Exhibit 10.1
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of June 30, 2005, to that
certain Loan and Security Agreement, dated as of May 13, 2005 (as it may be
amended, modified or supplemented from time to time, the "Loan Agreement"),
among Atari, Inc., a Delaware corporation ("Borrower") and HSBC Business Credit
(USA) Inc., a Delaware corporation ("Lender").
WITNESSETH:
WHEREAS, Borrower has requested that Lender (i) waive Borrower's
non-compliance with Sections 6.8(a), 6.8(b) and 6.8(c) of the Loan Agreement in
respect of the period ended June 30, 2005, (ii) amend such Sections, Sections
1.2, 2.1 and Article X of the Loan Agreement, and (iii) consent to certain
transactions between Borrower and its affiliates, and Lender is willing to do so
on the terms and conditions hereafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms.
All capitalized terms not otherwise defined herein shall have the
meanings given to them in the Loan Agreement.
2. Amendments to the Loan Agreement.
(a) From and after the date this Amendment becomes effective in
accordance with Section 5 below, the definition of "Change of Control" in
Section 1.2 of the Loan Agreement is and shall be amended and restated in its
entirety to read as follows:
"Change of Control" shall mean the occurrence of any event or events
that results in (a) the acquisition, directly or indirectly, by any
person or group (within the meaning of Section 13(d)(3) of the
Exchange Act), other than Parent, of beneficial ownership of more than
50% of the aggregate outstanding voting power of the capital stock of
Borrower; (b) during any period of up to 12 consecutive months,
individuals who at the beginning of such 12 month period were
directors of Borrower ceasing for any reasons to constitute a majority
of the Board of Directors of Borrower; or (c) a vacancy in the
position of Chief Financial Officer of the Borrower which has not been
filled within a thirty day period by a replacement acceptable to
Lender in its reasonable discretion.
(b) From and after the date this Amendment becomes effective in
accordance with Section 5 below, the definition of "Consolidated EBITDA" in
Section 1.2 of the Loan Agreement is and shall be amended and restated in its
entirety to read as follows:
"Consolidated EBITDA" shall mean, for Borrower and its consolidated
Subsidiaries, on a consolidated basis, for any period (without
duplication), the Consolidated Net Income (Net Loss) of Borrower and
its consolidated Subsidiaries for such period, plus
the sum, without duplication, of (a) Consolidated Interest Expense,
(b) depreciation and amortization expenses or charges, (c) income
taxes to any government or governmental instrumentality expensed on
Borrower's or any of its consolidated Subsidiaries' books (whether
paid or accrued), (d) non-cash, non-recurring charges or losses, if
any, (e) discontinued operation costs relating to the operations of
Humongous Entertainment for such period (regardless of how such costs
are classified on the income statement of Borrower, provided such
costs are calculated in accordance with GAAP), and (f) restructuring
charges shown as such on the financial statements delivered pursuant
to Sections 9.5, 9.6 and 9.7, if any, minus the sum of (i) non-cash,
non-recurring gains, and (ii) interest income.
