EXHIBIT 10.2
INTERCREDITOR
AND SUBORDINATION AGREEMENT
INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of November 12,
2002, among INFOGRAMES ENTERTAINMENT SA, a company organized under the laws of
the Republic of France ("Parent") and CALIFORNIA US HOLDINGS, INC., a California
corporation ("CUSH") (Parent and CUSH, together with any other holder of the
Subordinated Obligations, from time to time, collectively, the "Subordinated
Noteholder"), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation as
agent (in such capacity, the "Senior Agent") for the lenders from time to time
party to the Senior Credit Agreement referred to below (the "Senior Lenders" and
together with Senior Agent and their respective successors and assigns, the
"Senior Creditors"), and the CREDIT PARTIES SIGNATORY HERETO.
W I T N E S S E T H
WHEREAS, Infogrames, Inc., a Delaware corporation (the "Borrower"),
the other Credit Parties signatory thereto and Senior Creditors have entered
into the Senior Credit Agreement (such terms and all other capitalized terms
used herein without definition have the meanings provided in Section 1 hereof)
pursuant to which Senior Lenders have agreed, among other things, to make the
Senior Loans; and
WHEREAS, Senior Lenders are willing to make the Senior Loans as and
to the extent provided for in the Senior Credit Agreement, but only upon the
condition, among others, that Subordinated Noteholder and the Credit Parties
shall have executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
Section 1. Definitions.
1.1 Senior Credit Agreement Definitions. Unless otherwise defined
herein, terms defined in the Senior Credit Agreement and used herein shall have
the meanings given to them in the Senior Credit Agreement.
1.2 Defined Terms. The following terms shall have the following
respective meanings when used in this Agreement:
"Agreement" shall mean this Intercreditor and Subordination
Agreement.
"Availability" shall mean Borrowing Availability plus any available
amounts in the Overnight Investment Account.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York.
"Credit Parties" shall mean Borrower, Guarantors and each of their
respective subsidiaries and their respective successors and assigns.
"Current Assets" means, with respect to any Person, all current
assets of such Person as of any date of determination calculated in accordance
with GAAP, but excluding cash, cash equivalents and debts (excluding royalties)
due from Affiliates.
"Current Liabilities" means, with respect to any Person, all
liabilities that should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand
or within one year from any date of determination without any option on the part
of the obligor to extend or renew beyond such year, all accruals for federal or
other taxes based on or measured by income and payable within such year, but
excluding the current portion of long-term debt required to be paid within one
year and the aggregate outstanding principal balances of the Revolving Loan and
the Swing Line Loan and the Subordinated Notes.
"CUSH" has the meaning assigned to it in the preamble hereto.
"Distribution Agreement" shall mean the Distribution Agreement dated
as of October 2, 2000 between Borrower (as successor in interest to GT
Interactive Software Corp.) and the Parent and Infogrames Europe SA, as
supplemented by that certain side letter among Parent, Borrower and Interactive
dated as of November __, 2002.
"exercise of remedies" shall mean any of the following with respect
to the Subordinated Obligations: (i) the taking of actions to collect or enforce
all or any part of the Subordinated Obligations or any claims in respect thereof
against any Credit Party or any of its property or assets, including any Shared
Collateral, (ii) the application of any property or assets of any Credit Party,
including any Shared Collateral, to the Subordinated Obligations (except
payments specifically permitted under Section 3 hereof) or the repossession of,
foreclosure on, or the exercise of any other remedy (judicially or
nonjudicially) with respect to any Credit Party or any of its property or
assets, including any Shared Collateral; (iii) the taking of control or
possession of, or the exercise of any right of setoff with respect to, any
property or assets of any Credit Party, including any Shared Collateral, or the
sale or other disposition of any interest in such property or assets; (iv) the
taking of any action to interfere with any rights in respect of such property or
assets of Senior Creditors or their ability to realize upon or otherwise deal
with such property or assets; or (v) the commencement or maintenance of any
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action, suit or other proceeding at law, in equity or otherwise in furtherance
of any of the foregoing or to otherwise enforce rights against any Credit Party
or any of its property or assets, including any Shared Collateral, or to direct
the owner of such property or assets to sell or otherwise dispose of any
interest therein. To "exercise remedies" shall mean to take or institute the
taking of any exercise of remedies.
"Excess Cash Flow" means, without duplication, with respect to any
four Fiscal Quarter period of Borrower and the Guarantors, combined net income
plus (a) depreciation, amortization and Interest Expense to the extent deducted
in determining combined net income, plus decreases or minus increases (as the
case may be) (b) in Working Capital, minus (c) Capital Expenditures (excluding
the financed portion thereof), minus (d) Interest Expense paid or accrued
(excluding any original issue discount, interest paid in kind or amortized debt
discount, to the extent included in determining Interest Expense) and principal
payments paid or payable in respect of Funded Debt (excluding principal payments
in respect of the Subordinated Obligations pursuant to clauses (iii), (iv) and
(v) of Section 3.1 hereof), plus or minus (as the case may be) (e) extraordinary
gains or losses which are cash items not included in the calculation of net
income, plus (g) taxes deducted in determining combined net income to the extent
not paid for in cash. For purposes of this definition, "Working Capital" means
Current Assets minus Current Liabilities.
"Insolvency Event" shall mean (A) any Credit Party commencing any
case, proceeding or other action (1) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (2) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or any Credit Party making a general assignment for the benefit of its
creditors; or (B) there being commenced against any Credit Party any case,
proceeding or other action of a nature referred to in clause (A) above which (1)
results in the entry of an order for relief or any such adjudication or
appointment or (2) remains undismissed, undischarged or unbonded for a period of
30 days; or (C) there being commenced against any Credit Party any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 30 days from the entry thereof; or (D) any Credit Party generally not
paying, or being unable to pay, or admitting in writing its inability to pay,
its debts as they become due.
"Guarantors" shall mean Interactive, Atari, Paradigm and Shiny, and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of
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Senior Creditors, in connection with the transactions contemplated by the Senior
Loan Documents, and their respective successors and assigns.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance,
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Maximum Excess Cash Flow Amount" shall mean, with respect to any
period of determination, the sum of fifty percent (50%) of that portion (if any)
of Excess Cash Flow that is less than or equal to $50,000,000, plus,
seventy-five percent (75%) of that portion of (if any) Excess Cash Flow that is
greater than $50,000,000, but less than or equal to $75,000,000, plus one
hundred percent (100%) of that portion (if any) of Excess Cash Flow that is
greater than $75,000,000.
"Minimum Availability Requirement" shall mean, with respect to any
proposed payments under Section 3.1(iii) or Section 3.1(v), satisfaction of each
of the following conditions: (i) Availability at any time during the ninety-day
period immediately preceding the date of such payment shall not be less than
$30,000,000 for any three consecutive days, (ii) on the date of such payment and
after giving effect thereto, Availability shall not be less than $30,000,000,
and (iii) Availability at any time during the four-month period immediately
succeeding the date of such payment shall be projected to be no less than
$30,000,000, as set forth in projections prepared by Borrower and reasonably
acceptable to Senior Agent.
