AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 22, 1997 (the
"Agreement"), by and among Take-Two Interactive Software, Inc., a Delaware
corporation ("Take-Two"); Inventory Management Systems, Inc., a Delaware
Corporation and wholly-owned subsidiary of Take-Two ("IMSI"); Alliance Inventory
Management, Inc., a New York corporation and wholly-owned subsidiary of IMSI
("Subsidiary"); L&J MARKETING INC. D/B/A ALLIANCE DISTRIBUTORS, a New York
corporation ("Alliance"); and each of XXX XXXXXX ("Xxx"), XXXXX XXXXXX ("Xxxxx")
and XXXXX XXXXXX (collectively referred to as the "Alliance Stockholders").
W I T N E S S E T H :
WHEREAS, Alliance is in the business of distributing computer software and
other items at wholesale (the "Business");
WHEREAS, the Boards of Directors of Take-Two and of Subsidiary, and of each
of IMSI and Take-Two, as the sole shareholder of Subsidiary and IMSI,
respectively, as well as the Board of Directors of Alliance and the Alliance
Stockholders have (a) determined that it is in the best interests of their
respective companies for Alliance to be merged with and into Subsidiary upon the
terms and subject to the conditions set forth herein and (b) approved the merger
of Alliance with and into Subsidiary (the "Merger") in accordance with the
Business Corporation Law of the State of New York ("New York Law"), and upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto do hereby agree as follows:
1. The Merger.
1.1. The Merger. At the Effective Time (as defined in subsection 1.2),
and subject to and upon the terms and conditions of this Agreement and New
York Law, Alliance shall be merged with and into Subsidiary, the separate
corporate existence of Alliance shall cease, and Subsidiary shall continue
as the surviving corporation. Subsidiary, as the surviving corporation
after the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2. Effective Time. Simultaneously herewith, Subsidiary and Alliance
shall cause the Merger to be consummated by delivering those documents to
be delivered pursuant to subsection 1.7 hereof and by filing a Certificate
of Merger (the
"Certificate of Merger") with the Secretary of State of the State of New
York in the form of Exhibit 1.2 and making such other filings as may be
required by New York Law, in such form as required by and executed in
accordance with such laws (the date of such filing being the "Effective
Time").
1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of New York Law.
Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the rights, privileges, powers, franchises and all
property (real, personal and mixed) of Alliance and all debts due Alliance
shall vest in Subsidiary, and all debts, liabilities, obligations and
duties of Alliance shall become the debts, liabilities, obligations and
duties of Subsidiary.
1.4. Certificate of Incorporation; By-Laws.
(a) The Certificate of Incorporation of Subsidiary, as in effect
immediately prior to the Effective Time (annexed hereto as Exhibit
1.4(a)), shall be, subject to the name change set forth in the
Agreement of Merger, the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law or such
Certificate of Incorporation.
(b) The By-Laws of Subsidiary, as in effect immediately prior to
the Effective Time (annexed hereto as Exhibit 1.4(b)), shall be the
By-Laws of the Surviving Corporation until thereafter amended as
provided by law or the Certificate of Incorporation of the Surviving
Corporation or the By-Laws of the Surviving Corporation.
1.5. Directors and Officers of Surviving Corporation.
(a) Except for Xxxxx and Xxx, who shall be elected as officers of
the Subsidiary to serve commencing as of the Effective Time until
their successors are duly elected or qualified, as Chief Operating
Officer and Senior Vice-President, Sales, respectively, the initial
directors and officers of the Subsidiary, as in effect immediately
prior to the Effective Time, shall be the Board of Directors and
officers of the Surviving Corporation, each director holding office in
accordance with applicable law, the Certificate of Incorporation and
By-Laws of the Surviving Corporation until their resignation, removal
or replacement.
(b) Take-Two will provide each director or officer of the
Subsidiary with D & O insurance consistent with, and to the extent of,
any coverage currently offered from time to time by Take-Two to its
officers and directors.
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(c) Take-Two shall indemnify each individual who served as a
director or officer of the Subsidiary at any time after the Effective
Time to the full extent permitted by law.
1.6. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Take-Two, Subsidiary, Alliance
or the Alliance Stockholders:
(a) All of the 200 issued and outstanding shares (the "Alliance
Shares") of the capital stock, no par value, of Alliance (the
"Alliance Common Stock") shall be converted into 500,000 shares (the
"Stock Consideration") of Common Stock, par value of $.001 per share,
of Take-Two ("Take-Two Stock") against the surrender to Subsidiary of
the certificates representing the Alliance Shares. Schedule 1.6(a)
sets forth the allocation of the Stock Consideration to each of the
Alliance Stockholders.
(b) All shares of the common stock, par value $.01 per share, of
Subsidiary issued and outstanding at the Effective Time shall remain
outstanding and unchanged and shall constitute all of the issued and
outstanding shares of the capital stock of the Surviving Corporation.
(c) Any share of Alliance Common Stock held in the treasury of
Alliance shall be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(d) At the Effective Time, the stock transfer books of Alliance
shall be closed and there shall be no further registration of
transfers of any Alliance Shares thereafter on the records of
Alliance.
(e) From and after the Effective Time, the holders of
certificates evidencing ownership of Alliance Shares shall cease to
have any rights with respect to the Alliance Shares, except as
otherwise provided herein or by law.
(f) Notwithstanding anything to the contrary in this subsection
1.6, no party hereto shall be liable to a holder of a certificate or
certificates formerly representing Alliance Shares for any amount
properly paid to a public official pursuant to any applicable
property, escheat or similar law.