(c) From and after the date this Amendment becomes effective in
accordance with Section 5 below, Section 2.1(a)(ii) of the Loan Agreement is and
shall be amended and restated in its entirety to read as follows:
"(ii) during the period from August 1, 2005 to and including October
31, 2005 up to the lesser of (A) 60%, subject to the provisions of
Section 2.1(b), of the aggregate cost, calculated on a standard cost
basis, of Eligible Inventory at such time (the "Inventory Advance
Rate" and together with the Receivables Advance Rate, the "Advance
Rates"), and (B) (1) for the period from August 1, 2005 to and
including August 31, 2005, $7,000,000, (2) for the period from
September 1, 2005 to and including September 30, 2005, $8,000,000 and
(3) for the period from October 1, 2005 to and including October 31,
2005, $5,000,000, in each case minus"
(d) From and after the date this Amendment becomes effective in
accordance with Section 5 below, Sections 6.8(a), 6.8(b) and 6.8(c) of the Loan
Agreement are and shall be amended and restated in their entirety to read as
follows:
(a) EBITDA. Maintain Consolidated EBITDA for the twelve-month
periods ending on the dates set forth below of not less than the amounts
set forth below opposite such dates:
Twelve-Month
Period Ending On Minimum EBITDA
---------------- --------------
6/30/05 $(15,500,000)
9/30/05 $(32,000,000)
12/31/05 $(13,500,000)
3/31/06 $ 13,000,000
(b) Tangible Net Worth. Maintain Tangible Net Worth at all times
during each period set forth below of not less than the amounts set forth
below opposite such periods:
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Fiscal Quarter Minimum
Ending On Tangible Net Worth
-------------- ------------------
6/30/05 $19,700,000
9/30/05 $ 2,000,000
12/31/05 $36,000,000
3/31/06 $59,000,000
(c) Working Capital. Maintain Working Capital at all times during
each period set forth below of not less than the amounts set forth below
opposite such periods:
Fiscal Quarter Minimum
Ending On Working Capital
-------------- ---------------
6/30/05 $(10,500,000)
9/30/05 $(31,000,000)
12/31/05 $ (9,500,000)
3/31/06 $ 16,500,000
(e) From and after the date this Amendment becomes effective in
accordance with Section 5 below, the following Sections 10.17 and 10.18 shall be
inserted at the end of Article X of the Loan Agreement:
"10.17 Parent, through a subsidiary, shall not have consummated on or
about August 31, 2005 the purchase from Borrower of the assets relating to
the operation of Borrower's Humongous Entertainment studio for $7,000,000
in cash and the assumption of certain licensing obligations which otherwise
would have remained the responsibility and liability of Borrower (for
purposes of this Section 10.17, "on or about" shall mean within a period of
three Business Days from August 31, 2005);
10.18 On or before September 15, 2005, (i) Parent shall not have made
a capital contribution to Borrower in the amount of at least $12,000,000,
(ii) Parent or a subsidiary shall not have purchased for cash intellectual
property assets of Borrower for an amount of at least $12,000,000 in one or
more transactions acceptable to Lender in its sole reasonable discretion,
or (iii) transactions (excluding inter-company debt arrangements),
acceptable to Lender in its sole reasonable discretion, shall not have been
effected pursuant to which Borrower has received $12,000,000 from Parent or
a subsidiary.
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3. Waiver. Lender hereby waives, as of June 30, 2005, Borrower's
non-compliance with Sections 6.8(a), 6.8(b) and 6.8(c) of the Loan Agreement
(prior to giving effect to this Amendment) solely in respect of the period ended
June 30, 2005, and the Events of Default that would otherwise result or have
resulted solely from a violation of such Sections by reason of such
non-compliance. Additionally, if on or prior to September 30, 2005 there are
changes to the GAAP accounting rules which would require Borrower to allocate a
value to the goodwill of Humongous Entertainment studio in connection with the
Humongous Sale (as such term is defined in Schedule A to this Amendment) which
is greater than the value to be allocated under the current accounting rules,
and solely as a result thereof Borrower fails to comply with Section 6.8(b) of
the Loan Agreement for the period ended September 30, 2005, Lender hereby waives
Borrower's non-compliance with Section 6.8(b) of the Loan Agreement solely in
respect of the period ended September 30, 2005, and the Events of Default that
would otherwise result or have resulted solely from a violation of such Section
by reason of such non-compliance.
4. Consent. Lender hereby (i) consents to the transactions between
Borrower and certain of its affiliates that are set forth on Schedule A hereto
(the "Affiliate Transactions") and (ii) waives non-compliance with any section
of the Loan Agreement as a result of the completion of the Affiliate
Transactions and the Events of Default that would otherwise result or have
resulted solely from a violation of any sections of the Loan Agreement by reason
of such non-compliance. Lender consents to Borrower filing UCC-3 termination
statements simultaneous with the closing of the Humongous Sale with respect to
the assets of Borrower sold pursuant to the Humongous Sale. Lender further
agrees that it shall deliver to Borrower, promptly upon demand, such Lien
releases and other documents as Borrower shall reasonably request to enable
Borrower to dispose of free of Lender's Lien the assets of Borrower that are
being sold pursuant to the Humongous Sale.