"Ordinary Course Intercompany Obligations" shall mean all of the
following payments required to be made by Borrower or any other Credit Party to
Parent or any of its Subsidiaries in the ordinary course of its business and
without acceleration of the due date thereof or prepayment, and which are upon
fair and reasonable terms that are no less favorable to such Credit Party than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate of such Credit Party (but excluding any payments pursuant to the
Subordinated Note Documents other than royalty payments under the Distribution
Agreement): (i) royalty payments under the Distribution Agreement, (ii)
management fees to the Parent in an amount not to exceed $3,180,000 in the
aggregate in any Fiscal Year, which for any Fiscal Year ending on or after June
30, 2004 can be increased by not more than 5% per year from the amount paid
during the prior Fiscal Year, (iii) payments to the Parent to reimburse Parent
for its reimbursement obligations in respect of drawings under any Parent Letter
of Credit applied to the payment of ordinary course trade payables of Borrower
or any other Credit Party, (iv) research and development expenses for products
to be published, distributed, sold or licensed exclusively by Borrower or any
other Credit Party, and (v) payments for products and services rendered by
Parent or any of its Subsidiaries exclusively to Borrower or any other Credit
Party or by third parties contracted by Parent or any of its Subsidiaries for
the exclusive benefit of Borrower or any other Credit Party including
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fees to financial advisors for services rendered in connection with the
transactions contemplated by the Credit Agreement and consented to by Agent.
"Parent" has the meaning assigned to it in the preamble hereto.
"Parent Letters of Credit" shall mean those letters of credit listed
on Disclosure Schedule 3.25 to the Senior Credit Agreement and any other letters
of credit issued for the account of Parent to third parties for the payment of
ordinary course trade payables of the Borrower or any other Credit Party.
"Payment or Distribution" shall mean any direct or indirect payment
or distribution of assets of any kind or character, whether in cash, property or
securities, by setoff or otherwise, on or with respect to the Subordinated
Obligations, including any principal of or interest on the Subordinated
Obligations.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Refinancing Senior Lenders" has the meaning specified in Section
8.13 hereof.
"Secured Creditors" shall mean the Senior Creditors and the
Subordinated Noteholder, collectively.
"Senior Agent" shall have the meaning provided in the first
paragraph hereof and shall be deemed to include any agent or trustee for the
Refinancing Senior Lenders or any other Person providing replacement or
refinancing indebtedness for the then outstanding Senior Obligations.
"Senior Credit Agreement" shall mean the Credit Agreement dated as
of the date hereof by and among Borrower, the other Credit Parties signatory
thereto and Senior Creditors, as such agreement may be amended, modified or
supplemented from time to time, including amendments, modifications, supplements
and restatements thereof giving effect to increases, renewals, extensions,
refundings, deferrals, restructurings, replacements or refinancings of, or
additions to, the arrangements provided in such agreement (whether provided by
the original Senior Lenders under such agreement, by successors or assigns or by
Refinancing Senior Lenders).
"Senior Creditors" shall have the meaning specified in the first
paragraph hereof.
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"Senior Lenders" shall have the meaning provided in the first
paragraph hereof and shall be deemed to include any Refinancing Senior Lenders
or any other Person providing replacement or refinancing indebtedness for the
then outstanding Senior Obligations.
"Senior Loan Documents" shall mean the collective reference to the
Senior Credit Agreement, the Senior Notes, the other Loan Documents and all
other documents that from time to time evidence the Senior Obligations or secure
or support payment or performance thereof.
"Senior Loans" shall mean the Loans and other extensions of credit,
including letters of credit, made or issued by Senior Lenders to or for the
account of Borrower or any other Credit Party pursuant to the Senior Credit
Agreement.
"Senior Notes" shall mean the promissory note or notes of the Credit
Parties outstanding from time to time under the Senior Credit Agreement
evidencing the Senior Obligations.
"Senior Obligations" shall mean the collective reference to the
unpaid principal of and interest on the Senior Loans and all other Obligations
of Borrower or any other Credit Party to Senior Lenders (including interest
accruing at the then applicable rate provided in the Senior Credit Agreement
after the maturity of the Senior Loans and interest accruing at the then
applicable rate provided in the Senior Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Credit Party, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the Senior Loan Documents or any other document made,
delivered or given in connection herewith or therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including all fees and disbursements of counsel to
Senior Lenders that are required to be paid by any Credit Party pursuant to the
terms of this Agreement or any Senior Loan Document).
"Shared Collateral" shall mean all assets and properties of Borrower
and Shiny (other than real property), and all proceeds thereof, in which the
Senior Creditors have a first priority perfected security interest to secure the
Senior Obligations.
"Shiny Notes" means that indebtedness represented by or described in
the term sheet between Parent and Borrower dated April 22, 2002.
"Subordinated Convertible Notes" shall mean (i) the Convertible
Subordinated Note dated December 28, 2001 issued by Borrower to the Parent in
the original principal amount of $40,812,000, (ii) the Convertible Subordinated
Note dated December 28, 2001 issued by Borrower to the Parent in the original
principal amount of
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$9,188,000, and (iii) the Convertible Subordinated Note dated December 16, 1999
issued by Borrower (as successor in interest to GT Interactive Software Corp.)
to CUSH in the original principal amount of $60,587,206.72.
"Subordinated Credit Agreement" shall mean the Credit Agreement
dated as of September 11, 1998 between Borrower (as successor in interest to GT
Interactive Software Corp.) and the Parent, as administrative agent and lender,
as successor to First Union National Bank, as agent, and the lenders party
thereto, pursuant to a Master Assignment and Acceptance dated as of February 15,
2000 among GT Interactive Software Corp., First Union National Bank, as agent,
issuing lender and existing lender and the lenders party thereto as assignors,
as amended.
"Subordinated Intercompany Loan" means any loan from Subordinated
Noteholder to any Credit Party (other than any Indebtedness represented by the
Subordinated Convertible Notes and the Subordinated Secured Notes.)
"Subordinated Intercompany Note" means any note issued to evidence a
Subordinated Intercompany Loan.
"Subordinated Notes" shall mean the Subordinated Convertible Notes,
the Subordinated Secured Notes and the Subordinated Intercompany Notes.
"Subordinated Note Documents" shall mean the collective reference to the
Subordinated Credit Agreement, the Subordinated Notes, the Distribution
Agreement and any other documents or instruments, if any, that from time to time
evidence the Subordinated Obligations or any other Indebtedness or other
obligations or liabilities of any Credit Party to Subordinated Noteholder or
secure or support payment or performance thereof.
"Subordinated Noteholder" shall have the meaning provided in the
first paragraph hereof.
"Subordinated Obligations" shall mean, collectively, the unpaid
principal of and interest on the Subordinated Notes (including interest accruing
at the then applicable rate provided in the Subordinated Notes after the
maturity of the indebtedness evidenced thereby and interest accruing at the then
applicable rate provided in the Subordinated Notes after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Credit Party, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), and all
other obligations, liabilities and Indebtedness of Borrower and any other Credit
Party to Subordinated Noteholder or any Subsidiary thereof whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, the Subordinated Credit Agreement, the Subordinated Notes, the
Distribution Agreement or any other Subordinated Note Document or otherwise, in
each case whether on account of
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principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses, trade payables, royalty payments (including any royalty or other
payments under the Distribution Agreement), management fees or otherwise
(including all fees and disbursements of counsel to Subordinated Noteholder that
are required to be paid by any Credit Party pursuant to the terms of this
Agreement, the Subordinated Credit Agreement, the Subordinated Notes, the
Distribution Agreement or any other Subordinated Loan Document).
"Subordinated Secured Notes" shall mean the following promissory
notes issued pursuant to the Subordinated Credit Agreement (i) the note dated
April __, 2002 issued by Borrower to the Subordinated Noteholder in the original
principal amount of $50,000,000, and (ii) the Shiny Notes.
