OPTION AGREEMENT
OPTION AGREEMENT dated as of the 8th day of February 1999 by and among T2
DEVELOPER, INC., a Delaware corporation (the "Class A Limited Partner");
TAKE-TWO INTERACTIVE SOFTWARE, INC., a Delaware corporation ("T2"); GATHERING OF
DEVELOPERS, INC., a Texas corporation ("Gathering"); and each limited partner of
Gathering of Developers I, Ltd., a Texas limited partnership (the "Partnership")
set forth on Schedule A (individually, a "Class B Limited Partner" and
collectively, the "Class B Limited Partners").
WITNESSETH:
WHEREAS, Gathering is the sole general partner of the Partnership
(hereinafter referred to as the "General Partner"); and
WHEREAS, the Class B Limited Partners are the owners of all of the issued
and outstanding limited partnership interests of the Partnership, other than
those interests held by T2, the Class A Limited Partner or any affiliate of
either or any heirs, transferees or heirs thereof (the "Class B Limited
Interests"); and
WHEREAS, the Class B Limited Partners, Gathering and the Class A Limited
Partners have amended and restated the Agreement of Limited Partnership of the
Partnership (the "Amended and Restated Partnership Agreement"); and
WHEREAS, the General Partner and the Class B Limited Partners desire to
grant to the Class A Limited Partner the option to purchase the General
Partner's and each Class B Limited Partner's respective interests in the
Partnership (collectively, the "Partnership Interests"); and
WHEREAS, the Class A Limited Partner desires to grant to the Class B
Limited Partners and the General Partner the option to purchase the Class A
Limited Partner's interest in the Partnership in the event the Class A Limited
Partner does not exercise its option to acquire the Partnership Interests;
NOW, THEREFORE, in consideration of and in reliance upon the covenants,
conditions, representations and warranties herein contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
recognized, the parties hereto hereby agree as follows:
1. Purchase Option.
1.1. The General Partner and each Class B Limited Partner agrees that
during the period commencing October 31, 2000 and expiring April 30, 2001 (the
"First Option Period"), the Class A Limited Partner shall have the right and
option to purchase all, but not less than all, of the Partnership Interests held
by the General Partner and each of the Class B Limited Partners (the "Purchase
Option") at an exercise price equal to the greater of (i) $16 million or
(ii) 80% of the product obtained by multiplying 12.5 by the Partnership's EBIT
(as defined below) for the twelve months ending July 31, 2000.
1.2. In the event that the Class A Limited Partner has not exercised the
Purchase Option during the First Option period, then during the period
commencing October 31, 2001 and expiring April 30, 2002 (the "Second Option
Period"; and together with the First Option Period, the "Option Period"), the
Class A Limited Partner shall have the right and option to exercise the Purchase
Option at an exercise price equal to the greater of (i) $21 million or (ii) 80%
of the product obtained by multiplying 17.5 by the Partnership's EBIT (as
defined below) for the twelve months ending July 31, 2001.
1.3. In the event that the Class A Limited Partner has not exercised either
Purchase Option during the Option Period, then during the period commencing
October 31, 2002 and expiring April 30, 2003, the General Partner and the Class
B Limited Partners shall have the right and option but not the obligation (the
"B Option") to purchase all, but not less than all, of the interests in the
Partnership held by the Class A Limited Partner, T2 or any affiliate of either
or any transferee, successor or heir thereof, or any equity holdings into which
such interest have been converted or other holdings for which they have been
exchanged (collectively, the "Class A Interest") from the Class A Limited
Partner at an exercise price equal to the greater of (i) any unrecouped Advances
(as defined in the Letter of Amendment to the Distribution Agreement between the
Partnership, T2 (or an affiliate thereof) and other parties thereto, dated
February 8, 1999) together with interest thereon at 12% per annum, which
interest shall accrue from the date of the Advance plus the product obtained by
multiplying 3 by the capital contribution of the Class A Limited Partner made to
the Partnership, on or prior to October 31, 2002 or (ii) 20% of the product
obtained by multiplying 17.5 by the Partnership's EBIT (as defined below) for
the twelve months ending July 31, 2002. The General Partner and the Class B
Limited Partners shall agree among themselves as to what portion of the Class A
Interest, if any, will be purchased by the General Partner and each Class B
Limited Partner.
1.4. For purposes hereof, the term "EBIT" shall mean earnings of the
Partnership before interest and income (federal and state) taxes computed in
accordance with generally accepted accounting principles ("GAAP"), derived from
the audited financial statements prepared by the Partnership's then independent
certified public accountants.
