Thomas Schmider as directors of GTIS,
effective as of the Closing. In addition, pursuant to the terms of the GTIS
Purchase Agreement, GTIS agreed that its Board of Directors would, at the
request of Infogrames, prior to the Closing elect another director to be
designated by Infogrames effective as of the Closing, provided that the designee
were reasonably acceptable to the GTIS Board of Directors. Infogrames has
designated Mr. Herve Liagre for election as such director. Pursuant to the GTIS
Purchase Agreement, GTIS has procured the resignation, effective as of
the Closing of all current directors of the GTIS other than Mr. Thomas A.
Heymann and Mr. Steven A. Denning, effective as of the Closing. GTIS also agreed
that, if requested by Infogrames, GTIS would secure the resignations of or
remove, effective as of the Closing, any member of the Board of Directors of any
subsidiary of GTIS. Purchaser has agreed pursuant to the GTIS Purchase Agreement
that following the Closing, it will use its reasonable best efforts to elect
directors in compliance with the Certificate of Incorporation of GTIS and rules
for inclusion of GTIS Common Stock on the Nasdaq National Market.
Pursuant to the GTIS Purchase Agreement, GTIS acknowledged that
Infogrames and its affiliates engage in the same or similar activities or lines
of business as GTIS and have an interest in the same area of business
opportunities. GTIS agreed that Infogrames and its affiliates shall have the
right to (a) engage in the same or similar business activities or lines of
business as GTIS, (b) do business with any client or customer of GTIS and (c)
employ or otherwise engage any officer or other employee of GTIS, and neither
Infogrames nor any affiliate or their respective officers or directors would be
liable to GTIS by reason of any such activities of Infogrames or its affiliates
or of such person's participation therein. Further, the GTIS Purchase Agreement
provides that in the event that (a) Infogrames or any of its affiliates, or (b)
any officer, director or employee of GTIS who is also an officer, director or
employee of Infogrames or any affiliate
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thereof, acquires knowledge of a potential transaction or matter which may be a
business opportunity for both GTIS and Infogrames or any of its affiliates, such
business opportunity shall belong only to Infogrames and not to GTIS, and any
such officer, director or employee of GTIS shall treat such business opportunity
as belonging only to Infogrames and not GTIS, subject to the following sentence.
In the case of clause (b) Infogrames shall determine in good faith whether,
based on the circumstances under which such person acquired this knowledge, such
business opportunity instead was offered to such person solely in his capacity
as an officer, director or employee of GTIS ("GTIS 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 Infogrames or any affiliate thereof. In the event Infogrames
determines that it was so offered to such person in his GTIS Capacity, such
business opportunity shall belong only to GTIS and not to Infogrames and such
officer, director or employee shall treat such business opportunity as belonging
only to GTIS and not to Infogrames. With respect to any business opportunity
belonging to Infogrames pursuant to the GTIS Purchase Agreement, Infogrames
shall decide how to allocate and pursue such business opportunity based on its
sole determination of what is in the best interests of Infogrames' stockholders.
Infogrames' good faith determination of the allocation of business opportunities
pursuant to the GTIS Purchase Agreement shall be conclusive and binding for all
purposes.
Pursuant to the Distribution Agreement between Infogrames and GTIS (the
"Distribution Agreement"), GTIS granted Infogrames the exclusive right (for all
countries in the European Union, Australia and New Zealand (the "Territory")) to
publish, manufacture, market, advertise, promote, publicize, distribute, sell,
sublicense or otherwise exploit GTIS products (the "Products"), subject to
agreements that GTIS had in place on November 11, 1999. GTIS further agreed not
to renew agreements with other parties covering the Territory. The Distribution
Agreement provides for the payment by Infogrames to GTIS of the purchase price
or royalties covering Products subject to the Distribution Agreement. A copy of
the Distribution Agreement is attached as Exhibit 7 hereto and incorporated
herein by reference.
GAP Purchase Agreement
At Closing, Purchaser acquired from the GAP Entities (as defined below)
outstanding warrants to purchase 4.5 million shares of GTIS Common Stock for an
aggregate purchase price of $990.00 (the "GAP Warrants"), pursuant to that
certain Equity Purchase and Voting Agreement, dated as of November 15, 1999 (the
"GAP Purchase Agreement"), among the Filing Persons and each of the following:
General Atlantic
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Partners 16, L. P., a Delaware limited partnership, General Atlantic Partners
19, L. P., a Delaware limited partnership, General Atlantic Partners II, L. P.,
a Delaware limited partnership, General Atlantic Partners 54, L. P., a Delaware
limited partnership, GAP Coinvestment Partners, L. P., a New York limited
partnership and GAP Coinvestment Partners II, L. P., a Delaware limited
partnership (collectively, the "GAP Entities"). The GAP Purchase Agreement and
form of GAP Warrants are attached hereto as Exhibits 8 and 9, respectively, and
are incorporated herein by reference.
In addition, pursuant to the GAP Purchase Agreement, the GAP Entities
agreed (a) not to sell an aggregate of 7,428,525 shares of GTIS Common Stock and
600,000 shares of Series A Convertible Preferred Stock of GTIS (collectively,
the "GAP Voting Shares") prior to Closing, (b) to vote (or issue a consent in
respect of) the GAP Voting Shares in favor of the transactions contemplated by
the GTIS Purchase Agreement and against any action or agreement that would
reasonably be expected to impede, interfere with, delay or attempt to discourage
such transactions, (c) to grant a proxy to Purchaser to vote the GAP Voting
Shares on those matters contemplated by clause (b) prior to the Closing, and (d)
not to solicit, initiate or knowingly encourage, participate in discussions
regarding or enter into an agreement regarding, certain business combination
transactions.
GAP Exchange Agreement
In addition, pursuant to a securities exchange agreement between the
GAP Entities and GTIS, dated as of November 15, 1999 (the "Exchange Agreement"),
the GAP Entities exchanged their 600,000 shares of GTIS Series A Convertible
Preferred Stock and their $20.0 million in principal amount of 9% Subordinated
Notes of GTIS, due July 29, 2000, for $50.0 million in principal amount of
Convertible Subordinated Notes due 2004 issued by GTIS (the "Convertible
Subordinated Notes"). The Convertible Subordinated Notes are convertible into
GTIS Common Stock at a conversion price of $4.00 per share, subject to
adjustment in certain circumstances. The Exchange Agreement is attached hereto
as Exhibit 10 and is incorporated herein by reference.
Cayre Purchase Agreements
In addition, at Closing, Purchaser acquired from the Cayre Group (as
defined below) 33,558,531 shares of GTIS Common Stock for an aggregate purchase
price of $25.0 million pursuant to those certain Equity Purchase and Voting
Agreements, each dated as of November 15, 1999 (the "Cayre Purchase Agreements")
among the Filing Persons and Joseph Cayre, Kenneth Cayre, Stanley Cayre and Jack
J. Cayre, their children and various associated trusts (collectively, the "Cayre
Group"). The Form of Cayre Purchase Agreements and schedule of agreements is
attached hereto as Exhibit 11A and is incorporated herein by reference.
In addition, at Closing, pursuant to the Note Purchase Agreement, dated
as of November 15, 1999, between certain members of the Cayre Group and
Purchaser (the "Cayre Note Purchase Agreement"), Purchaser acquired from the
Cayre Group $10.0 million in aggregate principal amount of 9% Subordinated Notes
of GTIS, due
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July 29, 2000 (the "Cayre Notes"), for a purchase price equal to such principal
amount plus interest accrued thereon through the Closing. The Cayre Note
Purchase Agreement is attached hereto as Exhibit 11B and is incorporated herein
by reference.
In addition, pursuant to the Cayre Purchase Agreements, the Cayre Group
agreed (1) prior to the Closing (a) not to sell any of their shares of GTIS
Common Stock, (b) to vote (or issue a consent in respect of) their shares of
GTIS Common Stock in favor of the transactions contemplated by the GTIS Purchase
Agreement and against any action or agreement that would reasonably be expected
to impede, interfere with, delay or attempt to discourage such transactions, (c)
to grant a proxy to Purchaser to vote their shares of GTIS Common Stock on those
matters contemplated by clause (b) prior to the Closing, and (d) not to solicit,
initiate or knowingly encourage, participate in discussions regarding or enter
into an agreement regarding, certain business combination transactions and (2)
to grant Infogrames a proxy, exercisable subsequent to the Closing, to vote any
shares of GTIS Common Stock retained by the Cayre Group for the election or
removal of directors in the sole discretion of Infogrames.