"Termination Date" means the date on which (a) the Senior Loans have
been indefeasibly repaid in full, (b) all other Senior Obligations under the
Senior Credit Agreement and the other Senior Loan Documents have been completely
discharged, (c) all Letter of Credit Obligations under the Senior Credit
Agreement have been cash collateralized, cancelled or backed by standby letters
of credit in accordance with the Senior Credit Agreement, and (d) Borrower shall
not have any further right to borrow any monies under the Senior Credit
Agreement.
1.3 Miscellaneous Terms of Construction. The words "hereof, "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement, and section and paragraph references are to this
Agreement unless otherwise specified. For purposes of this Agreement, the
following additional rules of construction shall apply: (a) wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter; (b) the term "including" shall not be limiting or exclusive,
unless specifically indicated to the contrary; (c) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (d) all references to any instruments or
agreements, including references to any of this Agreement, the Subordinated Note
Documents and the Senior Loan Documents, shall include any and all
modifications, supplements or amendments thereto and any and all extensions or
renewals thereof, in each case, made in accordance with the terms hereof.
1.4 Payment in Full. The expressions "prior payment in full,"
"payment in full," "paid in full" and any other similar terms or phrases when
used herein with respect to the Senior Obligations shall mean the indefeasible
payment in full, in immediately available funds, of all of the Senior
Obligations and termination or expiration of any commitments to extend any
financial accommodations to any Credit Party under the Senior Loan Documents.
Section 2. Subordination.
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2.1 Subordinated Obligations Subordinated to Senior Obligations.
Each of the Credit Parties and Subordinated Noteholder agrees, for itself and
each future holder of the Subordinated Obligations, that the payment of the
Subordinated Obligations are and shall be subordinate and subject, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all
Senior Obligations.
2.2 Insolvency Events. Upon any payment or distribution or other
transfer of assets of any Credit Party to creditors upon or in connection with
any Insolvency Event:
(a) all Senior Obligations shall be paid in full before any Payment
or Distribution is made or received by Subordinated Noteholder and no part of
the Subordinated Obligations shall have any claim to the assets of any Credit
Party on a parity with or prior to the claim of the Senior Obligations; and
(b) any Payment or Distribution to which Subordinated Noteholder
would be entitled except for the provisions hereof, shall be paid or delivered
by the Credit Parties, or any receiver, trustee in bankruptcy, liquidating
trustee, disbursing agent or other Person making such Payment or Distribution,
directly to Senior Agent to the extent necessary to pay in full all Senior
Obligations, before any Payment or Distribution shall be made to Subordinated
Noteholder.
2.3 Return of Prohibited Payments. If any Payment or Distribution
shall be collected or received by Subordinated Noteholder, except payments
permitted to be made at the time of payment as provided in Section 3 hereof,
Subordinated Noteholder forthwith shall deliver the same to Senior Agent, in the
form received, duly indorsed to Senior Agent, if required, to be applied in
accordance with the Senior Loan Documents to the payment or prepayment of the
Senior Obligations until the Senior Obligations are paid in full. Until so
delivered, such Payment or Distribution shall be held in trust by Subordinated
Noteholder as the property of Senior Creditors, segregated from other funds and
property held by Subordinated Noteholder.
Section 3. Limitations on Payments and Distributions on Subordinated
Indebtedness.
3.1 Payments; Remedies. Without the express prior written consent of
Senior Agent, Subordinated Noteholder will not take, demand or receive from any
Credit Party, and no Credit Party will make, give or permit, any Payment or
Distribution, or exercise remedies against any Credit Party or any of its assets
or property; provided, however, that Credit Parties may make, and Subordinated
Noteholder may receive:
(i) payments in respect of Ordinary Course Intercompany Obligations
made in the ordinary course of business and without acceleration of the due date
thereof or prepayment;
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(ii) scheduled quarterly interest payments when due under the
Subordinated Secured Notes and the Subordinated Convertible Notes to the extent
set forth on Schedule 2 hereto, provided, that (a) no Default or Event of
Default shall have occurred and be continuing or would result after giving
effect to any such payment, (b) at any time during the thirty-day period
immediately preceding the date of such payment, Availability shall not be less
than $8,000,000 for any five consecutive days, (c) on the date of such payment
and after giving effect thereto Availability shall not be less than $8,000,000,
(d) Availability at any time during the thirty-day period immediately succeeding
the date of such payment shall be projected to be no less than $8,000,000, as
set forth in projections prepared by Borrower and reasonably acceptable to
Senior Agent, and (e) at least 10 Business Days prior to the date of such
payment, Senior Agent shall have received a certificate signed by Borrower's
chief financial officer certifying compliance with the foregoing conditions and
the manner in which such payment has been calculated, including projections
required under the foregoing clause (d), which certificate shall be in form and
substance reasonably satisfactory to Senior Agent;
(iii) scheduled principal payments when due under the Shiny Notes to
the extent set forth on Schedule 2 hereto, provided, that either
(1) if the Minimum Availability Requirement is not satisfied as of
the date of the proposed payment, then (a) the amount of such
payment does not exceed the Maximum Excess Cash Flow Amount for the
immediately preceding four Fiscal Quarters less the amount of any
payments made under clauses (iii), (iv) or (v) of this Section 3.1
for the immediately preceding four Fiscal Quarters or being
simultaneously made under clauses (iv) or (v) of this Section 3.1,
(b) no Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any such payment,
(c) at any time during the thirty-day period immediately preceding
the date of such payment, Availability shall not be less than
$20,000,000 for any five consecutive days, (d) on the date of such
payment and after giving effect thereto Availability shall not be
less than $20,000,000, (e) Availability at any time during the
three-month period immediately succeeding the date of such payment
shall be projected to be no less than $20,000,000, as set forth in
projections prepared by Borrower and reasonably acceptable to Senior
Agent, (f) Borrower and Guarantors shall have on a combined basis at
the end of the most recent Fiscal Quarter, a Fixed Charge Coverage
Ratio for the 12-month period then ended of not less than 1.5:1.00,
calculated on a pro forma basis as if such payment were made during
such period, and (g) at least 10 Business Days prior to the date of
such payment, Senior Agent shall have received a certificate signed
by Borrower's chief financial officer certifying compliance with the
foregoing conditions and the manner in which such payment has been
calculated, including projections required under the foregoing
clause (e) and a calculation of the applicable
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Fixed Charge Coverage Ratio and a calculation of Excess Cash Flow,
which certificate shall be in form and substance reasonably
satisfactory to Senior Agent; or
(2) if the Minimum Availability Requirement is satisfied as of the
date of the proposed payment, then (a) no Default or Event of
Default shall have occurred and be continuing or would result after
giving effect to any such payment (including any breach of any
Financial Covenant set forth in Annex G to the Senior Credit
Agreement that would have resulted if such payment had been made
during the previous Fiscal Quarter), and (b) at least 10 Business
Days prior to the date of such payment, Senior Agent shall have
received a certificate signed by Borrower's chief financial officer
certifying compliance with the foregoing conditions and the manner
in which such payment has been calculated, which certificate shall
be in form and substance reasonably satisfactory to Senior Agent;
(iv) at all times prior to June 30, 2003, other payments in respect
of the Subordinated Obligations (in addition to those payments permitted under
the foregoing clauses (i), (ii) and (iii)), quarterly, on a date that is not
prior to ten Business Days after, nor later than 15 Business Days after, the
date on which the Financial Statements for the immediately preceding Fiscal
Quarter are delivered to the Senior Lenders in accordance with Annex E of the
Senior Credit Agreement, in an amount not to exceed the Maximum Excess Cash Flow
Amount for the immediately preceding four Fiscal Quarters, less the amount of
any payments made under clauses (iii), (iv) or (v) of this Section 3.1 for the
immediately preceding four Fiscal Quarters or being simultaneously made under
clauses (iii) and (v) of this Section 3.1, provided that (a) no Default or Event
of Default shall have occurred and be continuing or would result after giving