1.7. Deliveries. Simultaneous with the execution of this Agreement,
the parties shall deliver the following in accordance with the terms and
conditions of this Agreement:
(a) Take-Two, IMSI and Subsidiary, as applicable, shall deliver:
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(i) stock certificate(s), registered in the name of each of
the Alliance Stockholders, representing their pro rata share as
provided in Schedule 1.6(a), against stock certificate(s)
representing the Alliance Shares;
(ii) the Capital Contribution (as defined in Section 5.7
hereof);
(iii) confirmation, in the form satisfactory to the parties
hereto, from the State of New York or a filing service (jointly
chosen by the parties hereto) that the Certificate of Merger of
Alliance with and into the Subsidiary has been filed with the
Secretary of State of New York, together with a copy of the
executed form of such agreement;
(iv) the Employment Agreements (as defined in Section 5.4
hereof), duly executed by the Subsidiary; and
(v) copies of the resolutions of the Board of Directors of
Take-Two, IMSI and the Subsidiary, authorizing Take-Two, IMSI and
the Subsidiary to execute and deliver the documents each is
obligated to deliver pursuant to this Agreement, to perform its
obligations thereunder and to effect the Merger, duly certified
by the Secretary or assistant Secretary of Take-Two, IMSI and the
Subsidiary.
(b) Alliance and the Alliance Stockholders, as the case may be,
shall deliver:
(i) stock certificate(s) representing all of the issued and
outstanding shares of Alliance Common Stock, duly endorsed for
transfer by the Alliance Stockholders;
(ii) copies of the resolutions of the Board of Directors of
Alliance, and the written consent of the Alliance Stockholders,
authorizing Alliance to execute and deliver the documents it is
obligated to deliver pursuant to this Agreement, to perform its
obligations thereunder and to effect the Merger, duly certified
by the Secretary or assistant Secretary of Alliance;
(iii) certificates of the Secretary or Assistant Secretary
of Alliance certifying as to the incumbency and to the specimen
signatures of the officers of Alliance executing the documents
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pursuant to this Agreement on behalf of such corporation;
(iv) satisfaction and release of Subsidiary with respect to
Stockholders Notes (as defined in Section 5.7 hereof), in the
form of Exhibit 1.7(b)(v) attached hereto; and
(v) the Employment Agreements, duly executed by Xxx and
Xxxxx, respectively.
2. Representations and Warranties as to Alliance and Stockholder. Each
Alliance Stockholder hereby, jointly and severally, represents and warrants to
Take-Two, IMSI and Subsidiary, as follows:
2.1. Organization, Standing and Power. Alliance is a corporation duly
organized, validly existing and in good standing under the laws of New
York, with full corporate power and authority to own, lease and operate its
properties and to carry on the Business, as presently conducted by it. To
the best knowledge of the Alliance Stockholders, except for the State of
New Jersey, there are no states or jurisdictions in which the character and
location of any of the properties owned or leased by Alliance, or the
conduct of its Business, makes it necessary for it to qualify to do
business as a foreign corporation and where it has not so qualified, except
for those jurisdictions in which the failure to so qualify would not have a
materially adverse effect on the Business or operations of Alliance. Copies
of the Certificate of Incorporation of Alliance and all amendments thereof,
and of the By-laws of Alliance, as amended to date, and Alliance's
corporate books (containing corporate minutes and resolutions in Alliance's
possession) have been furnished to Take-Two and are substantially complete
and correct.
2.2. Capitalization. The authorized capital stock of Alliance consists
of 200 shares of Common Stock, no par value, of which 200 shares are issued
and outstanding. There are no outstanding options, warrants, rights, calls,
commitments, conversion rights, puts, plans or other agreements of any
character to which Alliance Stockholders or Alliance are a party or
otherwise bound which provide for the acquisition or disposition of any of
the Alliance Common Stock or any of the securities of Alliance. All of the
issued and outstanding Alliance Common Stock has been duly and validly
issued and is fully paid and nonassessable.
2.3. Ownership of Alliance Common Stock. The Alliance Stockholders
have good and marketable title to, and own, all of the issued and
outstanding shares of Alliance Common Stock, free and clear of any and all
liens, adverse claims, security interests, pledges, mortgages, charges and
encumbrances of any nature whatsoever.
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2.4. Interests in Other Entities.
(a) Alliance does not (A) own, directly or indirectly, of record
or beneficially, any shares of voting stock or other equity securities
of any other entity, (B) has any ownership interest, direct or
indirect, of record or beneficially, in any unincorporated entity, or
(C) has any obligation, direct or indirect, present or contingent, (1)
to purchase or subscribe for any interest in, advance or loan monies
to, or in any way make investments in, any person or entity or (2) to
share any profits from any entity. Notwithstanding the above, Alliance
has disclosed that it operates under the following two d/b/a's:
"Alliance Distributors" and "Alliance Advertising."
(b) None of the Alliance Stockholders (A) owns, directly or
indirectly, of record or beneficially, any shares of voting stock or
other equity securities of any other entity engaged in the same or
similar business to the Business, (B) has any ownership interest,
direct or indirect, of record or beneficially, in any unincorporated
entity engaged in the same or similar business to the Business, or (C)
has any obligation, direct or indirect, present or contingent, (1) to
purchase or subscribe for any interest in, advance or loan monies to,
or in any way make investments in, any person or entity engaged in the
same or similar business to the Business, or (2) to share any profits
from any entity engaged in the same or similar business to the
Business, other than in publicly traded companies and "Advanced
National Marketing Inc."
2.5. Authority.
(a) The execution and delivery by the Alliance Stockholders or
Alliance of this Agreement and of all of the agreements to be executed
and delivered by each of them pursuant hereto (the "Alliance
Documents"), the performance by each of them of their respective
obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, have been duly and
validly authorized by all necessary corporate action on the part of
Alliance (including, but not limited to, the unanimous consent of the
Alliance Stockholders and Boards of Directors) and Alliance has all
necessary power with respect thereto.
(b) This Agreement is, and when executed and delivered by the
Alliance Stockholders and Alliance (to the extent that they are
parties thereto) the Alliance Documents to be delivered by any or all
of them pursuant hereto will be, the valid and binding obligation of
the Alliance Stockholders and Alliance (to the extent that they are
parties thereto) in accordance with their respective terms.