The Filing Persons' beneficial ownership of 100,729,801 shares of GTIS
Common Stock represents a majority equity position in GTIS.
The Filing Persons intend to evaluate and consider from time to time
whether to engage in any of the following transactions: (a) to acquire
additional shares of GTIS Common Stock or other securities of GTIS through open
market purchases, privately negotiated transactions, a tender offer, a merger,
reorganization or other business combination transaction, or otherwise or (b) to
acquire a material amount of assets of GTIS. Any of the foregoing could result
(i) in changes in the capitalization or dividend policy of GTIS, (ii) changes in
GTIS' charter or bylaws, (iii) delisting of GTIS Common Stock from the NASDAQ
National Market (or other securities market on which GTIS Common Stock is then
listed or traded), (iv) termination of registration of GTIS Common Stock
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended,
or (v) other events comparable to those enumerated above. Alternatively, while
it is not the Filing Persons' present intention to dispose of the shares of GTIS
Common Stock beneficially owned by them, the Filing Persons intend to evaluate
and consider from time to time whether to dispose of some or all of such shares,
which disposition could be effected through a privately negotiated transaction
to third parties, through a public offering upon exercise of the registration
rights described in Item 6 below, in a merger or other business combination
transaction involving GTIS, or otherwise. Purchaser has agreed pursuant to the
GTIS Purchase Agreement that following the Closing, it will use its reasonable
best efforts to elect directors in compliance with the Certificate of
Incorporation of GTIS and rules for inclusion of GTIS Common Stock on the Nasdaq
National Market.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
1 Purchaser is the beneficial owner of 100,729,801 shares of GTIS Common Stock,
or 71.7% of the outstanding shares of GTIS Common Stock, which includes
62,129,960 shares of GTIS Common Stock acquired by Purchaser pursuant to the
GTIS Purchase Agreement and
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the Cayre Purchase Agreements, 4,500,000 shares of GTIS Common Stock which may
be acquired by Purchaser upon exercise of the GAP Warrants, 50,000 shares of
GTIS Common Stock which may be acquired upon exercise of the Purchaser Warrant
and 32,749,841 shares of GTIS Common Stock which may be acquired by Purchaser
upon conversion of the 5% Note.
Pursuant to the Cayre Purchase Agreements, Infogrames and Purchaser may
be deemed to have beneficial ownership with respect to the 1.3 million shares of
GTIS Common Stock retained by the Cayre Group after Closing. Other than voting
rights conferred by the Cayre Purchase Agreements, Purchaser is not entitled to
any rights as a stockholder with respect to such 1.3 million shares.
Infogrames may be deemed to be the beneficial owner of the 100,729,801
shares beneficially owned by Purchaser by virtue of its ownership of 100% of the
capital stock of Purchaser.
(b) Other than as set forth in this Schedule 13D, no Filing Person has
entered into any transaction with respect to the GTIS Common Stock.
(c) No person other than the persons listed is known to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any securities owned by any member of the group.
(d) Not applicable.
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ITEM 6. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Chart Regarding Executive Officers and Directors
of Filing Persons
Exhibit 2 Incorporated by reference the Joint Filing Agreement
between the Filing Persons filed as Exhibit 2 to the
Original 13D
Exhibit 3 Incorporated by reference the Securities Purchase
Agreement, dated as of November 15, 1999, among
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GTIS and the Filing Persons filed as Exhibit 3 to the
Original 13D
Exhibit 4 Incorporated by reference the Short Term Note of GTIS in the
Principal Amount of $25.0 million filed as Exhibit 4 to the
Original 13D
Exhibit 5 Incorporated by reference the Warrant to Purchase 50,000
shares of GTIS Common Stock, issued to Purchaser filed as
Exhibit 5 to the Original 13D
Exhibit 6 5% Subordinated Convertible Note of GTIS
Exhibit 7 Distribution Agreement between Infogrames and GTIS dated as
of December 16, 1999
Exhibit 8 Incorporated by reference the Equity Purchase and Voting
Agreement, dated as of November 15, 1999, among the Filing
Persons and the GAP Entities filed as Exhibit 8 to the
Original 13D
Exhibit 9 Incorporated by reference the Form of GAP Warrant filed as
Exhibit 9 to the Original 13D
Exhibit 10 Incorporated by reference the Exchange Agreement, dated as
of November 15, 1999, among GTIS and the GAP Entities filed
as Exhibit 10 to the Original 13D
Exhibit 11A Incorporated by reference the Form of Equity Purchase and
Voting Agreements, dated as of November 15, 1999, among the
Filing Persons and the members of the Cayre Group and
schedule of agreements filed as Exhibit 11A to the
Original 13D
Exhibit 11B Incorporated by reference the Note Purchase Agreement, dated
as of November 15, 1999, between certain members of the
Cayre Group and Purchaser filed as Exhibit 11B to the
Original 13D
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After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
January 10, 1999.
INFOGRAMES ENTERTAINMENT S.A.
By /S/BRUNO BONNELL
------------------------------
Bruno Bonnell
President
CALIFORNIA U.S. HOLDINGS, INC.
By/S/BRUNO BONNELL
------------------------------
Bruno Bonnell
President
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EXHIBIT 1
<TABLE>
<CAPTION>
Director (D)
and/or
Executive
Officer (EO)
of Infogrames Citizenship/ Principal
(I) and/or Jurisdiction of Occupation or
Name Purchaser (P) Organization Employment Principal Business Address
- ---- ------------- ------------ ---------- ------------------ -------
<S> <C> <C> <C> <C> <C>
Bruno Bonnell I (D) (EO) France Chief Executive Development and Infogrames Entertainment S.A.
P (D)(EO) Officer of Distribution of computer 82-84, rue du lers mars 1943
Infogrames software 69628 Villeurbanne cedex
France
Thomas Schmider I (D) (EO) France Managing Development and Infogrames Entertainment S.A.
P (D) (EO) Director of Distribution of computer 82-84, rue du lers mars 1943
Infogrames software 69628 Villeurbanne cedex
France
Christophe Sapet I (D) (EO) France Managing Development and Infogrames Entertainment S.A.
Director of Distribution of computer 82-84, rue du lers mars 1943
Infogrames software 69628 Villeurbanne cedex
France
Eric Mottet I (D) (EO) France Technical Development and Infogrames Entertainment S.A.
Director of Distribution of computer 82-84, rue du lers mars 1943
Infogrames software 69628 Villeurbanne cedex
France
Benoit I (D)(EO) France Sales Manager of Development and Infogrames Entertainment S.A.
Regnault De Infogrames Distribution of computer 82-84, rue du lers mars 1943
Maulmin software 69628 Villeurbanne cedex
France
David Ward I (D)(EO) England UK Director of Development and Infogrames Entertainment S.A.
Infogrames Distribution of computer 82-84, rue du lers mars 1943
software 69628 Villeurbanne cedex
France
Jean Claude I (D) France Director None 39 rue des Lilas
Larue 75019 Paris
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Pierre Sissmann I (D)(EO) France Director Development and Infogrames Entertainment S.A.
Distribution of computer 82-84, rue du lers mars 1943
software 69628 Villeurbanne cedex
France
Societe I (D) France Director Development and SA au capital de 138 450 000 F
Dassault Distribution of computer 9 rond point des Champs
Multimedia software Elysees
75008 Paris
Societe I (D) France Director Natural Gas and Water SA au capital de 170 108 345 F
Financiere et 3 rue Jacques Bingen
Industrielle 75017 Paris
Gaz et Eaux
Yves Legris P (D)(EO) France Director and Development and 5300 Stevens Creek Blvd.
Chief Operating Distribution of computer
Officer software San Jose, CA 95129
</TABLE>
<PAGE> 1
Exhibit 6
CONVERTIBLE SUBORDINATED NOTE
$60,587,206.72 New York, New York
December 16, 1999
GT INTERACTIVE SOFTWARE CORP., a Delaware corporation (the
"Obligor"), hereby promises to pay to the order of CALIFORNIA U.S. HOLDINGS,
INC., a Delaware corporation (together with any permitted transferee of this
Convertible Subordinated Note, the "Holder"), on December 16, 2004 (the
"Maturity Date"), the principal amount of SIXTY MILLION FIVE HUNDRED
EIGHTY-SEVEN THOUSAND TWO HUNDRED SIX DOLLARS AND SEVENTY TWO CENTS
$60,587,206.72) in lawful money of the United States of America.