5. Conditions to Effectiveness. This Amendment shall become effective
as of June 30, 2005 when all of the following conditions are satisfied: (i)
Borrower shall have executed and delivered to Lender this Amendment, (ii) Lender
shall have executed the same, and (iii) Borrower shall have paid to Lender a
non-refundable amendment fee in the amount of $150,000.
6. General.
(a) Representations and Warranties. To induce Lender to enter into
this Amendment, Borrower hereby represents and warrants to Lender that as of the
date hereof:
(i) Borrower has the requisite corporate power and authority, and
the legal right, to make, deliver and perform this Amendment and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Amendment.
(ii) This Amendment constitutes the legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting the enforcement of creditors' rights generally.
(iii) Each of the representations and warranties made by Borrower
in or pursuant to the Loan Agreement or the Other Documents is true and
correct in all material
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respects on and as of the date hereof as if made on and as of the date
hereof (or, if such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date), subject to
previously provided Disclosure Schedules and disclosures contained in the
Borrower's filings with the Securities and Exchange Commission which have
been provided to Lender pursuant to Section 9.8 of the Loan Agreement.
(iv) After giving effect to this Amendment, no Default or Event
of Default has occurred and is continuing.
(b) Payment of Expenses. Borrower agrees to pay or reimburse Lender
for all out-of-pocket costs and expenses incurred in connection with this
Amendment, any other documents prepared in connection herewith and the
transactions contemplated hereby, including, without limitation, the fees and
disbursements of counsel to Lender.
(c) No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Loan Agreement and the
Other Documents are and shall remain in full force and effect. This Amendment
shall not constitute a waiver of or amendment to any other provision of the Loan
Agreement or Other Document not expressly referred to herein and shall not be
construed as a waiver or consent to any further or future action on the part of
Borrower that would require a waiver or consent of the Lender.
(d) Governing Law; Counterparts. This Amendment and the rights and
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of New York. This
Amendment may be executed by one or more of the parties hereto on any number of
separate counterparts (including by facsimile transmission), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed and delivered by their respective proper and duly authorized officers
as of the day and year first above written.
HSBC BUSINESS CREDIT (USA) INC.
By: /s/ Xxxx Xxxxxxxxx
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Name: Xxxx Xxxxxxxxx
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Title: First Vice President
---------------------------------
ATARI, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
----------------------------------
Title: EVP & CFO
---------------------------------
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SCHEDULE A
Affiliate Transactions
1. Parent, through its internal studios, Eden Studios, Melbourne House and
Paradigm, shall provide research and development services in the months of July,
August and September in respect of Borrower's products Test Drive Unlimited and
Stuntman II in exchange for Borrower's common stock. The value of such services
has been estimated by the parties to be approximately $4,500,000.
2. Parent, through a subsidiary, shall purchase the assets relating to the
operation of Borrower's Humongous Entertainment studio for $7,000,000 in cash,
plus the assumption of certain licensing obligations which otherwise would have
remained the responsibility and liability of Borrower (the "Humongous Sale") and
to the extent Borrower is not released therefrom by such licensors, any
continuing liability of Borrower with respect to such licensing obligations
shall not materially diminish the $7,000,000 purchase price. Further, Borrower
and Parent have agreed in principle that, after such acquisition, Borrower shall
retain exclusive distribution rights for the related product throughout North
America and Mexico, for which Borrower shall be entitled to retain a
distribution fee of between 15% and 20% of the revenue derived from the
distribution of such products. The closing of the sale, and Borrower's receipt
of the $7,000,000 cash purchase price, shall occur on or about August 31, 2005.
For purposes of this paragraph "on or about" shall mean within a period of three
Business Days from August 31, 2005.
3. In full and final settlement for all payments, liabilities and obligations
that Atari UK and Parent may have paid or incurred for or on behalf of GT
Interactive UK, a non-operating subsidiary of Borrower, Atari UK will accept
Borrower common stock with a total market value of L892,575 GBP, plus any
applicable interest.
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