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2.6. Noncontravention. Except as set forth on Schedule 2.6, neither
the execution and delivery by the Alliance Stockholders or Alliance of this
Agreement or of any agreement to be executed and delivered by the Alliance
Stockholders and/or Alliance pursuant hereto, nor the consummation of any
of the transactions contemplated hereby or thereby, nor the performance by
the Alliance Stockholders or Alliance of their respective obligations, as
the case may be, hereunder or thereunder, will (nor with the giving of
notice or the lapse of time or both would) (a) conflict with or result in a
breach of any provision of the Certificate of Incorporation or By-laws of
Alliance, or (b) 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 Alliance or under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which it is a party or by
which Alliance or the Alliance Stockholders may be bound or to which
Alliance or the Business may be subject, or require any consent, approval
or notice under the terms of any such document or instrument, or (c)
violate any order, writ, injunction, decree, law, statute, rule or
regulation of any court or governmental authority which is applicable to
Alliance, or the Business, or (d) result in the creation or imposition of
any lien, claim, charge, restriction or encumbrance upon any of the
properties or assets of Alliance, or (e) interfere with or otherwise
adversely affect the ability of Subsidiary to carry on the Business after
the Effective Time on substantially the same basis as is now conducted by
Alliance.
2.7. Litigation. Except as set forth in Schedule 2.7, there are no
suits or actions, or administrative, arbitration or other proceedings or
governmental investigations, pending or, to the best of the knowledge of
the Alliance Stockholders, threatened, against or relating to Alliance or
the Business, in which the amount in dispute in each matter exceeds
$2,500.00. There are no judgments, orders, stipulations, injunctions,
decrees or awards in effect which relate to Alliance, the Business or the
operation of the Company, the effect of which is (A) to limit, restrict,
regulate, enjoin or prohibit Alliance's operation in any area, or the
acquisition of any properties, assets or businesses, or (B) otherwise
materially adverse to the Business or Alliance.
2.8. No Violation of Law.
(a) Except with respect to the representations and warranties
made herein by Alliance and the Alliance Stockholders as to Laws (as
herein defined) relating to environmental and ecological protection,
which representations and warranties are not qualified by "best
knowledge" or otherwise and which is set forth in paragraph (b)
hereof, Alliance and/or the Alliance Stockholders, as the case may be,
are not engaging in any activity or omitting to take any action as a
result of
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which to the best of knowledge of the Alliance Stockholders: (A) they
are in violation of any law, rule, regulation, zoning or other
ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or
agency, applicable to Alliance or the Business ("Laws"), including,
but not limited to, those relating to: occupational safety and health;
business practices and operations; labor practices; employee benefits;
and zoning and other land use, and (B) Alliance or the Business have
been or will be materially and adversely affected.
(b) Alliance and/or the Alliance Stockholders, as the case may
be, are not engaging in any activity or omitting to take any action as
a result of which they are in violation of any Laws relating to
environmental and ecological protection (e.g., the use, storage,
handling, transport or disposal of pollutants, contaminants or
hazardous or toxic materials or wastes, and the exposure of persons
thereto).
2.9. Financial Statements. Alliance has herewith delivered to Take-Two
and Subsidiary (a) its financial statements consisting of the audited
balance sheets for the years ended December 31, 1995 and 1996, and the
related statements of income, stockholders' equity and cash flows for the
two years then ended, which have been audited by Berenson & Company LLP,
independent certified public accountants, and (b) its unaudited balance
sheet at November 30, 1997, statements of income, stockholders' equity and
cash flows for the ten months ended November 30, 1997 (collectively, the
"Financial Statements"). The Financial Statements were prepared in
accordance with generally accepted accounting principals ("GAAP"),
consistently applied, and present fairly the financial position of Alliance
as at the dates thereof and the results of operations for the periods and
the cash flow indicated. The books and records of Alliance are materially
complete and correct, except as qualified by Paragraph 2.10 infra., have
been maintained in accordance with good business practices, and reflect the
basis for the financial condition, results of operations and cash flow of
Alliance as set forth in the Financial Statements in all material respects.
2.10. Absence of Undisclosed Liabilities. To the best knowledge of
Xxxxx and Xxx, the only liabilities or obligations of any nature
whatsoever, whether accrued, absolute, contingent or otherwise of Alliance
are: (A) liabilities reflected on the Financial Statements or (B) incurred
in the ordinary course of business since November 30, 1997, (C) in the case
of other types of liabilities and obligations, described in any of the
schedules delivered pursuant hereto or omitted from said schedules in
accordance with the terms of this Agreement and (D) space lease for 14-20B
000 Xxxxxx, Xxxxxxx Xxxxx, Xxx Xxxx 00000 with Xxxxxxxxx Realty Inc. as
Landlord.
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2.11. Accounts Receivables; Inventories.
(a) The accounts receivable of Alliance are owned free and clear
of all liens in favor of any person other than European American Bank
("EAB") and NationsCredit; are bona fide transactions completed in the
ordinary course of business; and to the best of knowledge of Xxxxx and
Xxx, the amounts thereof shown on Alliance's books and records are
accurate; and there are no defenses, set-offs, counterclaims or
disputes existing or asserted with respect thereto which in the
aggregate exceed $100,000, other than set-offs available to the
parties who are also vendors to the Company with respect to accounts
payable schedule.
(b) The inventories reflected on the Financial Statements consist
of items of a quality and quantity usable or saleable in the ordinary
course of business, except for obsolete materials, slow-moving items,
materials of below standard quality and not readily marketable items.
2.12. Properties. Except for the liens and encumbrances incurred in
the ordinary course of business of Alliance or disclosed in Schedule 2.12,
Alliance has good and valid title to all of the properties and assets,
reflected on the Financial Statements as owned by it or thereafter
acquired, except properties or assets sold or otherwise disposed of in the
ordinary course of business, free and clear of any and all mortgages, liens
(excluding liens for current Taxes, as defined in subparagraph 2.15(b)
hereof), pledges, claims, charges and encumbrances of any nature
whatsoever. All plants, structures and equipment which are utilized in the
Business, or are material to the condition (financial or otherwise) of
Alliance are owned or leased by Alliance. Alliance does not own any real
property.
2.13. Intellectual Property. To the best knowledge of Xxxxx and Xxx,
no proceedings have been instituted, are pending or are threatened, which
challenge the rights of Alliance in respect to the Alliance tradename or
the validity thereof.