1. Interest. Interest on the outstanding principal amount
hereof shall accrue at a rate per annum equal to 5% and shall be added quarterly
(on the date following three months from the date of this Convertible
Subordinated Note (the "Note") and every three months thereafter) to the
principal amount of this Note.
2. Payments. Notwithstanding anything to the contrary herein,
except pursuant to a conversion set forth in Section 4 hereof, no payment or
prepayment of principal of or interest on this Note may be made or received,
directly or indirectly, prior to the Senior Debt Payment Date. On the Maturity
Date, the Obligor shall make payments of all outstanding principal of and
accrued interest on this Note in immediately available funds to such account of
the Holder as the Holder may designate in writing. If any payment hereunder
becomes due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day.
3. Definitions. (a) Terms defined in the Credit Agreement
referred to below are used herein with the meanings set forth in such Credit
Agreement unless otherwise defined herein. As used herein, the following terms
shall have the following meanings:
"Board of Directors" shall mean the Board of Directors of the
Obligor.
"Business Days" shall mean any day except 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.
"Capital Stock" shall mean, with respect to any Person, any
and all shares, interests, participations, rights in, or other equivalents
(however designated and whether voting or non-voting) of, such Person's capital
stock and any and all rights, warrants or options exchangeable for or
convertible into such capital stock (but excluding any debt security whether or
not it is exchangeable for or convertible into such capital stock).
"Credit Agreement" shall mean the Credit Agreement dated as of
September 11, 1998, among the Obligor, the Lenders parties thereto, the
Documentation Agent and Syndication Agent named therein, and First Union
National Bank, as Administrative Agent, as amended, restated, supplemented or
otherwise modified from time to time.
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"Current Market Price" per share shall mean, as of the date of
determination, the average of the daily Market Price under clause (a), (b) or
(c) of the definition thereof of the Common Stock (as defined in Section 4)
during the immediately preceding thirty (30) trading days ending on such date.
"Market Price" shall mean as of the date of determination, (a)
the closing price per share of Common Stock on such date published in The Wall
Street Journal or, if no such closing price on such date is published in The
Wall Street Journal, the average of the closing bid and asked prices on such
date, as officially reported on the principal national securities exchange
(including, without limitation, the Nasdaq Stock Market, Inc.) on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price of the Common
Stock on such date; or (c) if there shall have been no trading on such date or
if the Common Stock is not so designated, the average of the reported closing
bid and asked prices of the Common Stock on such date as shown by the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotations System and reported by any member firm of the New York Stock Exchange
selected by the Obligor.
"Merger" shall mean a recapitalization, reorganization,
merger, a sale of all or substantially all of the assets of the Obligor or other
business combination transaction after the consummation of which the
stockholders of the Obligor prior to such transaction do not own at least a
majority of the voting power of the surviving Person or the transferee of the
assets of the Obligor, as the case may be.
"Person" shall mean an individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental body or other
entity of any kind.
"Senior Creditors" shall mean the collective reference to the
Lenders, the Administrative Agent, the Issuing Lender and all other holders of
the Senior Debt.
"Senior Debt" shall mean the obligations of the Obligor and
any Subsidiary in respect of the unpaid principal of and interest on the notes
made by the Obligor in favor of the Senior Creditors in connection with the
Credit Agreement (the "Senior 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
the Obligor, 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
Obligor and any Subsidiary to the Administrative Agent, the Issuing Lender and
the Lenders in respect of the Loans, the Senior 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
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<PAGE> 3
arise under, out of, or in connection with, the Credit Agreement, the Senior
Notes, the other Loan Documents, the Letters of Credit, the L/C Obligations, any
Hedging Agreements permitted or required under the Credit Agreement, or any
other document made, delivered or given in connection or therewith, in each case
whether on account of principal, interest, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent, the Issuing Lender or the Lenders that are required
to be paid by the Obligor or any Subsidiary pursuant to the terms of the Credit
Agreement or any other Loan Document).
"Senior Debt Payment Date" shall mean the first Business Day
to occur after the Senior Debt is paid in full.
"Subordinated Debt" shall mean the principal amount of this
Note, together with accrued and unpaid interest thereon and any other amounts of
any kind whatsoever from time to time owing hereunder or in connection
therewith.
"Subsidiary" shall mean as to any Person, any corporation,
partnership, limited liability company or other entity of which more than fifty
percent (50%) of the outstanding capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation, partnership, limited liability company or
other entity is at the time, directly or indirectly, owned by or the management
is otherwise controlled by such Person (irrespective of whether, at the time,
capital stock or other ownership interests of any other class or classes of such
corporation, partnership, limited liability company or other entity shall have
or might have voting power by reason of the happening of any contingency).
(b) The expressions "prior payment in full," "paid in full,"
"payment in full" and any other similar terms or phrases when used in this Note
shall mean payment in full in immediately available funds of the Senior Debt (or
cash collateralization in full in the case of any L/C Obligations) and
termination of the Aggregate Commitment.
4. Conversion of the Note.
(a) Subject to and upon compliance with the provisions of this
Section 4, the Holder, at the Holder's option at any time and from time to time
from and after the date hereof so long as this Note is outstanding, may convert
all or any part of the unpaid principal amount of this Note and accrued interest
thereon into shares of the common stock of the Obligor, par value $.01 per share
(the "Common Stock"), at the Conversion Price in effect at the Conversion Date.
Notwithstanding anything to the contrary herein, until the Obligor's certificate
of incorporation has been amended to increase the Obligor's authorized capital
stock, the Holder shall not convert all or any part of this Note into shares of
Common Stock such that the Obligor would have more shares of Common Stock
outstanding or reserved for issuance upon exercise or conversion of its
outstanding convertible securities than are then authorized under its
certificate of incorporation as in effect on the date of such conversion.
(b) In order to exercise the conversion privilege of this
Note, the Holder shall deliver (i) this Note and (ii) written notice in
substantially the form attached to this Note as
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Exhibit 1 to the Obligor during regular business hours at its address set forth
in, or at such other address as the Obligor shall designate in writing in
accordance with, Section 12 hereof. Conversion shall be deemed to have been
effected on the date when such notice is delivered to the Obligor (the
"Conversion Date"). An election to convert this Note in whole or in part shall
be irrevocable once made.
(c) As promptly after the Conversion Date as practicable, the
Obligor shall issue and deliver to the Holder at the address of the Holder set
forth on the Obligor's records, without any charge to the Holder, a certificate
or certificates (issued in the name of the Holder or, subject to compliance with
applicable securities laws, in such other name as the Holder may designate) for
the number of shares of Common Stock of the Obligor issuable upon the conversion
of this Note. In case the Note is surrendered for a partial conversion, the
Obligor will issue to the Holder upon conversion a new Note of like tenor (the
"New Note") in an aggregate principal amount equal to the unconverted portion of
the outstanding principal amount of the surrendered Note, which New Note shall
indicate (I) the interest that had accrued through the date of such issuance on
the converted portion of the outstanding principal amount of the surrendered
Note (excluding any interest which also had been converted) but had not yet been
added pursuant to Section 1 to the principal amount of the surrendered Note, and
(ii) that interest on the outstanding principal amount of such New Note shall
accrue from the most recent quarterly date on which interest was added pursuant
to Section 1 to the principal amount of the surrendered Note. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon the conversion of any amounts outstanding under this Note to Common Stock
pursuant to Section 4(a) hereof. Notwithstanding the provisions of Section 7(a)
hereof, instead of any fractional shares of Common Stock which would otherwise
be issuable upon conversion, the Obligor shall pay to the Holder a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the Market Price of the Common Stock on the date of such conversion.
(d) Upon conversion, the Holder shall be deemed to have become
the stockholder of record on the Conversion Date of the number of shares of
Common Stock issuable upon such conversion. All rights of the Holder to amounts
of principal and accrued interest converted shall cease upon conversion, but all
other rights of the Holder hereunder, including without limitation rights to any
amounts of interest accrued and to any principal not converted and to any
expenses or other amounts owned hereunder, shall be unaffected by such
conversion.