effect to any such payment, (b) at any time during the three-month period
immediately preceding the date of such payment, Availability shall not be less
than $30,000,000 for any three consecutive days, (c) on the date of such payment
and after giving effect thereto Availability shall not be less than $30,000,000,
(d) Availability at any time during the four-month period immediately succeeding
the date of such payment shall be projected to be no less than $30,000,000, as
set forth in projections prepared by Borrower and reasonably acceptable to
Senior Agent, (e) Borrower and Guarantors shall have on a combined basis at the
end of such Fiscal Quarter, a Fixed Charge Coverage Ratio for the 12-month
period then ended of not less than 1.75:1.00, calculated on a pro forma basis as
if such payment were made during such period, and (f) at least 10 Business Days
prior to the date of such payment, Senior Agent shall have received a
certificate signed by Borrower's chief financial officer certifying compliance
with the foregoing conditions and the manner in which such payment has been
calculated, including projections required under the foregoing clause (d),
calculation of the applicable Fixed Charge Coverage Ratio and a calculation of
Excess Cash Flow, which certificate shall be in form and substance reasonably
satisfactory to Senior Agent; and
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(v) other payments in respect of the Subordinated Obligations (in
addition to those payments permitted under the foregoing clauses (i), (ii) (iii)
and (iv)), quarterly (except as provided in clause (1) below), on a date that is
not prior to ten Business Days after, nor later than 15 Business Days after, the
date on which the Financial Statements for the immediately preceding Fiscal
Quarter are delivered to the Senior Lenders in accordance with Annex E of the
Senior Credit Agreement, provided, that either
(1) in the case of any payment made on June 30, 2003, then (a) the
amount of such payment does not exceed the Maximum Excess Cash Flow
Amount for the twelve month period ending May 31, 2003 less the
amount of any payments made under clauses (iii), (iv) or (v) of this
Section 3.1 for the twelve month period ending May 31, 2003, or
being simultaneously made under clauses (iii) or (iv) of this
Section 3.1, (b) no Default or Event of Default shall have occurred
and be continuing or would result after giving effect to any such
payment, (c) at any time during the thirty-day period immediately
preceding the date of such payment, Availability shall not be less
than $20,000,000 for any five consecutive days, (d) on the date of
such payment and after giving effect thereto Availability shall not
be less than $20,000,000, (e) Availability at any time during the
three-month period immediately succeeding the date of such payment
shall be projected to be no less than $20,000,000, as set forth in
projections prepared by Borrower and reasonably acceptable to Senior
Agent, (f) Borrower and Guarantors shall have on a combined basis, a
Fixed Charge Coverage Ratio for the 12-month period ending May 31,
2003 of not less than 1.75:1.00, calculated on a pro forma basis as
if such payment were made during such period, and (g) at least 10
Business Days prior to the date of such payment, Senior Agent shall
have received a certificate signed by Borrower's chief financial
officer certifying compliance with the foregoing conditions and the
manner in which such payment has been calculated, including
projections required under the foregoing clause (e), calculation of
the applicable Fixed Charge Coverage Ratio and a calculation of
Excess Cash Flow, which certificate shall be in form and substance
reasonably satisfactory to Senior Agent; or
(2) in the case of any payment made after June 30, 2003, on a date
on which the Minimum Availability Requirement is not satisfied, then
(a) the amount of such payment does not exceed the Maximum Excess
Cash Flow Amount for the immediately preceding four Fiscal Quarters
less the amount of any payments made under clauses (iii), (iv) or
(v) of this Section 3.1 for the immediately preceding four Fiscal
Quarters or being simultaneously made under clauses (iii) or (iv) of
this Section 3.1, (b) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to
any such payment, (c) at any time
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during the thirty-day period immediately preceding the date of such
payment, Availability shall not be less than $20,000,000 for any
five consecutive days, (d) on the date of such payment and after
giving effect thereto Availability shall not be less than
$20,000,000, (e) Availability at any time during the three-month
period immediately succeeding the date of such payment shall be
projected to be no less than $20,000,000, as set forth in
projections prepared by Borrower and reasonably acceptable to Senior
Agent, (f) Borrower and Guarantors shall have on a combined basis at
the end of such Fiscal Quarter, a Fixed Charge Coverage Ratio for
the 12-month period then ended of not less than 1.75:1.00,
calculated on a pro forma basis as if such payment were made during
such period, and (g) at least 10 Business Days prior to the date of
such payment, Senior Agent shall have received a certificate signed
by Borrower's chief financial officer certifying compliance with the
foregoing conditions and the manner in which such payment has been
calculated, including projections required under the foregoing
clause (e), calculation of the applicable Fixed Charge Coverage
Ratio and a calculation of Excess Cash Flow, which certificate shall
be in form and substance reasonably satisfactory to Senior Agent; or
(3) in the case of any payment made after June 30, 2003 on a date on
which the Minimum Availability Requirement is satisfied, then (a) no
Default or Event of Default shall have occurred and be continuing or
would result after giving effect to any such payment (including any
breach of any Financial Covenant set forth in Annex G to the Senior
Credit Agreement that would have resulted if such payment had been
made during the previous Fiscal Quarter), and (b) at least 10
Business Days prior to the date of such payment, Senior Agent shall
have received a certificate signed by Borrower's chief financial
officer certifying compliance with the foregoing conditions and the
manner in which such payment has been calculated, which certificate
shall be in form and substance reasonably satisfactory to Senior
Agent.
3.2 Acceleration of Senior Obligations and Subordinated Obligations.
Notwithstanding any other provision of this Agreement, following an acceleration
of the maturity of the Senior Obligations and as long as such acceleration shall
continue unrescinded, all Senior Obligations shall first be paid in full in cash
before any Payment or Distribution is made on account of or applied on the
Subordinated Obligations. No acceleration (other than automatic acceleration
upon the occurrence of an Insolvency Event with respect to any Credit Party) of
the maturity of the Subordinated Notes will be effective until ten Business Days
following notice by Subordinated Noteholder to Senior Agent of such
acceleration.
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3.3 Prepayments. Without the express prior written consent of Senior
Agent, Subordinated Noteholder will not take, demand or receive from any Credit
Party, and no Credit Party will make, give or permit, any prepayment (whether
optional, voluntary, mandatory or otherwise) or other payment (in each case,
whether by redemption, defeasance or other Payment or Distribution), of any
Subordinated Obligation of any kind prior to the scheduled maturity date thereof
or prior to the date on which such payment is required to be made under the
terms of the Subordinated Note Documents, except as otherwise permitted under
clause (iv) of Section 3.1 hereof.
3.4 Provisions of Section 2 Control. The provisions of this Section
3 shall not be applicable in any case in which the provisions of Section 2
hereof are applicable.
Section 4. Security Interests; Priorities.
4.1 Priorities. Each Secured Creditor hereby acknowledges that the
other Secured Creditor has been granted a Lien upon the Shared Collateral to
secure their respective Obligations. The Liens of Senior Agent on the Shared
Collateral, to the extent that such Liens secure the Senior Obligations, have
and shall be senior and prior in right to the Liens of the Subordinated
Noteholders on the Shared Collateral, and such Liens of the Subordinated
Noteholders on the Shared Collateral are and shall be junior and subordinate to
the Liens of Senior Agent, to the extent that such Liens secure the Senior
Obligations. The priorities of the Liens provided in this Section shall not be
altered or otherwise affected by any amendment, modification, supplement,
extension, renewal, restatement, replacement or refinancing of any of the
Obligations. The priorities set forth in this Section are applicable
irrespective of the order or time of attachment, or the order, time or manner of
perfection, or the order or time of filing or recordation of any document or
instrument, or other method of perfecting a Lien in favor of each Secured
Creditor in any Shared Collateral, and notwithstanding any conflicting terms or
conditions which may be contained in any of the Senior Loan Documents or the
Subordinated Note Documents. Each Subordinated Noteholder acknowledges and
agrees that the Senior Creditors have relied upon the lien priority and other
provisions hereof in entering into the Senior Loan Documents and in making funds
available to Borrower thereunder.