1.5. The General Partner and each Class B Limited Partner hereby agrees
that during the Option Period, he or it will not sell, transfer, encumber,
hypothecate, pledge or otherwise dispose of ("Transfer") any Partnership
Interests to any entity or party other than a party to this Agreement. The
General Partner and each Class B Limited Partner agrees that transferees and
newly admitted limited partners shall agree to be bound by the terms of this
Agreement as a condition to admission to the Partnership. The Class A Limited
Partner hereby agrees that it will not Transfer any of the Class A Interest
prior to the earlier to occur of (i) its consummation of the Purchase Option or
(ii) May 1, 2003, except to a party to this Agreement.
1.6. The Class A Limited Partner may exercise the Purchase Option at any
time during the Option Period by delivering to the General Partner (as agent for
the Class B Limited
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Partners) written notice of the Class A Limited Partner's intent to exercise the
Purchase Option, the applicable exercise price and a written calculation of the
exercise price. Upon receipt of such notice by the General Partner, the Class B
Limited Partners and the General Partner will have ten days to review the
information provided by the Class A Limited Partner in its notice. If neither
the General Partner nor any Class B Limited Partner notifies the Class A Limited
Partner in writing prior to 5:00 p.m. New York time on the tenth day after the
General Partner's receipt of the Class A Limited Partner's notice, that it
objects to the calculation of the exercise price, then the General Partner and
each Class B Limited Partner shall be deemed to have agreed to such calculation,
whereupon, subsequent to payment to the Class B Limited Partners of the exercise
price, all right, title and interest to the Partnership Interests subject to the
Purchase Option shall vest in possession of the Class A Limited Partner without
any further act or deed.
1.7. In the event of a dispute as to the exercise price, then the parties
shall promptly submit the calculation to the independent auditors identified in
paragraph 1.4 for their calculation, which shall be binding upon the parties.
Payment of the exercise price shall be made within 30 days of such final
calculation made by such auditors.
1.8. Upon exercise of the Purchase Option, the General Partner and each of
the Class B Limited Partners shall severally, but not jointly, with respect to
themselves, represent and warrant that good title to the Partnership Interests
is being transferred free and clear of all Liens (as defined below) and the
Class B Limited Partners shall reaffirm their respective Development and
Publishing Agreements then in place with the Partnership (collectively, the
"Development and Publishing Agreements") with the limited liability company or
other corporate entity to which the Partnership is converted (the "LLC"). The
General Partner and each Class B Limited Partner shall deliver any documents
reasonably necessary to effect such transfer of interests, and the reaffirmation
of the Development and Publishing Agreements with the LLC. The Class A Limited
Partner, General Partner and each Class B Limited Partner shall be responsible
for the payment of taxes applicable to him or it, if any, with respect to the
transfer of Partnership Interests.
1.9. The General Partner and the Class B Limited Partners may exercise the
B Option during the period set forth in Section 1.3 above by delivering the
applicable exercise price together with a written calculation of the exercise
price and of its intention to exercise its option to the Class A Limited
Partner. The Class A Limited Partner may object to such calculation, and any
dispute regarding the calculation shall be resolved, in the same manner as is
provided above with respect to exercise of the Purchase Options. Upon exercise
of the B Option, the Class A Limited Partner shall represent in writing to the
General Partner and each Class B Limited Partner exercising the B Option that
good title to the Class A Interest is being transferred free and clear of all
Liens. The Class A Limited Partner, Class B Limited Partner and the General
Partner shall each be responsible for the payment of such party's taxes
applicable to it, if any, with respect to the transfer of the Class A Interest.
If the Class A Limited Partner does not object to the calculation of the
exercise price, or upon resolution of any dispute in accordance with this
Section 1.9, all right and title to the Class A Interest shall vest in
possession of the General Partner without any further act or deed.
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1.10. The closing of the transactions contemplated in this Section 1 shall
take place as soon as practicable after receipt of the notice specified in
Sections 1.6, or 1.9, or final resolution of any dispute regarding the exercise
price, at the offices of Xxxxxx Xxxxxxxxxx LLP, at 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, 00000, or at such other place as the parties may agree. Payments
made pursuant to this Section 1 shall be made in cash, payable by wire transfer
of immediately available funds.
1.11. Upon the exercise of either of the Purchase Options or the B Option,
neither T2 or any affiliate thereof will have any right to recoup any of the
Recoupment or other advance due under the Amended Distribution Agreements (as
defined in the Amended and Restated Partnership Agreement) and such Recoupment
shall automatically and immediately be deemed paid in full.
2. Shares. In consideration of the grant of the Purchase Option, T2 shall
issue to the General Partner and the Class B Limited Partners, pro rata, on the
date first set forth above an aggregate of 125,000 shares of T2 common stock
(the "Common Stock"), $.01 par value per share.