(e) The initial Conversion Price of this Note shall be $1.85
per share of Common Stock and shall be subject to adjustment as follows:
(i) Dividends, Subdivision, Combination or
Reclassification of Common Stock. In the event that the Obligor shall at any
time or from time to time, prior to any conversion of the Note, (v) declare,
make or pay a dividend or make a distribution on the outstanding shares of
Common Stock, payable in Capital Stock of the Obligor, (w) subdivide the
outstanding shares of Common Stock into a large number of shares, (x) combine
the outstanding shares of its Common Stock into a smaller number of shares, (y)
issue any shares of its Capital Stock in a reclassification of the Common Stock
or (z) change the shares of Common Stock
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<PAGE> 5
issuable upon conversion hereunder into the same or any different number of
shares of any class of Capital Stock of the Obligor, whether by
reclassification, exchange, cancellation amendment of the Obligor's certificate
of incorporation or otherwise (other than any such event for which an adjustment
is made pursuant to another clause of this Section 4(e)), then, and in each such
case, the Conversion Price in effect immediately prior to such event shall be
adjusted (and any other appropriate action shall be taken by the Obligor) so
that the Holder, with respect to any amounts outstanding on the Note thereafter
surrendered for conversion, shall be entitled to receive the number of shares of
Common Stock or other securities of the Obligor that the Holder would have owned
or would have been entitled to receive upon or by reason of any of the events
described above, had such amounts been converted immediately prior to the record
date applicable to such event. An adjustment made pursuant to this Section
4(e)(i) shall become effective retroactively to the close of business on the day
upon which such corporate action becomes effective.
(ii) Certain Distributions. In case the Obligor shall
at any time or from time to time prior to conversion of all amounts outstanding
under the Note, distribute to all holders of shares of Common Stock (including
any such distribution made in connection with a merger or consolidation in which
the Obligor is the resulting or surviving Person and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Obligor or another
Person, securities of the Obligor or another Person or other assets (excluding
dividends declared in the ordinary course of business and payable in cash,
dividends payable in shares of Common Stock for which adjustment is made under
another paragraph of this Section 4(e)) or rights or warrants to subscribe for
or purchase securities of the Obligor (excluding those distributions in respect
of which an adjustment in the Conversion Price is made pursuant to another
paragraph of this Section 4(e)), then, and in each such case, the Conversion
Price then in effect shall be adjusted (and any other appropriate actions shall
be taken by the Obligor) by multiplying the Conversion Price in effect
immediately prior to the date of distribution by a fraction (x) the numerator of
which shall be the Current Market Price of the Common Stock immediately prior to
the date of distribution less the then fair market value (as determined in good
faith by the Board of Directors) of the portion of the cash, evidences of
indebtedness, securities or other assets so distributed or of such rights or
warrants applicable to one share of Common Stock and (y) the denominator of
which shall be the Current Market Price of the Common Stock immediately prior to
the date of distribution. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) Effect of Consolidation or Merger. In the case
of any consolidation or merger, directly or indirectly, of the Obligor with or
into another Person (any such event, a "Change of Shares"), the Holder
thereafter shall have the right to convert this Note into the kind and number of
shares of stock and/or other securities, cash or other property receivable upon
such Change of Shares by a holder of the number of shares of Common Stock of the
Obligor into which this Note might have been converted immediately before the
time of determination of the stockholders of the Obligor entitled to receive
such shares of stock and/or other securities or property, and the Conversion
Price shall be adjusted accordingly. The Obligor shall be obligated to retain
and set aside, or otherwise make fair provision for exercise of the right of the
Holder to receive, the shares of stock and/or other securities, cash or other
property provided for in this Section 4(e)(iii). In any such case, appropriate
adjustments shall be made in
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<PAGE> 6
the application of this Section 4(e)(iii) with respect to the Holder after such
merger or consolidation such that the provisions of this Section 4(e)(iii) shall
be applicable after that event in a manner as nearly equivalent as may be
practicable.
(iv) Other Changes. In case the Obligor at any time
or from time to time, prior to the conversion of all amounts outstanding under
the Note, shall take any action affecting its Common Stock similar to or having
an effect similar to any of the actions described in any of Sections 4(e)(i)
through (iii) (but not including any action described in any such Section) and
the Board of Directors in good faith determines that it would be equitable in
the circumstances to adjust the Conversion Price as a result of such action,
then, and in each such case, the Conversion Price shall be adjusted in such
manner and at such time as the Board of Directors in good faith determines would
be equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the Holder).
(v) De Minimis Adjustments. Notwithstanding anything
herein to the contrary, no adjustment in the Conversion Price shall be required
unless such adjustment would require a change of at least 1% in the Conversion
Price, provided, however, that any adjustments which by reason of this Section
4(e)(v) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(f) Abandonment. If the Obligor shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Conversion Price shall be required by
reason of the taking of such record.
(g) Certificate as to Adjustments. Upon any increase or
decrease in the Conversion Price, the Obligor shall within a reasonable period
(not to exceed 20 days) following the consummation of any of the foregoing
transactions deliver to the Holder a certificate, signed by (i) the President or
a Vice President of the Obligor and (ii) the Chief Financial Officer of the
Obligor, setting forth in reasonable detail the event requiring the adjustment
and the method by which such adjustment was calculated and specifying the
increased or decreased Conversion Price then in effect following such
adjustment.
(h) Notices. In case at any time or from time to time:
(i) the Obligor shall declare a dividend (or any
other distribution) on its shares of Common Stock;
(ii) the Obligor shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(iii) there shall be any reorganization or
reclassification of the Common Stock; or
(iv) there shall occur a Merger;
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<PAGE> 7
then the Obligor shall mail to the Holder as promptly as possible but in any
event at least ten (10) days prior to the applicable date hereinafter specified,
a notice in accordance with Section 12 hereof stating the date on which a record
is to be taken for the purpose of such dividend, distribution or granting of
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or granting of rights or warrants are to be determined, or the date on which
such reorganization, reclassification or Merger is expected to become effective
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for shares of stock or other
securities or property or cash delivered upon such reorganization,
reclassification or Merger.
(i) Reservation of Common Stock. The Obligor shall at all
times reserve and keep available for issuance upon the conversion of the Note,
such number of its authorized but unissued shares of Common Stock as will from
time to time be sufficient to permit the conversion of all amounts outstanding
under the Note. Each March 31, June 30, September 30 and December 31, the
Obligor shall reserve additional shares of Common Stock reasonably determined by
the Obligor to be required to cover the conversion of all interest on the Note
(which has accrued on such date) into shares of Common Stock. As soon as
practicable after the date hereof, the Obligor shall take all actions necessary
to increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the conversion of all outstanding amounts under
the Note.
(j) No Conversion Tax or Charge. The issuance or delivery of
certificates for Common Stock upon the conversion of amounts under the Note
shall be made without charge to the Holder for such certificates or for any
documentary stamp, or similar issue or transfer tax in respect of the issuance
or delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the name of, or (subject to
compliance with the applicable provisions of federal and state securities laws)
in such names as may be directed by, the Holder; provided, however, that the
Obligor shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate in a
name other than that of the Holder, and the Obligor shall not be required to
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Obligor the
amount of such tax or shall have established to that reasonable satisfaction of
the Obligor that such tax has been paid.
5. Transfer, Exchange and Replacement of Note. Subject to the
third sentence of this Section 5, this Note shall be transferable in whole or in
part by the Holder. Upon delivery of this Note duly endorsed by, or accompanied
(if required by the Obligor) by proper evidence of succession, assignment or
authority to transfer executed by, the Holder, in each case accompanied by any
necessary transfer tax imposed upon transfer or evidence thereof, the Company
shall execute a new Note to the Person or Persons entitled thereto and such
Person or Persons shall be deemed the Holder hereunder. THIS NOTE MAY NOT BE
SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW IN CONNECTION
WITH SUCH SALE OR TRANSFER OR SUCH SALE OR TRANSFER IS EXEMPT FROM SUCH
REGISTRATION. The Obligor may deem and treat
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<PAGE> 8
the person in whose name this Note is held as the absolute, true and lawful
owner of this Note for all purposes. Upon receipt by the Obligor of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Note, the Obligor shall make and deliver a new Note of like tenor, in lieu
of this Note, if (i) in case of loss, theft or destruction, the Obligor receives
indemnity or security reasonably satisfactory to it, (ii) the Obligor is
reimbursed for all reasonable expenses incidental to such replacement, and (iii)
this Note is surrendered and cancelled, if mutilated.