4.2 Perfection. Each Secured Creditor shall be solely responsible
for perfecting and maintaining the perfection of its Lien in and to each item
constituting the Shared Collateral in which such Secured Creditor has been
granted a Lien. The foregoing provisions of this Section 4.2 are intended solely
to govern the respective Lien priorities as between the Secured Creditors and
shall not impose on any Secured Creditor any obligations in respect of the
disposition of proceeds of any Shared Collateral that would conflict with prior
perfected claims therein in favor of any other Person or any order or decree of
any court or governmental authority or any applicable law.
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4.3 Proceeds of Shared Collateral. All proceeds of the Shared
Collateral received by the Subordinated Noteholder shall be forthwith paid over,
in the funds and currency received, to Senior Agent for application to the
Senior Obligations (except as otherwise required by law or court order). All
proceeds of the Shared Collateral received by any Senior Creditor after the
Termination Date shall be forthwith paid over, in the funds and currency
received, to the Subordinated Noteholder for application to the Subordinated
Note Obligations (unless otherwise required by law or court order).
4.4 Management of Shared Collateral. Subject to the other terms and
conditions of this Section 4.4, the Senior Creditors shall have the exclusive
right to manage, perform and enforce the terms of the Senior Loan Documents with
respect to the Shared Collateral, to exercise and enforce all privileges and
rights thereunder according to their discretion and the exercise of their sole
business judgment, including the exclusive right to take or retake control or
possession of the Shared Collateral and to hold, prepare for sale, process,
sell, lease, dispose of, or liquidate the Shared Collateral and to incur
expenses in connection with such sale or disposition and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code of any
applicable jurisdiction. In conducting any public or private sale under the
Uniform Commercial Code, Senior Agent shall give the Subordinated Noteholder
such notice of such sale as may be required by the applicable Uniform Commercial
Code; provided, however, that 10 days' notice shall be deemed to be commercially
reasonable notice. Until the Termination Date, the Subordinated Noteholder may
not exercise remedies against any of the Shared Collateral except for the filing
of proofs of claim in connection with an Insolvency Event.
4.5 Release of Collateral. The Subordinated Noteholder shall at any
time in connection with any sale, transfer or disposition of the Shared
Collateral permitted by the Senior Creditors or any sale, transfer or other
disposition of any of the Shared Collateral by the Senior Creditors: (i) upon
the request of Senior Agent with respect to the Shared Collateral subject to
such sale, transfer or other disposition, release or otherwise terminate its
Liens on such Shared Collateral; (ii) deliver such terminations of financing
statements, partial lien releases, mortgage satisfactions and discharges,
endorsements, assignments or other instruments of transfer, termination or
release (collectively, "Release Documents") and take such further actions as
Senior Agent shall require in order to release and/or terminate the Subordinated
Noteholder's Liens on any Shared Collateral subject to such sale, transfer or
other disposition. The Subordinated Noteholder shall be deemed to have consented
to any such sale, transfer or other disposition.
4.6 Power of Attorney. The Subordinated Noteholder hereby
irrevocably constitutes and appoints Senior Agent and any officer of Senior
Agent, with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the
Subordinated Noteholder and in the
15
name of such Subordinated Noteholder or in Senior Agent's own name, from time to
time in Senior Agent's discretion, for the purpose of carrying out the terms of
Sections 4.4 and 4.5 hereof, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of such Sections, including any Release
Documents, and, in addition, to take any and all other appropriate and
commercially reasonable action for the purpose of carrying out the terms of such
Sections. The Subordinated Noteholder hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of attorney granted
in this Section 4.6. No Person to whom this power of attorney is presented, as
authority for Senior Agent to take any action or actions contemplated hereby,
shall be required to inquire into or seek confirmation from the Subordinated
Noteholder as to the authority of Senior Agent to take any action described
herein, or as to the existence of or fulfillment of any condition to this power
of attorney, which is intended to grant to Senior Agent unconditionally the
authority to take and perform the actions contemplated herein. The Subordinated
Noteholder irrevocably waives any right to commence any suit or action, in law
or equity, against any Person which acts in reliance upon or acknowledges the
authority granted under this power of attorney.
4.7 Waiver of Marshalling and Similar Rights. The Subordinated
Noteholder, to the fullest extent permitted by applicable law, waives any
requirement regarding, and agrees not to demand, request, plead or otherwise
claim the benefit of, any marshalling, appraisement, valuation or other similar
right that may otherwise be available under applicable law. The Subordinated
Noteholder waives any and all notice of the creation, renewal, extension of
accrual of any of the Obligations under the Senior Loan Documents and notice of
or proof of reliance by the Senior Creditors upon this Agreement and protest,
demand for payment or notice except to the extent otherwise specified herein.
The Subordinated Noteholder acknowledges and agrees that the Senior Creditors
have relied upon the lien priority and other provisions hereof in entering into
the Senior Loan Documents and in making funds available to the Borrower
thereunder.
4.8 Notice of Interest In Collateral. This Agreement is intended, in
part, to constitute an authenticated notification of a claim by Senior Agent to
the Subordinated Noteholder of an interest in the Collateral in accordance with
the provisions of Sections 9-611 and 9-621 of the Uniform Commercial Code.
Section 5. Consent; Waivers; Other Matters.
5.1 Consent to Amendments, etc. Subordinated Noteholder consents
that, without the necessity of any reservation of rights against it, and without
notice to or further assent by Subordinated Noteholder:
(a) any demand for payment of any Senior Obligations made by Senior
Creditors may be rescinded in whole or in part by Senior Creditors, and the
Senior Obligations, or the liability of any Credit Party or any other party upon
or for any part thereof, or any collateral security, including any Shared
Collateral, or guarantee therefor
16
or right of offset with respect thereto, or any obligation or liability of
any Credit Party or any other party under the Senior Loan Documents or any
other agreement, may, from time to time, in whole or in part, be
increased, continued, renewed, extended, modified, accelerated,
compromised, waived, surrendered, or released by Senior Creditors; and
(b) any Senior Loan Document may be amended, modified, supplemented,
terminated or waived, in whole or in part, as Senior Creditors may deem
advisable from time to time, and any collateral security, including any Shared
Collateral, at any time held by Senior Creditors for the payment of any of the
Senior Obligations may be sold, exchanged, waived, surrendered or released, in
each case all without notice to or further assent by Subordinated Noteholder,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination and other provisions hereof.
5.2 Reliance by Senior Creditors. Subordinated Noteholder
acknowledges and agrees that Senior Creditors have relied upon the subordination
and other provisions hereof in entering into the Senior Loan Documents and in
making Senior Loans available to the Credit Parties thereunder. Subordinated
Noteholder waives any and all notice of the creation, renewal, increase,
extension or accrual of any of the Senior Obligations and notice of or proof of
reliance by Senior Creditors upon this Agreement. The Senior Obligations, and
any of them, shall be deemed conclusively to have been created, contracted or
incurred in reliance upon this Agreement, and all dealings between the Credit
Parties and Senior Creditors shall be deemed to have been consummated in
reliance upon this Agreement.