2.14. Banks; Powers of Attorney. Schedule 2.14 is a complete and
correct list showing (A) the names of each bank in which Alliance has an
account or safe deposit box and the names of all persons authorized to draw
thereon or who have access thereto, and (B) the names of all persons, if
any, holding powers of attorney from Alliance or the Alliance Stockholders
with respect to the Business.
2.15. Tax Matters.
(a) Alliance has filed with the appropriate governmental agencies
all tax returns and reports required to be filed by it, and has paid
in full or contested in good faith or
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made adequate provision for the payment of, Taxes (as defined herein)
shown to be due or claimed to be due on such tax returns and reports.
The provisions for Taxes which will be set forth on the latest balance
sheet included in the Financial Statements reflects and includes
adequate provisions for the payment in full of any and all Taxes for
which Alliance is or could be liable, whether to any governmental
entity or to other persons (as, for example, under tax allocation
agreements), not yet due for any and all periods up to and including
the date of such balance sheet; and all Taxes for periods beginning
thereafter through the Effective Time have been, or will be, paid when
due or adequately reserved against on the books of Alliance and an
amount of cash equal to the amount of such reserve will have been set
aside for the payment of such Taxes. Alliance has duly withheld all
payroll taxes, FICA and other federal, state and local taxes and other
items requiring to be withheld by it from employer wages, and has duly
deposited the same in trust for or paid over to the proper taxing
authorities. Alliance has not executed or filed with any taxing
authority any agreement extending the periods for the assessment or
collection of any Taxes, and is not a party to any pending or, to the
best knowledge of Alliance and the Alliance Stockholders, threatened,
action or proceeding by any governmental authority for the assessment
or collection of Taxes. Within the past three years, the United States
federal income tax returns of Alliance have not been examined by the
Internal Revenue Service ("the IRS") nor has the State of New York or
any taxing authority thereof examined any merchandise, personal
property, sales or use tax returns of Alliance. To the best knowledge
of Xxxxx and Xxx, there is no tax lien, whether imposed by any
Federal, state, county, local or foreign taxing authority, outstanding
against the assets, properties or business of Alliance. Alliance has
not agreed to make or is required to make any adjustment under Section
481(a) of the Internal Revenue Code, by reason of a change in
accounting method or otherwise. Alliance is not a party to any tax
sharing or allocation agreement. Alliance has not been a member of an
affiliated group filing a consolidated Federal income tax return or
has any liability for Taxes under Treas. Reg. ss. 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(b) As used herein, the term "Taxes" or "Tax" means all federal,
state, county, local and other taxes and governmental assessments,
including but not limited to income taxes, estimated taxes,
withholding taxes, excise taxes, ad valorem taxes, payroll related
taxes (including but not limited to premiums for worker's compensation
insurance and statutory disability insurance), employment taxes,
franchise taxes and import duties, together with any related
liabilities, penalties, fines, additions to tax or interest.
2.16. Certain Business Matters and Practices. Except as set forth on
Schedule 2.17, Alliance is not a party to
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or bound by any distributorship, dealership, sales agency, franchise or
similar agreement which relates to the Business. To the best of the
knowledge of Alliance and the Alliance Stockholders, there are no pending
or threatened labor negotiations, work stoppages or work slowdowns
involving or affecting Alliance or the Business, and no union
representation questions exist, and there are no organizing activities, in
respect of any of the employees of Alliance. Alliance gives no warranties
on the products sold by it other than warranties offered by manufacturer;
provided, however, that on occasion Alliance assumes to liability under the
manufacturer's warranty where Alliance deems, that such is in the best
interests of its business or Alliance extends warranties, as it is required
to do so, by law.
2.17. Certain Contracts. Set forth on Schedule 2.17 is a complete and
correct list of all contracts, commitments, obligations and understandings,
other than contracts, commitments, obligations and understandings
pertaining to the purchase and sale of merchandise, i.e., purchase order to
and from Alliance (which are not listed) pursuant to the Business, which
are not set forth in any other schedule delivered hereunder and to which
Alliance is a party or otherwise bound, except for each of those which (a)
was made in the ordinary course of business, and (b) either (i) is
terminable by Alliance (and will be terminable by Subsidiary, IMSI or
Take-Two) without liability, expense or other obligation on thirty (30)
days' notice or less, or (ii) may be anticipated to involve aggregate
payments to or by Alliance of $5,000 (or the equivalent) or less calculated
over the full term thereof, and (c) is not otherwise material to the
Business. Schedule 2.17 also sets forth agreements or arrangements in
effect with respect to Alliance or the Business with any independent
salesperson, distributor, sublicensor or other remarketer or sales
organization. To the best of knowledge of Xxxxx and Xxx, Alliance has not
received any notice of written default with respect to any such agreements
or arrangements which remains uncured.
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2.18. Customers and Suppliers.
(a) To the best of knowledge of Xxxxx and Xxx, Alliance has
provided to Take-Two, IMSI and Subsidiary a complete and correct list
setting forth, for the period commencing January 1, 1997 until
December 14, 1997, (a) the 20 largest customers (by dollar volume) of
the Business and the amount for which each such customer was invoiced,
and (b) the 10 largest suppliers (by dollar volume) of the Business
and the amount of goods and services purchased from each such
supplier.
(b) During the last twelve (12) months, other than the notice
from Sony Corp. ("Sony") transmitted to Alliance on or about August
1997 (notifying of Sony's intention to terminate its distributorship
relationship), neither Nintendo nor Sony has informed Alliance or the
Alliance Stockholders, orally or in writing (other than the right to
terminate the agreement under the terms of its agreement), of any
disputes with Alliance or its intention to cease selling or rendering
services to, or dealing with, Alliance on substantially the same basis
as of the date hereof, nor its intention to alter in any material
respect the amount of sales or service or the extent of dealings with
Alliance, or would alter in any material respect the sales or service
or dealings in the event of the consummation of the Merger. To the
best of the Alliance Stockholders' knowledge, neither Alliance nor any
Alliance Stockholders have information which might reasonably
indicate, nor has any information been brought to their attention
which might reasonably lead them to believe, that any supplier or
Alliance will not be able to fulfill outstanding or currently
anticipated purchase orders place by, or service obligations to,
Alliance.