6. Securities Laws. By his acceptance of this Note, Holder
hereby represents and warrants to the Obligor that it is an "accredited
investor" as that phrase is defined in Rule 501 under the Securities Act of
1933, as amended (the "Act"), and is acquiring this Note for his own account,
for investment, and not with a view to the distribution of this Note or the
Common Stock issuable upon conversion hereof in a manner contrary to the
provisions of the Act or any applicable state securities laws. Holder
understands that the shares issuable upon conversion of this Note have not been
and will not, except to the extent provided herein, be registered under the Act
or any state securities laws, and that neither such shares nor any interest
therein may be transferred or sold unless such registration is then effective or
an exemption from such registration is then available. By conversion of this
Note, Holder acknowledges that the certificates representing such shares will
bear appropriate legends restricting the transferability thereof. The Obligor
shall have the right to an opinion of counsel in connection with any transfer of
this Note or the shares issuable upon conversion hereof.
7. Subordination.
(a) Payment of the Subordinated Debt is and shall be expressly
subordinate and junior in right of payment to the prior payment in full of the
Senior Debt to the extent and in the manner set forth herein, and the
Subordinated Debt is hereby so subordinated as a claim against the Obligor or
any Subsidiary or any of the assets of the Obligor or such Subsidiary, whether
such claim be (i) in the event of any distribution of assets of the Obligor or
such Subsidiary upon any voluntary or involuntary dissolution, winding-up, total
or partial liquidation or reorganization, or bankruptcy, insolvency,
receivership or other statutory or common law proceedings or arrangements
involving the Obligor or such Subsidiary or the readjustment of its liabilities
or any assignment for the benefit of creditors or any marshaling of its assets
or liabilities (collectively, a "Reorganization") or (ii) other than in
connection with a Reorganization.
(b) Except for the conversion of the Note as set forth in
Section 4 hereof and the payments to be made in connection with the Transaction
(as defined in the Third Amendment, Consent, Waiver and Agreement dated the date
hereof (the "Third Amendment")) on the Transaction Closing Date (as defined in
the Third Amendment), all of the Senior Debt shall be paid in full before any
direct or indirect payment or distribution of any kind or character (including,
without limitation, securities that are subordinated in right of payment to the
Senior Debt) is made upon the Subordinated Debt, and in any Reorganization or
other proceedings any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable in
respect of this Subordinated Note and the Subordinated Debt shall be paid or
delivered directly to the Administrative Agent, for payment of the Senior Debt
until the Senior Debt is paid in full. If the Holder does not file a claim or
proof of debt in the
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<PAGE> 9
form required in any Reorganization or other proceedings prior to 20 days before
the expiration of the time to file such claims or proofs, the Administrative
Agent shall have the right to demand, sue for, collect and receive any payments
and distributions in respect of the Subordinated Debt which are required to be
paid or delivered to the Senior Creditors and to take such other action in the
name of the Holder or of the Senior Creditors as the Administrative Agent may
deem reasonably necessary or advisable for the enforcement of the provisions
hereof. The Holder shall execute and deliver such other and further powers of
attorney, assignments, proofs of claim or other instruments, and take such other
actions, as may be reasonably requested by the Administrative Agent in order to
enable the Administrative Agent to accomplish any of the foregoing.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of the assets of the Obligor or any Subsidiary of any
kind or character, whether in cash, property or securities, and whether prior to
or after the commencement of any Reorganization or other proceedings, shall be
received by the Holder in respect of this Note before all Senior Debt is paid in
full, such payment of distribution shall be held in trust for the Senior
Creditors and shall forthwith be paid over to the Administrative Agent for
application to the payment of the Senior Debt until all Senior Debt shall have
been paid in full.
(d) Except with respect to an Event of Default occurring at
maturity of this Note pursuant to Section 9(a)(i) hereof, the Holder and the
Obligor each agrees that, until the Senior Debt has been paid in full (i) the
Holder will not take, demand, receive or accept, or take any action to
accelerate or collect (and the Obligor shall not make) any cash payment of all
or any part of the Subordinated Debt and (ii) the Holder will not file or join
in any petition or proceeding seeking the bankruptcy or Reorganization of the
Obligor; provided, however, that if any Person (other than the Holder or any
Affiliate of the Holder or any such other holder) files or initiates any
petition or proceeding seeking the foregoing or takes any action to accelerate
or collect any cash payment of all or any part of any debt of the Obligor, then
after the filing of any such petition or the commencement of any such proceeding
the Holder may join in such petition or proceeding or initiate a separate action
to accelerate all or any part of the Subordinated Debt.
(e) The Senior Creditors, or any of them, may, at any time and
from time to time, without the consent of or notice to the Holder, without
incurring any responsibility to the Holder, and without impairing or releasing
any of the rights of any Senior Creditor or any of the obligations of the
Holder: (i) change the amount or terms of, or renew or extend, the Senior Debt
or enter into or amend in any manner any agreement relating to the Senior Debt;
(ii) sell, exchange, release or otherwise deal with any property at any time
pledged or mortgaged to secure the Senior Debt; (iii) release anyone liable in
any manner for the payment or collection of the Senior Debt; and (iv) exercise
or refrain from exercising any rights against the Obligor, any Subsidiary and
any other Person (including the Holder). The Obligor shall provide prompt
written notice to the Holder of the occurrence of any of the foregoing matters.
(f) The Holder hereby waives notice of or proof of reliance by
any Senior Creditor upon the provisions hereof, and the Senior Debt shall
conclusively be deemed to have been created, contracted, incurred or maintained
in reliance upon the provisions hereof.
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<PAGE> 10
(g) The Obligor hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The nonexercise by the Administrative
Agent or any other Senior Creditor of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
(h) The subordination provisions contained herein are for the
benefit of the Senior Creditors and their respective successors and assigns, and
the rights of any present or future holder of the Senior Debt to enforce the
subordination provisions contained herein, may not be rescinded, cancelled,
modified or impaired in any way without the prior written consent of the
Administrative Agent.
8. Prepayments. Subject to Section 7 hereof and the prior
payment in full of the Senior Debt, the Obligor may only repay this Note prior
to the Maturity Date, in whole or in part, in accordance with Section 4 hereof.
9. Defaults and Remedies. Subject to the subordination
provisions contained in this Note:
(a) Events of Default. An "Event of Default" shall occur if:
(i) the Obligor shall default in the payment of the
principal of this Note, when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(ii) any event or condition shall occur that results
in the right of the holder of the Senior Debt to accelerate the maturity of any
Senior Debt, or of any other indebtedness in a principal amount aggregating
$3,000,000 or more; or
(iii) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent jurisdiction
seeking (x) relief in respect of the Obligor or any Subsidiary, or of a
substantial part of its property or assets, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (y) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Obligor or any Subsidiary, or for a substantial part of its property or
assets, or (z) the winding up or liquidation of the Obligor or any Subsidiary;
or
(iv) the Obligor or any Subsidiary shall (A)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar law,
(B) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
clause (iv) above, (C) apply for or consent to the appointment of a receiver
trustee, custodian, sequestrator, conservator or similar official for the
Obligor or any Subsidiary, or for a substantial part of its property or assets,
(D) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (E) make a general assignment for the benefit
of creditors, (F) become
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unable, admit in writing its inability or fail generally to pay its debts as
they become due or (G) take any action for the purpose of effecting any of the
foregoing; or
(v) one or more judgments for the payment of money in
an aggregate amount in excess of $3,000,000 (to the extent not covered by
insurance) shall be rendered against the Obligor, any Subsidiary or both and the
same shall remain undischarged for a period of 30 days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Obligor or any
Subsidiary to enforce any such judgment; or
(vi) any material uninsured damage to or loss, theft
or destruction of any assets of the Obligor or its Subsidiaries shall occur that
has a material adverse effect on the assets, business or financial condition of
the Obligor.
(b) Acceleration. Subject to Section 7(d) hereof: (i) if an
Event of Default occurs under subsection (a)(iv) or (v) above, then the
outstanding principal of and all interest on this Note shall automatically
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are expressly waived, (ii) if any other Event
of Default occurs and is continuing, the Holder, by written notice to the
Obligor, may declare the principal of and interest on the Note to be due and
payable immediately, (iii) upon such declaration, such principal and interest
shall become immediately due and payable, and (iv) the Holder of the Note may
rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived, except nonpayment of principal or interest that has
become due solely because of the acceleration, and if the rescission would not
conflict with any judgment or decree.
10. Subrogation. After all amounts payable under or in respect
of the Senior Debt are paid in full, the Holder shall be subrogated to the
rights of holders of the Senior Debt to receive payments or distributions
applicable to the Senior Debt to the extent that distributions otherwise payable
to the Holder have been applied to the payment of the Senior Debt. A
distribution made under this Section 9 to a holder of the Senior Debt which
otherwise would have been made to the Holder is not, as between the Obligor and
the Holder, a payment by the Obligor on the Senior Debt.