5.3 No Representation by Senior Creditors. Except as provided in
Section 6.2 hereof, Senior Creditors have not made and do not hereby or
otherwise make to Subordinated Noteholder, any representations or warranties,
express, or implied, nor do Senior Creditors assume any liability to
Subordinated Noteholder with respect to: (a) the financial or other condition of
the Credit Parties or any other obligors under any instruments of guarantee, if
any, with respect to the Senior Obligations, (b) the enforceability, validity,
value or collectibility of the Senior Obligations or the Subordinated
Obligations, any collateral therefor, or any guarantee or security which may
have been granted in connection with any of the Senior Obligations or the
Subordinated Obligations or the validity, priority or perfections of any Liens,
or (c) any Credit Party's title or right to any property or assets or to
transfer any collateral or security.
5.4 No Waiver of Subordination Provisions. No right of any Senior
Creditor to enforce the subordination provisions of this Agreement shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Credit Party or by any act or failure to act by any Senior Creditor,
or by an noncompliance by any Person with the terms, provisions and covenants of
this Agreement or any of the Senior Loan Documents, regardless of any knowledge
thereof which any Senior Creditor may have or be otherwise charged with.
17
5.5 Waivers. Subordinated Noteholder hereby agrees that (i) Senior
Creditors may exercise remedies against all or part of any collateral, including
any Shared Collateral, it holds as security for the Senior Obligations in such
order as Senior Creditors, in their sole discretion, elect and (ii) any proceeds
of such collateral received by Senior Creditors may be applied, reversed, and
reapplied, in whole or in part, to any of the Senior Obligations, as Senior
Creditors, in their sole discretion, deem appropriate. Subordinated Noteholder
agrees not to assert and hereby waives, to the fullest extent permitted by law,
any right to demand, request, plead or otherwise assert or otherwise claim the
benefit of, any marshaling, appraisement, valuation or other similar right of a
creditor that may otherwise be available under applicable law or any right to
receive notice of Senior Creditors' intended disposition of such collateral (or
a portion thereof) or of Senior Creditors' proposed retention of such collateral
in satisfaction of the Senior Obligations (or a portion thereof). Neither Senior
Creditors nor any of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon any of such
collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any such collateral upon the request of any Credit Party
or Subordinated Noteholder or any other Person or to take any other action
whatsoever with regard to any such collateral or any part thereof. To the
maximum extent permitted by law, Subordinated Noteholder hereby waives, releases
and discharges any and all rights, claims, causes of action, liabilities, claims
and demands, in law or equity, which Subordinated Noteholder has had, now has,
or may in the future have, against Senior Creditors with respect to, or arising
out of, any action or failure to act or any error of judgment, negligence, or
mistake or oversight whatsoever on the part of Senior Creditors or their
directors, officers, employees or agents with respect to any exercise of rights
or remedies or other action or failure to act under or in connection with the
Senior Loan Documents or any other documents or in an effort to collect in
respect of the Senior Obligations.
5.6 Amendments to Subordinated Loan Documents; Waiver of Covenants.
Without the prior written consent of Senior Agent, no Subordinated Loan Document
shall be amended, modified, waived or supplemented. The Subordinated Noteholder
hereby until the Termination Date waives compliance by each Credit Party with
all of the covenants, terms and other provisions of the Subordinated Note
Documents, other than obligations thereunder with respect to the payment of the
Subordinated Obligations, and any default or event of default that may arise by
reason of the failure to comply with any such covenants, terms and other
provisions of the Subordinated Note Documents.
5.7 Subrogation. On and after the Termination Date, Subordinated
Noteholder shall be subrogated to the rights of Senior Creditors to receive
payments or distributions of assets of the Credit Parties in respect of the
Senior Obligations until the Senior Obligations shall be paid in full. For the
purposes of such subrogation, no Payments or Distributions to Senior Creditors
to which Subordinated Noteholder would be entitled except for the provisions of
this Agreement shall be deemed, as between the
18
Credit Parties and their creditors other than Senior Creditors and Subordinated
Noteholder, to be a payment by the Credit Parties to or on account of the Senior
Obligations, it being understood that the provisions of this Agreement are, and
are intended solely, for the purpose of defining the relative rights of
Subordinated Noteholder, on the one hand, and Senior Creditors, on the other
hand.
Section 6. Representations, Warranties and Covenants.
6.1 Representations and Warranties of Subordinated Noteholder.
Subordinated Noteholder represents and warrants to Senior Creditors that:
(a) the Subordinated Obligations (1) are owned by Subordinated
Noteholder free and clear of any Liens whatsoever arising from, through or under
Subordinated Noteholder, other than the interest of Senior Creditors under this
Agreement, (2) are payable solely and exclusively to Subordinated Noteholder and
to no other Person, and (3) outstanding on the date hereof are completely and
accurately described on Schedule 1 hereto;
(b) the Distribution Agreement is in full force and effect and has
not been amended or modified in any respect;
(c) Subordinated Noteholder has the power and authority and the
legal right to execute and deliver and to perform its obligations under this
Agreement and has taken all necessary action to authorize its execution,
delivery and performance of this Agreement; and
(d) this Agreement constitutes a legal, valid and binding obligation
of Subordinated Noteholder.
6.2 Representations and Warranties of Senior Agent. Senior Agent
represents and warrants to Subordinated Noteholder that:
(a) Senior Agent has the corporate power and authority and the legal
right to execute and deliver and to perform its obligations under this Agreement
and has taken all necessary corporate action to authorize its execution,
delivery and performance of this Agreement; and
(b) this Agreement constitutes a legal, valid and binding obligation
of Senior Agent.
6.3 Covenants of Subordinated Noteholder. Subordinated Noteholder
shall not (and hereby releases and waives any right to), without the prior
written consent of Senior Agent:
19
(a) permit to exist any Lien on any property or assets of any Credit
Party to secure or provide for payment or performance of the Subordinated
Obligations, other than a second priority security interest on the Shared
Collateral pursuant to the Subordinated Note Documents to secure the
Subordinated Secured Notes;
(b) permit the Distribution Agreement to be amended, modified,
waived or supplemented, and notwithstanding any provision in the Distribution
Agreement to the contrary or any right under applicable law or otherwise, no
Subordinated Noteholder or any affiliate thereof shall, or shall have any right
to, revoke, terminate or cancel, the Distribution Agreement in any respect; or
(c) commence or join with any creditors other than Senior Creditors
in commencing any proceeding referred to in the definition of "Insolvency
Event".
6.4 License to Use Intellectual Property. For the purpose of
enabling Senior Agent to exercise rights and remedies under the Loan Documents
(including, in order to take possession of, hold, preserve, process, assemble,
prepare for sale, market for sale, sell or otherwise dispose of any collateral,
including any Shared Collateral) at such time as Senior Agent shall be lawfully
entitled to exercise such rights and remedies, the Subordinated Noteholder
hereby grants to Senior Agent, for the benefit of Senior Agent and Lenders, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation by Agent and Lenders to the Subordinated Noteholder,
provided, that nothing in this Section 6.4 shall impair the obligation of any
Credit Party to Parent for payment of royalties and other compensation under the
Distribution Agreement, which such payments shall continue to accrue and be
payable to Parent by such Credit Party) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by the Subordinated
Noteholder, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. The Subordinated Noteholder hereby consents to the grant by the
Borrower to the Senior Creditors of a security interest in Borrower's right,
title and interests under the Distribution Agreement, and consents to any sale,
assignment or other transfer by the Senior Creditors of Borrower's right, title
and interests under the Distribution Agreement in connection with any exercise
of rights and remedies by the Senior Creditors under the Senior Loan Documents.