2.19. Nature of Securities. The Alliance Stockholders understand that
as of the date hereof (a) the Stock Consideration has not been registered
under the Securities Act of 1933, as amended (the "Act"), based upon an
exemption from such registration requirements; (b) the Stock Consideration
to be received is "restricted securities," as said term is defined in Rule
144 of the General Rules and Regulations promulgated under the Act; (c) the
Stock Consideration to be received may not be sold or otherwise transferred
unless it has first been registered under the Act and applicable state
securities laws or an exemption from the registration provisions of the Act
and applicable state securities laws are available with respect to the
proposed sale or transfer; (d) the certificates evidencing the Stock
Consideration will bear a legend to the effect that the transfer thereof is
restricted; and (e) stop transfer instructions will be placed with the
transfer agent for the Stock Consideration.
2.20. Investment Representations. The Alliance Stockholders or their
respective representatives have received and carefully reviewed Take-Two's
registration statement on
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Form SB-2 as declared effective by the Securities and Exchange Commission
(the "SEC") on April 14, 1997 and most recent Form 10- QSB, and except for
the foregoing and the representations and warranties contained herein, the
Alliance Stockholders have not been furnished with any other materials or
literature relating to Take-Two or the Stock Consideration. The Alliance
Stockholders or their respective representatives have had a reasonable
opportunity to ask questions of and receive answers from Take-Two
concerning Take-Two, IMSI and Subsidiary and the Stock Consideration.
2.21. Information as to Alliance and the Alliance Stockholders. None
of the representations or warranties made by Alliance or the Alliance
Stockholders in this Agreement or in any agreement executed and delivered
by or on behalf of any of them 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.
3. Representations and Warranties as to Take-Two, IMSI and Subsidiary.
Take-Two, IMSI and Subsidiary, as applicable, hereby represent and warrant to
the Alliance Stockholders as follows:
3.1. Organization, Standing and Power.
(a) Take-Two is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it.
(b) IMSI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties
and to carry on its business as presently conducted by it.
(c) Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, with
full corporate power and authority to own, lease and operate its
properties.
(d) Take-Two has filed all forms, reports, statements and
documents required to be filed with the Securities and Exchange
Commission ("SEC") since April 14, 1997, (collectively, the "SEC
Reports"), each of which has complied in all material respects with
the applicable requirements of the Act or the Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable, each as in effect on the
date so filed. Take-Two has delivered or made available to the
Alliance Stockholders, in the form filed with the SEC (including any
amendments thereto), (A) its Quarterly Report on Form 10-QSB for the
quarter ended
-13-
October 31, 1997 and (B) its Prospectus dated April 14, 1997. None of
such forms, reports or documents (including but not limited to any
financial statements or schedules included or incorporated by
reference therein) filed by Take-Two, when filed (except to the extent
revised or superseded by a subsequent filing with the SEC) contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements included in such forms were prepared in
accordance with generally accepted accounting principles consistently
applied, and fairly present the financial position of Take-Two as at
the dates thereof and its results of operations for the periods
indicated, except that any unaudited financial statements are subject
to normal reoccurring adjustments which might be required as a result
of year-end audits.
3.2. Authority. The execution and delivery by Take-Two, IMSI and
Subsidiary of this Agreement and of each agreement, document and instrument
to be executed and delivered by either or both of them pursuant hereto (the
"Take-Two Documents"), the compliance by either or both of them with the
provisions hereof and thereof, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate
actions on the part of Take-Two, IMSI and the Subsidiary, and Take-Two,
IMSI and the Subsidiary have all necessary corporate powers with respect
thereto.
3.3. Noncontravention. This Agreement is, and when executed and
delivered by each of Take-Two, IMSI and the Subsidiary, the Take-Two
Documents to be executed and delivered by either or both of them pursuant
hereto will be, the valid and binding obligation of Take-Two, IMSI and the
Subsidiary in accordance with their terms. Neither the execution and
delivery by Take-Two, IMSI or the Subsidiary of this Agreement or of the
Take-Two Documents, nor the consummation of the transactions contemplated
hereby or thereby, nor the compliance by Take-Two, IMSI or the Subsidiary
with the provisions hereof and thereof, will (nor with the giving of notice
or the lapse of time or both, would) conflict with or result in a violation
of any provision of the Certificates of Incorporation or By-laws of
Take-Two, IMSI and the Subsidiary, or, to the best knowledge of Take-Two,
IMSI and the Subsidiary, result in the breach of any material agreement to
which either Take-Two, IMSI or the Subsidiary is a party or otherwise bound
which first has not been waived.
3.4. Investment. The Buyer is not acquiring the Alliance Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
3.5. Capitalization. The authorized capital stock of Take-Two consists
of 15,000,000 shares of Take-Two Stock
-14-
and 5,000,317 shares of Preferred Stock, par value $.01 per share. As of
the date hereof, (A) 9,250,043 shares of Take-Two Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid
and nonassessable, (B) 1,360,311 shares of Take-Two Stock are issuable upon
exercise of options (plan and non-plan) and (C) 2,821,199 shares of
Take-Two Stock are reserved for future issuance upon exercise of
outstanding common stock purchase warrants. No preferred stock is
outstanding as of the date hereof. There is no personal liability, and
there are no preemptive rights with regard to the capital stock of
Take-Two, and no right-of-first refusal or similar rights with regard to
such capital stock.
3.6. Stock Consideration. The Stock Consideration, when issued, will
be (A) duly authorized and validly issued, fully paid and non-assessable,
(B) delivered hereunder free and clear of any security interests, pledges,
mortgages, claims, liens and encumbrances of any kind whatsoever except
that the Take-Two Stock will be "restricted securities" as such term is
defined in the rules and regulations of the SEC and will be subject to
restrictions on transfers pursuant to such rules and regulations and State
laws, and (C) issued in compliance with all applicable federal and state
securities laws.
3.7. Information as to Take-Two, IMSI and the Subsidiary. None of the
representations or warranties made by Take-Two, IMSI or the Subsidiary in
this Agreement or in any agreement executed and delivered by or on behalf
of either or both of them 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. Indemnification.