11. Notices. All notices and other communications made
pursuant to the provisions of or in connection with this Note shall be in
writing and shall be deemed to have been duly made when delivered personally or
by express mail or courier or when sent by facsimile transmission with
confirmation received (provided a writing evidencing such transmission is mailed
by first class mail, postage prepaid within two (Business Days).
(a) If to the Holder, to c/o Infogrames Entertainment S.A.,
84, rue du 1er Mars 1943, Villeurbanne, 69100, France, or to such other address
as the Holder may give notice of to the Obligor from time to time (with copies
to Pillsbury Madison & Sutro LLP, 50 Freemont Street, San Francisco, California
94104, Attention: Nathaniel M. Cartmell III, Esq. and Ronald E. Bornstein, Esq.,
telecopy: (415) 983-1200).
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(b) If to the Obligor, GT Interactive Software Corp., 417
Fifth avenue, New York, New York 10016, Attention: Thomas Heymann, telecopy:
(212) 679-3424 (with copies to Kramer Levin Naftalis & Frankel LLP, 919 Third
Avenue, New York, New York 10022, Attention: David P. Levin, Esq., telecopy:
(212) 715-8000), or to such other address as the Obligor may give notice of to
the Holder from time to time.
12. Expenses. The Obligor shall pay all fees and expenses of
the Holder, including the reasonable fees and disbursements of the Holder's
counsel, incurred in connection with any claim, action or proceeding relating to
or arising out of this Note made by any Person (other than the Holder) against
either the Holder or any other Person in which the Holder is subsequently
impleaded or otherwise made a party, and any other claim, action or proceeding
in which the Holder exercises or enforces, or seeks to exercise or enforce, its
legal and equitable rights hereunder; provided, however, that each party hereto
shall pay its own expenses incurred in connection with the negotiation and
execution of this Note.
13. Entire Agreement. Each of the Obligor and the Holder
confirms that this Note constitutes the entire contract among the parties
relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
14. Severability. Any provision of this Note that is
prohibited or unenforceable in a 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.
15. Successors and Assigns. All covenants and agreement of the
Obligor and the Holder under this Note shall be binding on the Obligor and the
Holder and their respective successors and assigns. Neither this Note nor any
interest therein shall be transferred or assigned prior to the Senior Debt
Payment Date without the prior written consent of the Administrative Agent;
provided, however, the Holder may transfer or assign all or any part of this
Note at any time to an affiliate of the Holder without such consent.
16. Amendments. No amendment, supplement, waiver or other
modification to this Note shall be effective without the prior written consent
of the Obligor, the Holder and, prior to the Senior Debt Payment Date, the
Administrative Agent.
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<PAGE> 13
17. Governing Law. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York
without giving effect to principles regarding conflicts of law.
GT INTERACTIVE SOFTWARE CORP.
/s/ John Baker
By:_____________________________________
Title:
Acknowledged and Agreed:
By:_______________________________
Title:
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<PAGE> 14
EXHIBIT 1
To GT Interactive Software Corp.:
The undersigned owner of this Note hereby irrevocably
exercises the option to convert $__________ principal amount of this Note into
shares of Common Stock of GT Interactive Software Corp. in accordance with the
terms of this Note, and directs that the shares issuable and deliverable upon
the conversion be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Dated: ________________
[HOLDER]
By:___________________________________
Name:
Title:
Fill in for registration of shares of Common Stock if to be issued otherwise
than to the registered holder.
Name:
Address:
Social Security or Taxpayer ID Number:
<PAGE> 1
DISTRIBUTION AGREEMENT
BETWEEN
INFOGRAMES ENTERTAINMENT S.A.
AND
GT INTERACTIVE SOFTWARE CORP.
This Distribution Agreement (this "Agreement") is entered into by and
between Infogrames Multimedia S.A. and Infogrames Entertainment S.A.
(collectively, "Infogrames") and GT Interactive Software Corp. ("GTIS") as of
December 16, 1999 (the "Effective Date").
Whereas, GTIS is in the business of publishing and marketing Products
and wishes to license Infogrames to distribute, publish and market Products
owned or controlled by GTIS; and
Whereas, Infogrames wishes to obtain the right to distribute, publish
and market Products owned or controlled by GTIS;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. Definitions
(a) "Chargeback" means deductions customers take against an Infogrames
invoice for price protection, promotions or markdowns.
(b) "Confidential Information" means trade secrets, discoveries, ideas,
concepts, know-how, techniques, designs, specifications, drawings,
diagrams, data, computer programs, business activities and
operations. In order to be considered "Confidential Information," the
information must contain a legend, such as "Confidential
Information," "Confidential" or "Proprietary," or if orally
disclosed, such information shall be considered and treated as
Confidential Information only if it is clearly identified at the time
of disclosure as being confidential and the disclosing party gives
written notice within 10 days after disclosure specifically reciting
the information orally disclosed and stating that such information is
Confidential Information.
(c) "Manufacturing Costs" means all reasonable direct costs of
manufacturing, including license fees paid to console product
manufacturers and in-bound transportation costs, for Products sold
and not returned.
(d) "Master" means a gold master CD-ROM, cartridge or other appropriate
electronic medium of delivery which is of sufficient quality to allow
reproduction of the applicable software product without any material
degradation, plus the applicable user manual and any and all
documentation reasonably necessary to exercise Infogrames' rights
under this Agreement, including without limitation, graphics in hard
and electronic copy.
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<PAGE> 2
(e) "Merchandise" means goods and sundries bearing the names, characters,
themes or based on the storylines related to any Product.
(f) "Net Revenues" means gross revenues received by Infogrames from third
parties, less any returns, Chargebacks, discounts, rebates,
Manufacturing Costs, taxes, duties, commissions, insurance and
transportation costs.
(g) "Products" means the Products (in any format, e.g. PC, Macintosh,
console, video, online play) to which GTIS (and its subsidiaries) has
the right to distribute such Products in the Territory, whether
licensed or owned by GTIS (or its subsidiaries), and any
demonstration versions and derivative works thereof, including
without limitation, rights to merchandising, television, film, music,
hint books, strategy guides, sequels, add-ons and level packs.
(h) "Trademarks" means the trademarks, logos, service marks, trade names
and other proprietary markings owned by or licensed to GTIS in
connection with any Product.
(i) "Territory" means all countries currently comprising Europe,
including without limitation all countries included in the European
Union.
(j) All capitalized terms not defined herein are as defined in the
Securities Purchase Agreement between the parties dated as of
November 15, 1999.
11. License: GTIS hereby grants to Infogrames the exclusive right to publish,
manufacture, have manufactured, localize, adapt, market, advertise,
promote, publicize, distribute, sell, sublicense or otherwise exploit the
Products through all channels of distribution in the Territory, subject to
rights granted in any license agreement dated prior to November 11, 1999
(the "Pre-existing Agreements"). GTIS shall not renew the Pre-existing
Agreements nor allow the Pre-existing Agreements to automatically renew.
Upon Infogrames' request, GTIS shall provide Infogrames with all materials
reasonably necessary for Infogrames to localize the Products, including
without limitation, source code and all related documentation, subject to
their availability to GT and to third-party approval rights, as applicable.
12. Trademark License: GTIS hereby grants to Infogrames a royalty-free,
non-exclusive, non-transferable license to use GTIS' Trademarks in
connection with the exercise of the license granted to Infogrames pursuant
to Paragraph 2 of this Agreement. GTIS' Trademarks and the goodwill
associated therewith are and remain GTIS' exclusive property. Infogrames
shall acquire no right, title or interest in GTIS' Trademarks or the
goodwill associated therewith, other than the limited license and right to
use GTIS' Trademarks as set forth under this Agreement. All usage of GTIS'
Trademarks by Infogrames shall inure to GTIS' benefit. Infogrames will use
all reasonable efforts to ensure that all applicable and reasonably
necessary Trademarks used for a Product appear
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<PAGE> 3
clearly on the packaging and major advertising and promotional materials
for such Product.
12. Termination of License Agreements: Immediately after the Closing, GTIS
agrees to terminate any and all license agreements between GTIS and any
European Company Subsidiary effective as of such date that Infogrames and
GTIS mutually agree Infogrames will commence publishing and distributing
GTIS' Products, but in no event later than March 31, 2000.