Nothing in this Agreement shall impair or limit the Subordinated Noteholder's
ownership rights with respect to any of its intellectual property, other than
the license granted to Senior Agent pursuant to this Section 6.4.
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Section 7. Bankruptcy Matters.
7.1 Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any Insolvency Event.
Subordinated Noteholder agrees that Senior Creditors may consent to the use of
cash collateral or provide financing to any Credit Party on such terms and
conditions and in such amounts as Senior Creditors, in their sole discretion,
may decide and that Subordinated Noteholder shall not contest or oppose in any
manner, such cash collateral use or such financing, and further that in
connection with such cash collateral use or financing any Credit Party (or a
trustee appointed for the estate of any Credit Party) may grant to Senior
Creditors Liens upon all or any part of the assets of such Credit Party, which
Liens (i) shall secure payments of all Senior Obligations (whether such Senior
Obligations arose prior to the filing of the petition for relief or arise
thereafter); and (ii) shall be superior in priority to the Liens on the assets
of such Credit Party held by any other Person. All allocations of payments
between Senior Creditors and Subordinated Noteholder shall, subject to any court
order, continue to be made after the filing of a petition under the United
States Bankruptcy Code, as amended (the "Bankruptcy Code"), or any similar
proceeding on the same basis that the payments were to be allocated prior to the
date of such filing. Subordinated Noteholder agrees that it will not object to
or oppose a sale or other disposition of any assets securing the Senior
Obligations (or any portion thereof) free and clear of Liens or other claims
under Section 363 of the Bankruptcy Code or any other provision of the
Bankruptcy Code if Senior Creditors have consented to such sale or disposition
of such assets. In the event that Subordinated Noteholder has or at any time
acquires any security for the Subordinated Obligations, Subordinated Noteholder
agrees not to assert any right it may have to "adequate protection" of its
interest in such security in any bankruptcy proceeding and agrees that it will
not seek to have the automatic stay lifted with respect to such security,
without the prior written consent of Senior Creditors. Subordinated Noteholder
waives any claim it may now or hereafter have arising out of Senior Creditors'
election, in any proceeding instituted under Chapter 11 of the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code by any Credit Party, as debtor in possession. Subordinated Noteholder (both
in its capacity as Subordinated Noteholder and in its capacity as a party which
may be obligated to the Credit Parties and their respective Affiliates with
respect to contracts which are part of the Senior Creditors' collateral) agrees
not to initiate or prosecute or encourage any other Person to initiate or
prosecute any claim, action or other proceeding (i) challenging the
enforceability of Senior Creditors' claim or oppose any action by Senior
Creditors to enforce their rights or remedies relating to the Senior
Obligations, (ii) challenging the enforceability, validity, priority or
perfected status of any Liens on assets securing the Senior Obligations or (iii)
asserting any claims which the Credit Parties may hold with respect to Senior
Creditors.
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7.2 Invalidated Payments. To the extent that Senior Creditors
receive payments on, or proceeds of collateral for, the Senior Obligations which
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause,
then to the extent of such payment or proceeds received, the Senior Obligations,
or part thereof, intended to be satisfied shall be revived and continue in full
force and effect as if such payments or proceeds had not been received by Senior
Creditors.
7.3 Proof of Claims. Upon the occurrence and during the continuance
of any Insolvency Event:
(a) Subordinated Noteholder irrevocably authorizes and empowers
Senior Creditors (A) to demand, xxx for, collect and receive for and on behalf
of Subordinated Noteholder every Payment or Distribution on account of the
Subordinated Obligations payable or deliverable in connection with such
Insolvency Event and give acquittance therefor, and (B) if proper proof of claim
and other pleadings and motions are not filed by Subordinated Noteholder at
least 30 days prior to the bar date for such filings, to file claims and proofs
of claim in any statutory or non-statutory proceeding against the Credit Parties
on account of the Subordinated Obligations and to vote such proofs of claim in
any such proceeding and take such other actions, in its own name as Senior
Creditors, or in the name of Subordinated Noteholder or otherwise, as Senior
Creditors may deem necessary or advisable for the enforcement of the provisions
of this Agreement; provided, however, that the foregoing authorization and
empowerment imposes no obligation on Senior Creditors to take any such action
and that, in voting such proofs of claim in any such proceeding, Senior
Creditors may act in a manner consistent with their own interests and shall have
no duty to take any action to optimize or maximize Subordinated Noteholder's
recovery with respect to its claim;
(b) Subordinated Noteholder shall take such action, duly and
promptly, as Senior Agent may request from time to time (A) to demand, xxx for,
collect and receive the Subordinated Obligations for the account of Senior
Creditors and (B) to file appropriate proofs of claim and other pleadings and
motions in respect of the Subordinated Obligations; and
(c) Subordinated Noteholder shall execute and deliver such powers of
attorney, assignments or proofs of claim or other instruments as Senior Agent
may request to enable Senior Creditors to enforce any and all claims in respect
of the Subordinated Obligations and to collect and receive any and all payments
and distributions which may be payable or deliverable at any time upon or in
respect of the Subordinated Obligations.
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Section 8. Miscellaneous.
8.1 Termination. This Agreement shall remain in full force and
effect and be enforceable against each party hereto according to its terms and
shall terminate upon the earlier of (i) payment in full of all of the
Subordinated Obligations in accordance with the terms hereof and (ii) the
Termination Date. This is a continuing agreement of subordination and Senior
Creditors may continue, at any time and without notice to Subordinated
Noteholder to extend credit and other financial accommodations and lend monies
to or for the benefit of any Credit Party on the faith hereof. Subordinated
Noteholder and Senior Creditors hereby waive any right they may have under
applicable law to revoke this Agreement or any of the provisions of this
Agreement.
8.2 Further Assurances. Subordinated Noteholder and each Credit
Party, at its own expense and at any time from time to time, upon the written
request of Senior Agent will promptly and duly execute and deliver such further
instruments and documents and take such further actions as Senior Agent
reasonably may request for the purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted. The
Subordinated Noteholder will pay, indemnify and hold each Senior Creditor
harmless from and against any and all liabilities, obligations damages,
penalties, actions (whether sounding in tort, contract or on any other ground),
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever arising out of or relating to a breach by the Subordinated Noteholder
of any of its obligations under this Agreement.
8.3 Provisions Define Relative Rights. This Agreement is intended
solely for the purpose of defining the relative rights of Senior Creditors on
the one hand and Subordinated Noteholder on the other, and no other Person shall
have any right, benefit or other interest under this Agreement.
8.4 Legend. Subordinated Noteholder and the Credit Parties will
cause the Subordinated Notes to bear the following legend:
ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER
INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND THE RIGHTS OF
THE HOLDER OF THIS NOTE ARE OTHERWISE SUBJECT TO THE TERMS OF, THE
INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED AS OF NOVEMBER 12,
2002, AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM
TIME TO TIME (THE "INTERCREDITOR AGREEMENT"), BY AND AMONG GENERAL
ELECTRIC CAPITAL CORPORATION, AS SENIOR AGENT, INFOGRAMES ENTERTAINMENT
SA, AND CERTAIN OF ITS SUBSIDIARIES. THE TERMS OF THE INTERCREDITOR
23
AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE INTO THIS NOTE AS IF SET
FORTH IN FULL HEREIN.
8.5 Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until termination of this Agreement.