4.1. Indemnification by the Alliance Stockholders. Subject to the
limitations set forth in Paragraph 4.5 hereof, each of Xxxxx and Xxx,
jointly and severally hereby indemnifies and agrees to defend and hold
harmless each of Take-Two, IMSI and Subsidiary from and against any and all
actual losses, obligations, deficiencies, liabilities, damages, costs and
expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution or defense of
any matter indemnified pursuant hereto) which either of them may sustain,
suffer or incur and which arise out of, are caused by, relate to, or result
or occur from or in connection with any breach by Alliance or Xxxxx and Xxx
of any representation, warranty or covenant made by any one or all of them,
in this Agreement or the Alliance Documents, as applicable (provided,
however, that the provisions of this subsection 4.1 shall not be available
to the extent that the damages result from the actions or omissions of
Take-Two, IMSI or the Subsidiary).
-15-
The foregoing indemnification shall also apply to direct claims by
Take-Two, IMSI and/or Subsidiary against the Alliance Stockholders.
4.2. Indemnification by Take-Two, IMSI and the Subsidiary. Subject to
the provisions of Paragraph 4.5 hereof, each of Take-Two, IMSI and the
Subsidiary, jointly and severally, indemnifies and agrees to defend and
hold harmless the Alliance Stockholders from and against any and all actual
losses, obligations, deficiencies, liabilities, damages, costs and expenses
(including, without limitation, the amount of any settlement entered into
pursuant hereto, and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of any matter
indemnified pursuant hereto), which it or he may sustain, suffer or incur
and which arise out of, are caused by, relate to, or result or occur from
or in connection with any breach by Take-Two, IMSI or Subsidiary of any
representation, warranty or covenant made by either or both of them in this
Agreement or any Take-Two Document, (provided, however, that the provisions
of this subsection 4.2 shall not be available to the extent that the
damages result from the actions or omissions of Alliance or the Alliance
Stockholders). The indemnification provisions herein shall also apply to
direct claims by the Alliance Stockholders against Take-Two, IMSI or the
Subsidiary.
4.3. Third Party Claims. Subject to the provisions of Paragraph 4.5,
if a claim by a third party is made against any party or parties hereto and
the party or parties against whom said claim is made intends to seek
indemnification with respect thereto under subsections 4.1 or 4.2 or such
claim is made by EAB against the Alliance Stockholders under the personal
guaranties, the party or parties seeking such indemnification shall
promptly notify the indemnifying party or parties, in writing, of such
claim, providing such details of the claim (including the claimed amount)
as are then known; provided, however, that the failure to give such notice
shall not affect the rights of the indemnified party or parties hereunder
except to the extent that such failure materially and adversely affects the
indemnifying party or parties due to the inability to timely defend such
action. The indemnifying party or parties shall have 10 business days after
said notice is given to elect, by written notice given to the indemnified
party or parties, to undertake, conduct and control, through counsel of
their own choosing (subject to the consent of the indemnified party or
parties, such consent not to be unreasonably withheld) and at their sole
risk and expense, the good faith settlement or defense of such claim, and
the indemnified party or parties shall cooperate with the indemnifying
parties in connection therewith; provided: (a) all settlements require the
prior reasonable consultation with the indemnified party and the prior
written consent of the indemnified party, which consent shall not be
unreasonably withheld, and (b) the indemnified party or parties shall be
-16-
entitled to participate in such settlement or defense through counsel
chosen by the indemnified party or parties, provided that the fees and
expenses of such counsel shall be borne by the indemnified party or
parties. So long as the indemnifying party or parties are contesting any
such claim in good faith, the indemnified party or parties shall not pay or
settle any such claim; provided, however, that notwithstanding the
foregoing, the indemnified party or parties shall have the right to pay or
settle any such claim at any time, provided that in such event they shall
waive any right of indemnification therefor by the indemnifying party or
parties. If the indemnifying party or parties do not make a timely election
to undertake the good faith defense or settlement of the claim as
aforesaid, or if the indemnifying parties fail to proceed with the good
faith defense or settlement of the matter after making such election, then,
in either such event, the indemnified party or parties shall have the
right, through counsel of their own choosing (subject to the consent of the
indemnifying party or parties, such consent not to be unreasonably
withheld) to contest, settle or compromise (provided that all settlements
or compromises require the prior reasonable consultation with the
indemnifying party and the prior written consent of the indemnifying party,
which consent shall not be unreasonably withheld) the claim at their
exclusive discretion, at the risk and expense of the indemnifying parties;
it being understood that payment by the indemnifying parties of damages,
costs and expenses to the indemnified party or parties shall be on a thirty
(30) day basis following submission to such indemnifying parties of
invoices, etc. evidencing damage, costs and expenses incurred by the
indemnified party or parties.
4.4. Assistance. Regardless of which party is controlling the defense
of any claim, each party shall act in good faith and shall provide
reasonable documents and cooperation to the party handling the defense.
4.5. Limitations. Notwithstanding the foregoing, and subject only to
the set-off provisions with respect to Alliance's accounts receivable
provided for in subsection 2.11(a) hereof, each of the parties covenants
and agrees that the indemnification provisions of this Section 4 shall not
be applicable unless and until the aggregate of all indemnifiable amounts
sought against the indemnifying parties first exceeds $50,000, in which
event the party seeking indemnification may seek indemnification for
amounts in excess of $50,000; provided, however, that the Alliance
Stockholders shall not have any liability with respect to the
representation and warranty relating to receivables unless and until the
amounts of defenses, set-offs, counterclaims or disputes exceed $100,000;
provided further that any such amounts shall be applied to the $50,000
basket provided for herein with respect to other damages (exclusive of the
aforementioned set-offs for receivables up to an aggregate amount of
$100,000). Notwithstanding any obligations to indemnify pursuant hereto,
the maximum liability
-17-
of each of the Alliance Stockholders shall be the value of their respective
share of the Stock Consideration, as valued at the closing bid price of
Take-Two Common Stock on the Nasdaq SmallCap Market for the trading day
immediately preceding the date hereof. Satisfaction of any obligation to
indemnify may be satisfied (i) by delivery of shares of Take-Two Common
Stock (valued at the closing bid price for the Take-Two Common Stock the
trading day immediately preceding the date hereof) or (ii) by cash. In no
event shall any Alliance Stockholder have any liability for indemnification
obligations under this Agreement in excess to the market value of their
Stock Consideration (as valued above) received by that individual Alliance
Stockholder. The closing bid price for the Take-Two Common Stock on the
Nasdaq Small Cap Market for the trading preceding the date hereof was 5
3/8.