13. Purchase of Prepackaged Products: If GTIS offers prepackaged Products,
Infogrames shall be entitled to purchase such prepackaged Products at GTIS'
actual direct cost of manufacture, F.O.B. GTIS' warehouse. The prepackaged
Products will be purchased on a purchase order basis, under Infogrames
standard purchase order terms and conditions. Royalties due GTIS for the
subsequent sale of such product are covered by the other terms and
conditions of this Agreement including but not limited to Paragraphs 8 and
15 below.
14. Return of Prepackaged Products: Infogrames shall be entitled to return
prepackaged Products purchased from GTIS to GTIS for a full refund or
credit, at Infogrames' option.
15. Delivery of Non-Prepackaged Products: GTIS will deliver as soon as
practicable a complete Master of any Product which is licensed to
Infogrames under this Agreement for manufacture by or for Infogrames
pursuant to this Agreement. The Master for all Products will include
English, German, French, Spanish and Italian language versions (except and
unless Infogrames and GTIS mutually agree that the sales potential for a
Product in one or more of these languages is not sufficient to economically
justify translation of the Product, in which case the versions in those
specific languages may be omitted).
16. Royalties on Products: Infogrames will pay to GTIS a royalty on
distribution of Products which are manufactured by or for Infogrames
pursuant to the license granted herein calculated as follows:
(a) If a third party is entitled to royalties based on Infogrames'
distribution of the specific Product, then the royalty will be the
greater of (i) 30% of the Net Revenues Infogrames actually receives
from the distribution of such Product or (ii) 130% of the royalty due
to such third party (not including any advance) actually paid by GTIS
to the third party for such Product. GTIS will inform Infogrames at
the time such Product is delivered to Infogrames of the amount of the
royalty due to such third party in writing.
(b) If the Product is internally developed by GTIS, or any of its
subsidiaries, then the royalty will be 30% of the Net Revenues
Infogrames actually receives from the distribution of the Product.
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<PAGE> 4
(c) No royalties will be due from Infogrames to GTIS for up to 500 units
of each Product, to be used for promotional and demonstration
purposes.
(d) No royalties will be due from Infogrames to GTIS for any transfer or
payment amongst Infogrames Entertainment S.A. and its subsidiaries
(and their subsidiaries).
5. Obligation to Release Product. Infogrames shall actively commence marketing
and selling the Products within the Territory in reasonable commercial
quantities within three (3) months following Infogrames' receipt of
Masters. If Infogrames shall fail to have commenced actively marketing and
selling the Products in the Territory within three (3) months following the
receipt of Masters with respect thereto, then GTIS shall have the right, in
addition to any other rights which GTIS may have hereunder, upon thirty
(30) days prior written notice to Infogrames, to declare such right
henceforth to be nonexclusive.
6. Anti-Export Protection. Infogrames shall use commercially reasonable
efforts not to sublicense, distribute or sell any Products to any
distributor or customer who Infogrames knows, or could reasonably be
expected to know, intends to resell or export the Products outside of the
Territory. A licensee, sublicensee, distributor or customer who wrongfully
resells or exports Products outside of the Territory is referred to as an
"Exporter." GTIS shall have the right, in addition to any other rights
which it may have hereunder, to require Infogrames to terminate any
license, distribution agreement or arrangement with any such Exporter who
is wrongfully distributing Products in violation of the rights of GTIS.
7. Prohibition of Sublicensing; Derivative Works. Infogrames shall not
sublicense any of the rights granted to Infogrames hereunder without GTIS'
prior written consent, such consent not to be unreasonably withheld.
Infogrames shall not exploit derivative works related to the Products,
including without limitation rights to merchandising, television, film,
music, hint books, strategy guides, sequels, add-ons and level packs,
without GTIS' prior written consent, such consent not to be unreasonably
withheld. Notwithstanding the above, GTIS acknowledges that Infogrames
maintains sublicensing agreements with affiliates and/or third parties in
certain countries within the Territory as listed on Schedule A and that
such sublicensing agreements are deemed to be pre-approved with respect to
the publishing and distribution of Product within those countries that is
developed by GTIS or its subsidiaries. Sublicensing to original equipment
manufacturers (OEMs) for exploitation in the Territory is also deemed
pre-approved for Product developed by GTIS or its subsidiaries. Such
pre-approvals for sublicensing within the Territory do not apply to Product
developed by third parties.
8. Approval Rights. The Products as manufactured, advertised, sold,
distributed or otherwise disposed of by Infogrames under this
Agreement shall be of customary quality and shall be sold and
distributed in packaging acceptable to GTIS and bearing GTIS'
Trademarks and trade names. Such packaging may indicate that the
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<PAGE> 5
Products are distributed by Infogrames. Infogrames agrees to furnish
GTIS free of cost, for GTIS' reasonable approval as to quality and
style, samples of each Product together with its proposed packaging
prior to the Product's release for sale or distribution. The Product
shall not be sold or distributed by Infogrames without such approval.
GTIS will approve or reject samples submitted by Infogrames within ten
(10) days of receipt of such samples; GTIS' failure to respond to
requests for approval within ten (10) days shall be deemed approval.
8. Ownership of Intellectual Property Rights. Notwithstanding anything
contained herein to the contrary and subject to the terms of this
Agreement, all artwork, designs and computer software embodying the
intellectual property embodied in the Products, or any reproduction
thereof, or any packaging or advertising materials, which are
designed, developed and/or created by Infogrames hereunder (or any of
its sublicensees, affiliates or subsidiaries), shall be, and remain
GTIS' (or its affected third party's, as the case may be) sole and
exclusive property, inclusive of all copyrights and right to copyright
therein and thereto for the life of the copyright therein; provided
that during the Term of this Agreement, Infogrames shall have the
exclusive right, license and privilege (without any compensation to
GTIS except as otherwise provided in this Agreement) to use all such
above described materials in connection with its exploitation, sale
and distribution of the Products.
Subject to the terms of this Agreement, Infogrames acknowledges and agrees
that: All copyrights, trademarks and service marks and rights to same
referred to in this Agreement in the name of and/or owned by and/or
licensed to GTIS shall be and remain the sole and complete property of
GTIS, or its affected third-party licensors, as the case may be; that all
such copyrights, trademarks and service marks and rights to same in the
name of or owned by any copyright proprietor other than GTIS or Infogrames
shall be and remain the sole and complete property of such copyright
proprietor; that all trademarks and service marks which, and/or the right
to use which, arise out of the license hereby granted to use the
intellectual property embodied in the Products shall be and remains the
sole and complete property of GTIS (or its affected third-party licensors,
as the case may be); that Infogrames shall not at any time acquire or claim
any right, title or interest of any nature whatsoever in any such trademark
or service mark by virtue of this Agreement or of Infogrames' uses thereof
in connection with the Products; and that any right, title or interest in
or relating to any such trademark or service mark, which comes into
existence as a result of, or during the Term of, the exercise by Infogrames
of any rights granted to it hereunder shall immediately vest in GTIS (or
its affected third-party licensor, as the case may be).
9. Taxes. All amounts due hereunder include any applicable taxes and duties.
10. Payment Procedures: Infogrames will report to GTIS the amount of royalties
due within sixty (60) days after the end of each calendar quarter, and each
such report will be accompanied by payment of such amount; provided,
however, that Infogrames shall be
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<PAGE> 6
entitled to credit the amounts to be paid by GTIS to any amounts that GTIS
owes to Infogrames under any other agreement or security whatsoever. All
payments will be made in U. S. dollars.
10. Audit: Infogrames will keep accurate records of the basis for the royalty
determination and will make such records available to an independent
certified public accountant mutually agreed upon by the parties for
inspection during normal business hours, provided however such inspection
shall not interfere with Infogrames' normal business activities. Such
accountant shall be under an obligation of confidentiality to Infogrames,
and will only disclose to GTIS whether or not the royalty reports provided
to GTIS by Infogrames were correct, and if not, the amount by which the
royalty reports are incorrect. No other information will be provided to
GTIS. If Infogrames has underpaid the royalties due, Infogrames will
promptly pay the underpaid amount. If Infogrames has overpaid the royalties
due, Infogrames may elect, in its sole discretion, to either credit such
overpayment against royalties to come due in the future or require GTIS to
refund such overpayment to Infogrames promptly. Inspections shall be at
GTIS' cost, shall not occur more frequently than once annually and shall
not cover the same records more than once; provided, however, that the
reasonable cost of the inspection will be reimbursed by Infogrames if the
inspection discovers an underpayment in excess of ten (10%) percent.