8.6 Specific Performance. Senior Creditors are hereby authorized to
demand specific performance of this Agreement at any time when Subordinated
Noteholder shall have failed to comply with any of the provisions of this
Agreement applicable to Subordinated Noteholder, whether or not the Credit
Parties shall have complied with any of the provisions hereof applicable to the
Credit Parties, and Subordinated Noteholder hereby irrevocably waives any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to such remedy of specific performance.
8.7 Notices. All notices, and other communications provided for
hereunder shall be in writing (including telecopy communication) and mailed,
telecopied, or delivered by hand, if to Senior Agent or Senior Lenders to
General Electric Capital Corporation, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
XX 00000, Attention: Infogrames Account Manager, Telecopier: (000) 000-0000 with
copies to Legal Counsel, Telecopier: (000) 000-0000 or if to Subordinated
Noteholder to Infogrames Entertainment SA, Attention: Directeur General Delegue,
Telecopier: 011-33-4-37-64-39-22 or if to any Credit Party to Infogrames, Inc.,
000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, Telecopier: (000) 000-0000 or
as designated by a party in a written notice to the other parties complying as
to delivery with the terms of this Section. All such notices and other
communications shall be effective as follows: (a) when mailed, after five days
of the date deposited in the mails, (b) when sent by telecopy, upon confirmation
of receipt, and (c) when delivered by hand, upon delivery to the addressee.
8.8 Counterparts. This Agreement may be executed by one or more of
the parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
8.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10 Integration. This Agreement represents the agreement of Senior
Creditors and Subordinated Noteholder with respect to the subject matter hereof
and there are no promises or representations by Senior Creditors or Subordinated
Noteholder relative to the subject matter hereof not reflected herein.
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8.11 Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified, except by a written instrument
executed by Senior Agent, Subordinated Noteholder and the Credit Parties.
(b) No failure to exercise, nor any delay in exercising, on the part
of Senior Creditors, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.12 Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.13 Successors and Assigns; Refinancing of Senior Obligations. This
Agreement shall be binding upon Subordinated Noteholder and the Credit Parties
and their respective successors and assigns and shall inure to the benefit of
Senior Creditors and their successors and assigns. Neither Subordinated
Noteholder nor any Credit Party may assign its rights or delegate its
obligations hereunder, except to the extent permitted with respect to the
Subordinated Noteholder by the immediately succeeding sentence of this Section
8.13. Subordinated Noteholder shall not, without the prior written consent of
Senior Agent, sell, assign, or otherwise transfer, in whole or in part, the
Subordinated Obligations to any other Person (a "Transferee") or create, incur
or suffer to exist any Lien whatsoever upon the Subordinated Obligations in
favor of any Transferee unless (1) such action is made expressly subject to this
Agreement and (2) the Transferee expressly acknowledges to Senior Agent, by a
writing in form and substance reasonably satisfactory to Senior Agent, the
subordination provided for herein and agrees to be bound by all of the terms
hereof. In the event that any Person ("Refinancing Senior Lenders") at any time
hereafter extends credit to any Credit Party and the proceeds of such extension
of credit are applied to the repayment of all or a substantial part of the
Senior Obligations then all indebtedness and liabilities of the Credit Parties
to the Refinancing Senior Lenders and the Refinancing Senior Lenders shall be
entitled to the benefits of this Agreement to the same extent as the Senior
Obligations and Senior Creditors, and Subordinated Noteholder and the Credit
Parties shall promptly execute and deliver any agreement which the Refinancing
Senior Lenders shall reasonably request with respect thereto confirming the
terms and conditions of this Agreement in favor of the Refinancing Senior
Lenders.
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8.14 Senior Obligations Unconditional. All rights and interests of
Senior Creditors hereunder, and all agreements and obligations of Subordinated
Noteholder and the Credit Parties hereunder, shall be absolute and irreversible
notwithstanding (a) any lack of validity or enforceability of any Senior Loan
Document; (b) any change in time, manner or place of payment of, or in any other
term of, all or any of the Senior Obligations, any increase in the amount of the
Senior Obligations, or any amendment or waiver or other modification, whether by
course of conduct or otherwise, of the terms of any Senior Loan Document; (c)
any exchange, release or nonperfection of any security interest in any
collateral, including any Shared Collateral, or any release, amendment, waiver
or other modification, whether in writing or by course of conduct or otherwise,
of all or any of the Senior Obligations or any guarantee thereof; or (d) any
other circumstances which otherwise might constitute a defense available to, or
a discharge of, any Credit Party in respect of the Senior Obligations, or of
Subordinated Noteholder or any Credit Party in respect of this Agreement.
8.15 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. EACH OF THE PARTIES HERETO HEREBY CONSENTS
AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG THE
PARTIES HERETO PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT, PROVIDED, THAT THE PARTIES HERETO ACKNOWLEDGE THAT
ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
NEW YORK CITY AND, PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE SENIOR CREDITORS FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON ANY SECURITY FOR THE
SENIOR OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
ANY SENIOR CREDITOR. EACH OF THE PARTIES HERETO EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. EACH OF THE PARTIES HERETO HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO IT AT THE ADDRESS SET FORTH HEREIN,
26
AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH
PARTY'S ACTUAL RECEIPT THEREOF OR THREE BUSINESS (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
8.16 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS RELATED
THERETO.
8.17 No Parent Funding Obligations. The parties acknowledge by their
signature below that nothing contained in this Agreement shall constitute a
commitment or obligation of Parent to fund the ongoing working capital needs of
the Credit Parties, including, without limitation, extending additional
financing under the Subordinated Credit Agreement or the Subordinated Notes
beyond the amounts outstanding thereunder on the date hereof.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
Senior Agent:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:___________________________________
Name:
Title:
Subordinated Noteholder:
INFOGRAMES ENTERTAINMENT SA,
for itself and each Subsidiary thereof
By:___________________________________
Name:
Title:
CALIFORNIA US HOLDINGS, INC.
By:___________________________________
Name:
Title:
Credit Parties:
INFOGRAMES, INC.
By:___________________________________
Name:
Title:
INFOGRAMES INTERACTIVE, INC.
By:___________________________________
Name:
Title:
28
ATARI INTERACTIVE, INC.
By:___________________________________
Name:
Title:
PARADIGM ENTERTAINMENT, INC.
By:___________________________________
Name:
Title:
CALIFORNIA US HOLDINGS, INC.
By:___________________________________
Name:
Title:
SHINY ENTERTAINMENT, INC.
By:___________________________________
Name:
Title:
GT INTERACTIVE SOFTWARE
AUSTRALIA PTY LIMITED
By:___________________________________
Name:
Title:
REFLECTIONS INTERACTIVE LIMITED
By:___________________________________
Name:
Title:
00
XX XXXXXXXXXXX XXXXXXXX
XXXXXX S.A.R.L.
By:___________________________________
Name:
Title:
GT INTERACTIVE SOFTWARE
By:___________________________________
Name:
Title:
GT INTERACTIVE SOFTWARE
(EUROPE) LIMITED
By:___________________________________
Name:
Title:
SPECTRUM HOLOBYTE JAPAN KK
By:___________________________________
Name:
Title:
HARTLAND TREFOIL LTD (UK)
By:___________________________________
Name:
Title:
MICROPROSE LTD (UK)
By:___________________________________
Name:
Title:
30
MICROPROSE SOFTWARE LTD (UK)
By:___________________________________
Name:
Title:
INFOGRAMES INTERACTIVE ASIA
PACIFIC PTY LTD (AUSTRALIA)
By:___________________________________
Name:
Title:
INFOGRAMES INTERACTIVE GmbH (GERMANY)
By:___________________________________
Name:
Title:
31