3. Representations and Warranties. The General Partner and each Class B
Limited Partner hereby severally represents and warrants, with respect to itself
or himself, to the Class A Limited Partner and T2 as follows:
3.1. Standing and Capacity.
Such party has the right, power, legal capacity and authority to enter into
this Agreement, the Amended and Restated Partnership Agreement and each of the
other agreements to be executed and delivered by it or him pursuant hereto and
to carry out his or its respective obligations hereunder and thereunder. This
Agreement constitutes, and each agreement to be executed and delivered by such
party pursuant hereto are the valid and binding obligation of such party
enforceable against such party, to the extent it is a party thereto in
accordance with their respective terms.
3.2. Authority.
The execution and delivery by such party of this Agreement, the Amended and
Restated Partnership Agreement and of all of the agreements to be executed and
delivered by it or him pursuant hereto, the performance by it or him of its or
his obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary action on the part of such party.
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3.3. Ownership of the Partnership Interests.
Such party is the record and beneficial owner of the Partnership Interests
issued in such party's name with good and marketable title to such Partnership
Interests, free and clear of any liens, charges, rights, pledges, claims and
encumbrances of any nature whatsoever ("Liens"), other than the Purchase Option,
the B Option granted hereby and as disclosed in Section 8.2 of the Securities
Purchase Agreement (as defined in the Amended and Restated Partnership
Agreement). All such Partnership Interests have been duly authorized and validly
issued and, subject to applicable law, are fully paid and nonassessable. Other
than the Purchase Options and the B Option granted hereby, there are no
outstanding options, warrants, rights, puts, calls, commitments, conversion
rights, plans or other agreements of any character to which such party is a
party or otherwise bound which provide for the acquisition, disposition or
issuance of any issued but not outstanding, outstanding, or authorized and
unissued Partnership Interests.
3.4. Noncontravention.
Neither the execution and delivery by such party of this Agreement, the
Amended and Restated Partnership Agreement or of any other agreement to be
executed and delivered pursuant hereto, nor the consummation of any of the
transactions contemplated hereby or thereby, nor the performance by any such
party of any of its obligations hereunder or thereunder, will (nor with the
giving of notice or the lapse of time or both would) (A) give rise to a default,
or any right of termination, cancellation or acceleration, or otherwise be in
conflict with or result in a loss of contractual benefits to such party under
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other material instrument or obligation to which such
party is a party or by which it may be bound, or require any consent, approval
or notice under the terms of any such document or instrument, or (B) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority which is applicable to the Partnership or such party
except where such violation would not have a material adverse effect on the
Partnership, the General Partner or such party or (C) result in the creation or
imposition of any Liens upon any of the Partnership Interests held by such party
or the Partnership's Assets.
3.5. Information as to the General Partner and Class B Limited Partners.
None of the representations or warranties made in this Agreement or in any
agreement executed and delivered by or on behalf of such party pursuant hereto
are false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein contained not
misleading.
4. Representations and Warranties. Each of T2 and the Class A Limited
Partner represents and warrants to the General Partner and the Class B Limited
Partners as follows:
4.1. Standing and Capacity.
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Such party has the right, power, legal capacity and authority to enter into
this Agreement, the Amended and Restated Partnership Agreement and each of the
other agreements to be executed and delivered by it pursuant hereto and to carry
out its respective obligations hereunder and thereunder. This Agreement
constitutes, and each agreement to be executed and delivered by such party
pursuant hereto are the valid and binding obligation of such party enforceable
against such party, to the extent it is a party thereto in accordance with their
respective terms.
4.2. Authority.
The execution and delivery by such party of this Agreement, the Amended and
Restated Partnership Agreement and of all of the agreements to be executed and
delivered by it pursuant hereto, the performance by it of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
action on the part of such party.
4.3. Noncontravention.
Neither the execution and delivery by T2 or the Class A Limited Partner of
this Agreement, the Amended and Restated Partnership Agreement or of any other
agreement to be executed and delivered pursuant hereto, nor the consummation of
any of the transactions contemplated hereby or thereby, nor the performance by
any such party of any of its obligations hereunder or thereunder, will (nor with
the giving of notice or the lapse of time or both would) (A) give rise to a
default, or any right of termination, cancellation or acceleration, or otherwise
be in conflict with or result in a loss of contractual benefits to such party
under the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other material instrument or obligation to
which such party is a party or by which it may be bound, or require any consent,
approval or notice under the terms of any such document or instrument, or (B)
violate any order, writ, injunction, decree, law, statute, rule or regulation of
any court or governmental authority which is applicable to the Partnership or
such party except where such violation would not have a material adverse effect
on the Partnership, the General Partner or such party.