11. GTIS Warranties and Indemnity: GTIS warrants and represents that GTIS has
sufficient rights to the Products to grant Infogrames the licenses under
this Agreement and that any Product provided to Infogrames under this
Agreement does not and will not infringe any third party proprietary right.
If Infogrames is obligated to pay any third party for rights reasonably
necessary to exploit its rights under this Agreement, GTIS will reimburse
Infogrames such amount upon Infogrames' request. GTIS warrants and
represents that it has the right to enter into this Agreement and that this
Agreement and GTIS' performance under this Agreement will not conflict or
violate any obligations that GTIS may have under an agreement with any
third party. GTIS will indemnify Infogrames, and its affiliates, officers,
directors and employees, against claims, actions, demands, liabilities,
losses, damages, expenses (including reasonable attorneys' fees and legal
costs) related to alleged or actual infringement of third party proprietary
rights by the Products and to alleged personal injury or property damage
related to the Products. GTIS will indemnify Infogrames, and its
affiliates, officers, directors and employees, against any claims,
liabilities, losses, damages, injuries, costs, expenses, causes of action,
claims, demands, assessments and similar matters related to any breach of
GTIS' warranties.
12. Infogrames Warranties and Indemnity: Infogrames warrants and represents
that it has the full power and authority to enter into this Agreement.
Except as contemplated hereby, Infogrames warrants and represents that it
will not assign, transfer, lease, convey or grant a security interest in or
otherwise similarly dispose of the Products or any related materials.
Infogrames warrants and represents that it shall use its reasonable best
efforts to protect GTIS' and any applicable third party's intellectual
property rights covered by this Agreement in the Territory against
infringement. Infogrames warrants and represents that the making of this
Agreement and the manufacture, marketing, sale and distribution
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<PAGE> 7
of the Products shall not infringe upon or violate any laws or regulations
of any nation with the Territory; any agreement, right or obligation
between Infogrames and any other person, firm or corporation; or any rights
of any third party. Infogrames will indemnify GTIS, and its affiliates,
officers, directors and employees, against any claims, liabilities, losses,
damages, injuries, costs, expenses, causes of action, claims, demands,
assessments and similar matters related to any breach of Infogrames'
warranties.
12. Conditions on Indemnity Obligations: The indemnity obligations set forth in
this Agreement are conditioned upon the party claiming indemnification (the
"Indemnified Party") promptly notifying the indemnifying party (the
"Indemnifying Party") of the claim, allowing the Indemnifying Party to
control any defense or settlement of such claim and assisting the
Indemnifying Party in the defense or settlement so long as the Indemnifying
Party reimburses the Indemnified Party's reasonable expenses.
13. Term: The term of this Agreement will be the later of (a) seven years or
(b) the period of time during which Infogrames and its subsidiaries hold at
least twenty-five percent (25%) of the voting stock of GTIS.
14. Termination: This Agreement may be terminated by Infogrames in its sole
discretion upon ninety (90) days written notice to GTIS. Either party may
terminate this Agreement for a material breach by the other party which has
not been cured within sixty days after the non-breaching party provided
written notice of such breach to the breaching party.
15. Effect of Termination: Upon termination of this Agreement, the licenses
granted hereunder will terminate, provided however, that in the event such
termination is for other than a breach by Infogrames, the licenses will
continue to the extent necessary for a period of up to six (6) months to
allow Infogrames to distribute its remaining inventory of Products and to
fulfill its obligations under any agreement with a third party. Paragraphs
1, 3, 8, 10, 11, 13, 15-19 and 22-32 shall survive termination of this
Agreement for any reason.
16. Assignment: Infogrames may assign all or a portion of its rights under this
Agreement to (a) its affiliates or (b) in the event of a change in control
of Infogrames, to the successor entity or any of its affiliates. Infogrames
may not assign this Agreement to any other third party without GTIS
approval. Subject to the foregoing, the provisions of this Agreement shall
apply to and bind the successors and permitted assigns of the parties. Any
attempted assignment or other transfer of this Agreement not in compliance
with this Paragraph 23 shall be null and void and shall be deemed to be a
material breach of this Agreement which is not capable of cure.
17. Disposition of European Operations: GTIS agrees that upon execution of this
Agreement, it will take all actions necessary to dispose, as soon as
practicable, of its existing publishing and distribution operations in the
Territory and those of Company Subsidiaries in the Territory.
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<PAGE> 8
18. Confidentiality: Each party agrees that it will hold in strict confidence
and not disclose the Confidential Information of the other party to any
third party and to use the Confidential Information of the other party for
no purpose other than the purposes expressly permitted by this Agreement.
Each party shall only permit access to the other party's Confidential
Information to those of its employees having a need to know and who have
signed confidentiality agreements containing terms at least as restrictive
as those contained in this Paragraph 20. Each party shall maintain the
confidentiality and prevent accidental or other loss or disclosure of any
Confidential Information of the other party with at least the same degree
of care as it uses to protect its own Confidential Information but in no
event with less than reasonable care. A party's obligations of
confidentiality under this Agreement shall not apply to information which
such party can document (i) is in the public domain without the breach of
any agreement or fiduciary duty or the violation of any law, (ii) was known
to the party prior to the time of disclosure without the breach of any
agreement or fiduciary duty or the violation of any law, (iii) is
independently developed by the party prior to receiving such Confidential
Information without reference to any Confidential Information, (iv) is
required to be disclosed pursuant to a judicial order, a requirement of a
governmental agency or by operation of law, provided that such party gives
the other party written notice of any such requirement immediately after
learning of any such requirement, and takes all reasonable measures to
avoid or limit disclosure under such requirements and to obtain
confidential treatment or a protective order and has allowed such other
party to participate in the proceeding. Upon written request by either
party hereto, the other party shall promptly return all documents and other
tangible materials representing the requesting party's Confidential
Information and all copies thereof. Notwithstanding anything contained
herein to the contrary, GTIS reserves the right to publicly disclose the
terms of this Agreement if it determines in good faith that this is a
material agreement which must be filed with the Securities and Exchange
Commission.
19. Governing Law: The laws of France shall govern this Agreement, without
regard to conflicts of laws provisions thereof and without regard to the
United Nations Convention on Contracts for the International Sale of Goods.
20. Relationship of Parties. The parties hereto expressly understand and agree
that the parties are independent contractors in the performance of each and
every part of this Agreement.
21. Amendment and Waiver. Except as otherwise expressly authorized herein, any
provision of this Agreement may be amended and the observance of any
provision of this Agreement may be waived only with the written consent of
the parties.
22. Headings. Headings and captions are for convenience only and are not to be
used in the interpretation of this Agreement.
23. Notices. All notices, statements, and reports required or permitted by this
Agreement shall be in writing and deemed to have been effectively given and
received; (i) five (5) business days after the date of mailing if sent by
registered or certified mail, postage
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<PAGE> 9
prepaid, with return receipt requested; (ii) when transmitted if sent by
facsimile, provided a confirmation of transmission is produced by the
sending machine and a copy of such facsimile is promptly sent by another
means specified in this Paragraph 25; or (iii) when delivered if delivered
personally or sent by express courier service. Notices shall be addressed
as follows:
If to Infogrames: If to GTIS:
Infogrames Entertainment S.A. GT Interactive Software Corp.
84, rue du 1er Mars 1943 417 Fifth Avenue
Villeurbanne, 69100 New York, New York 10016
France Attention: Thomas Heymann
Attention: Thomas Schmider Telecopy: (212) 679-3424
Telecopy: (011 33) 472 655116 Confirm: (212) 726-0750
Confirm: (011 33) 472 655000
And with a copy to:
Attention: Frederic Garnier Kramer Levin Naftalis & Frankel LLP
Telecopy: (011 33) 472 655059 919 Third Avenue
Confirm: (011 33) 472 655000 New York, New York 10022
Attention: David P. Levin, Esq.
With a copy to: Telecopy: (212) 715-8000
Confirm: (212) 715-9100
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
23. Entire Agreement. This Agreement supersedes all proposals, oral or written,
all negotiations, conversations, or discussions between or among parties
relating to the subject matter of this Agreement and all past dealing or
industry custom.
24. Severability. If any provision of this Agreement is held to be illegal or
unenforceable, that provision shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
25. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have executed this Distribution
Agreement on the Effective Date.
INFOGRAMES ENTERTAINMENT S.A. GT INTERACTIVE SOFTWARE CORP:
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
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