5. Covenants
5.1. Consummation of Transaction. Each of the parties hereto hereby
agrees to use all reasonable efforts to cause all conditions precedent to
his or its obligations (and to the obligations of the other parties hereto
to consummate the transactions contemplated hereby) to be satisfied,
including, but not limited to, using all reasonable efforts to obtain all
required (if so required by this Agreement) consents, waivers, amendments,
modifications, approvals, authorizations, novations and licenses; provided,
however, that nothing herein contained shall be deemed to modify any of the
absolute obligations imposed upon or rights of any of the parties hereto
under this Agreement or any agreement executed and delivered pursuant
hereto.
5.2. Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees to fully cooperate
with the other parties hereto in preparing and filing any notices,
applications, reports and other instruments and documents which are
required by, or which are desirable in the reasonable opinion of any
of the parties hereto, or their respective legal counsel, in respect
of, any statute, rule, regulation or order of any governmental or
administrative body in connection with the transactions contemplated
by this Agreement, subject to subsection 5.20 hereof. The legal,
administrative costs and disbursements incurred providing this
cooperation shall be borne by the party who seeks such cooperation.
(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record, or cause such other parties
to the extent permitted by law to execute, acknowledge, deliver, file
and/or record such other documents as may be required by this
Agreement and as Take-Two, IMSI and/or Subsidiary, on the one hand,
and/or Alliance and/or the Alliance Stockholders, on the other, or
their
-18-
respective legal counsel may reasonably require in order to document
and carry out the transactions contemplated by this Agreement. The
legal, administrative costs and disbursements incurred by the party of
whom the request is being made shall be borne by the party who sought
such request.
5.3. Broker. Each of the parties hereto represents and warrants to the
other parties that no broker or finder was engaged in connection with the
transaction contemplated by this Agreement with whom the indemnifying party
has dealt, and each of the parties shall indemnify and hold the other
harmless from and against any and all claims or liabilities asserted by or
on behalf of any alleged broker or finder for broker's fees, finder's fees,
commissions or like payments, without regard to the indemnification
limitations contained in this Agreement.
5.4. Employment Agreements. Simultaneous with the execution of this
Agreement, each of Xxx and Xxxxx will enter into an employment agreement
with Subsidiary in the form of Exhibits 5.4A and 5.4B hereto (the
"Employment Agreements").
5.5. Stock Options. At the Effective Time, Take- Two shall provide and
the Company shall grant five (5) year non-qualified options to purchase
shares of Take-Two Stock, at an exercise price of $2.00 per share, as
follows:
Name Amount of Stock
---- ---------------
Xxxxx Xxxxxxxxxx 19,000
Xxxx Xxxxxxxxx 38,000
Xxxxx Xxxxxx 19,000
Such non-qualified options shall vest as follows: (i) 33% on the one
year anniversary thereof; (ii) 33% on the two year anniversary thereof; and
(iii) 34% on the three year anniversary thereof.
5.6. Stock Option Plan. As promptly as possible, the Company shall
amend its Stock Option to provide for an additional 90,000 shares of
Take-Two Stock for the granting of stock options by the Company to
management and key employees of Alliance pursuant to the terms and
conditions of such Plan.
5.7. Capital Contribution. Simultaneously herewith, Take-Two shall
make a capital contribution to Alliance by certified check or wire transfer
of immediately available funds (at the option of the Alliance
Stockholders), in the aggregate amount of $1.5 million, in order for the
Company to discharge in full its outstanding indebtedness to the Alliance
Stockholders in the form of promissory notes ("Stockholder Notes"), as
provided for in the corporate resolution of L&J
-19-
Marketing, Inc., dated December 1, 1997. It is agreed that the Stockholder
Notes may be satisfied by direct payment of the capital contribution to the
holders of the Notes, or the Stockholder Notes may be partially or fully
satisfied prior to consummation of the transactions contemplated by this
Agreement, and in such event, the aforementioned capital contribution shall
be used to satisfy any debt incurred or replenish any account used
diminished as a result of the satisfaction of Stockholder Notes.
5.8. Credit Facility.
(a) Simultaneously herewith, Subsidiary and IMSI, as
co-borrowers, shall enter into an agreement with NationsBank, NA (the
"Bank"), whereby the Bank will grant to Subsidiary and IMSI, as
co-borrowers, a line of credit in an amount no less than $5 million,
upon terms and conditions mutually agreeably to the parties thereto.
(b) Simultaneously herewith, Subsidiary shall pay down any
outstanding balance on the existing lines of credit of Alliance with
each of EAB and NationsCredit, where upon such lines of credit shall
be terminated and each of Xxxxx and Xxx shall, effective as of the pay
down date, be released as personal guarantors thereto.
6. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that all representations and
warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto shall survive the Effective
Time until April 30, 1999, except for the representations and warranties
contained in subsections 2.8 and 2.15, which shall survive for the applicable
statute of limitations period.
7. General Provisions.
7.1. Fees and Expenses.
(a) Take-Two, on the one hand, and Alliance, on the other hand,
shall be responsible for and shall, prior to the Effective Time, pay
the fees and expenses incurred by each of (i) Take-Two, IMSI and the
Subsidiary and (ii) Alliance and the Alliance Stockholders,
respectively, in connection with the Merger and the transactions
contemplated by this Agreement.
(b) Take-Two and the Subsidiary agree that the legal and other
reasonable costs and disbursements incurred by the Alliance
Shareholders in conjunction with this merger shall be paid by Alliance
prior to the consummation of this
-20-
Agreement. Take-Two and Subsidiary hereby consent to such payment by
Alliance.