5. Miscellaneous Provisions.
5.1. Execution in Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which shall be deemed
to be an original but all of which taken together shall constitute one and the
same agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the other
parties hereto.
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5.2. Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered if delivered personally by overnight courier or mailed by express,
registered or certified mail, (postage prepaid, return receipt requested), or by
facsimile transmittal, confirmed by express, certified or registered mail, as
follows:
If to T2 or the
Class A Limited Partner to: Take-Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx
Attn: Xxxx Xxxxx
Copy to: Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
If to the Partnership,
the General Partner or
the Class B Limited Partners: Gathering of Developers I, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Partner
Copy to: Xxxxxxxx & Xxxxxx
0000 Xxxxxxx Xxxxxx, Xxx. 0000
Xxxxxx, Xxxxx 00000
Attn: X. Xxxx Xxxxxx, III, Esq.
or to such other address as any party shall have designated by like notice to
the other parties hereto (except that a notice of change of address shall only
be effective upon receipt).
5.3. Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without regard to its choice
of law principles with a forum and venue of New York County, New York.
5.4. Amendment.
This Agreement may only be amended by a written instrument executed by each
of the parties hereto.
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5.5. Entire Agreement.
This Agreement (together with the other agreements and documents being
delivered pursuant to or in connection with this Agreement) constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter hereof.
5.6. Assignment.
Neither this Agreement nor any rights, interests or obligations hereunder
may be assigned (by operation of law or otherwise) by any party hereto without
the prior written consent of all of the parties hereto.
5.7. Binding Effect; Benefits.
This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective heirs, legal representatives, successors
and permitted assigns. Nothing herein contained, express or implied, is intended
to confer upon any person other than the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
5.8. Waiver, etc.
The failure of any of the parties hereto to at any time enforce any of the
provisions of this Agreement shall not be deemed or construed to be a waiver of
any such provision, nor to in any way affect the validity of this Agreement or
any provision hereof or the right of any of the parties hereto to thereafter
enforce each and every provision of this Agreement. No waiver of any breach of
any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach shall be
construed or deemed to be a waiver of any other or subsequent breach.
5.9. Severability.
Any provision of this Agreement which is held by a court of competent
jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be,
as to such jurisdiction(s), ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
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5.10. Announcements.
Each of the parties shall hereto consult with each other prior to the
issuance of any press release or otherwise divulging the existence of this
Agreement, its contents, or the transactions contemplated hereby, and none of
the parties hereto shall issue any such press release or make any such statement
prior to such consultation, except as may be required by applicable law or the
applicable rules or regulations of NASDAQ or any other stock exchange.
5.11. Announcements.
Capitalized terms used herein shall have the meanings as assigned to such
terms herein and shall not necessarily have the definitions as assigned to such
terms in the Partnership Agreement.
[Signature page to follow.]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
T2 DEVELOPER, INC.
By: /s/ Xxxx Xxxxx
-------------------------------
Xxxx Xxxxx,
Chief Executieve Officer
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Xxxx Xxxxx
-------------------------------
Xxxx Xxxxx,
Chief Executive Officer
GATHERING OF DEVELOPERS I, LTD.
By: Gathering of Developers, Inc.
(a Texas corporation)
its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx,
Chief Executive Officer
GATHERING OF DEVELOPERS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx,
Chief Executive Officer
LIMITED PARTNERS:
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx
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/s/ Xxxxx X. Xxxxxx, XX
-------------------------------------
Xxxxx X. Xxxxxx, XX
/s/ Xxxx Xxxxxx
-------------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxx
-------------------------------------
Xxxxx Xxxx
/s/ X. Xxxx Xxxxxx, III
-------------------------------------
X. Xxxx Xxxxxx, III
/s/ Xxx X. Xxxxx
-------------------------------------
Xxx X. Xxxxx
/s/ Xxxx Xxxxxx
-------------------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxx
-------------------------------------
Xxxx Xxxxx
APOGEE SOFTWARE, LTD./3D REALMS, INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx,
Partner
POPTOP SOFTWARE, INC.
By: /s/ Xxxx Xxxxxxxxxx
----------------------------------
Xxxx Xxxxxxxxxx,
President
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STRATEGIC MARKETING PARTNERS, INC.
By: /s/ X.X. Xxxxxxxxxx
--------------------------------
X.X. Xxxxxxxxxx,
President
RITUAL ENTERTAINMENT, INC.
By: /s/ Xxxx Xxxxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxxxx,
President
TERMINAL REALITY, INC.
By: /s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx,
Vice President
EPIC MEGAGAMES, INC.
By: /s/ Xxxxx Xxxx
--------------------------------
Xxxxx Xxxx,
President
EDGE OF REALITY, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
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