7.2. Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
7.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be delivered personally by
registered or certified mail (postage prepaid, return receipt requested) or
recognized overnight courier and shall be deemed to have been duly given or
made as of the date of actual delivery, at the following addresses (or at
such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
If to Take-Two, IMSI
or Subsidiary: Take-Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx
Attn: Xxxx Xxxxx
with a copy to: Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
If to Alliance: L&J Marketing, Inc.
00-00X 000xx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxx Xxxxxx
with a copy to: Law Offices of Xxxxx X. Xxxxxx
000-00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
As for the Alliance Shareholders:
If to Xxxxx: 00 Xxxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
with a copy to: Law Offices of Xxxxx X. Xxxxxx
000-00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
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If to Xxx:
00 Xxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
with a copy to: Law Offices of Xxxxx X. Xxxxxx
000-00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
If to Xxxxx Xxxxxx:
000 Xxxxxxx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
with a copy to: Law Offices of Xxxxx X. Xxxxxx
000-00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
7.4. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the greatest extent possible.
7.5. Entire Agreement. This Agreement and the Confidentiality
Agreement and the agreements referred to herein constitute the entire
agreement, and supersede all prior agreements, representations and
undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
7.6. No Assignment. This Agreement shall not be assigned by operation
of law or otherwise, and any assignment shall be null and void.
7.7. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York without regard to its
choice of law principles.
-22-
7.8. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, but all
of which taken together shall constitute one and the same agreement.
-23-
IN WITNESS WHEREOF, each of the parties hereto, have caused this Agreement
to be executed as of the date first written above.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By:
----------------------------
Xxxx Xxxxx, CEO
INVENTORY MANAGEMENT SYSTEMS, INC.
By:
----------------------------
ALLIANCE INVENTORY MANAGEMENT, INC.
By:
----------------------------
L&J MARKETING, INC.
By:
----------------------------
-------------------------------
XXX XXXXXX
-------------------------------
XXXXX XXXXXX
-------------------------------
XXXXX XXXXXX
-24-
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
Page
----
EXHIBITS
--------
Exhibit 1.2 Certificate of Merger.............................................2
Exhibit 1.4(a) Subsidiary Certificate of Incorporation........................2
Exhibit 1.4(b) Subsidiary By-Laws.............................................2
Exhibit 1.7(b)(v) Satisfaction and Release ...................................5
Exhibit 5.4A Employment Agreement (Xxxxx)....................................19
Exhibit 5.4B Employment Agreement (Xxx)......................................19
Schedule 1.6(a) Allocation of Consideration ................................. 3
Schedule 2.6 Noncontravention ................................................4
Schedule 2.7 Litigation ......................................................7
Schedule 2.12 Property........................................................8
Schedule 2.14 Bank/Power of Attorney..........................................9
Schedule 2.17 Material Contracts.............................................12
-25-
AGREEMENT AND PLAN OF MERGER
by and among
TAKE-TWO INTERACTIVE SOFTWARE, INC.,
INVENTORY MANAGEMENT SYSTEMS, INC.,
ALLIANCE INVENTORY MANAGEMENT, INC.,
L&J MARKETING INC. d/b/a ALLIANCE DISTRIBUTORS,
and each of
XXX XXXXXX, XXXXX XXXXXX and XXXXX XXXXXX
-------------------------
December , 1997
-------------------------
TABLE OF CONTENTS
Page
1. The Merger1
1.1. The Merger ..................................................... 1
1.2. Effective Time ................................................. 1
1.3. Effect of the Merger ........................................... 2
1.4. Certificate of Incorporation; By-Laws .......................... 2
1.5. Directors and Officers of Surviving Corporation ................ 2
1.6. Conversion of Securities ....................................... 2
1.7. Deliveries ..................................................... 18
2. Representations and Warranties as to Alliance and Stockholder ......... 4
2.1. Organization, Standing and Power ............................... 4
2.2. Capitalization ................................................. 4
2.3. Ownership of Alliance Common Stock ............................. 4
2.4. Interests in Other Entities .................................... 5
2.5. Authority ...................................................... 5
2.6. Noncontravention ............................................... 6
2.7. Litigation ..................................................... 6
2.8. No Violation of Law ............................................ 6
2.9. Financial Statements ........................................... 7
2.10. Absence of Undisclosed Liabilities ............................. 7
2.11. Accounts Receivables; Inventories .............................. 7
2.12. Properties ..................................................... 8
2.13. Intellectual Property .......................................... 8
2.14. Banks; Powers of Attorney ...................................... 9
2.15. Tax Matters .................................................... 9
2.16. Certain Business Matters ....................................... 10
2.18. Customers and Suppliers ........................................ 11
2.19. Nature of Securities ........................................... 11
2.20. Investment Representations ..................................... 12
2.21. Information as to Alliance and the Alliance Stockholders ....... 12
3. Representations and Warranties as to Take-Two, IMSI and
Subsidiary ............................................................ 12
3.1. Organization, Standing and Power ............................... 12
3.2. Authority ...................................................... 13
3.3. Capitalization ................................................. 14
3.4. Stock Consideration ............................................ 14
3.5. Information as to Take-Two, IMSI and the Subsidiary ............ 14
4. Indemnification ....................................................... 15
4.1. Indemnification by the Alliance Stockholders ................... 15
4.2. Indemnification by ............................................. 15
4.3. Third Party Claims ............................................. 15
4.4. Assistance ..................................................... 16
4.5. Limitations .................................................... 16
5. Covenants ............................................................. 17
5.1. Consummation of Transaction .................................... 17
5.2. Cooperation/Further Assurances ................................. 17
5.3. Broker ......................................................... 18
5.4. Employment Agreements .......................................... 18
5.5. Stock Options .................................................. 18
5.6. Stock Option Plan .............................................. 18
5.7. Capital Infusion ............................................... 20
5.8. Credit Facility ................................................ 20
7. Survival of Representations and Warranties ............................ 20
8. General Provisions .................................................... 21
8.1. Fees and Expenses .............................................. 20
8.2. Amendment ...................................................... 20
8.3. Notices ........................................................ 21
8.4. Severability ................................................... 23
8.5. Entire Agreement ............................................... 23
8.6. No Assignment .................................................. 23
8.7. Governing Law .................................................. 23
8.8. Counterparts ................................................... 23
-ii-
