ASSET BASED
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of August 31, 1998, between Xxxx of All Games, Inc., an
Ohio corporation ("Borrower"), whose mailing address is 0000 Xxxxxxxxxxxxx Xxxx,
Xxxx Xxxxxxx, Xxxx 00000, and The Provident Bank ("Bank"), an Ohio banking
corporation whose mailing address is Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
00000.
This Agreement is executed in substitution of, and replaces, the Amended
and Restated Loan and Security Agreement between Borrower and Bank dated August
27, 1997.
1. Definitions. As used herein, the following terms, when initial capital
letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Uniform Commercial Code as adopted in Ohio
shall have the meanings given therein unless otherwise defined herein.
1.1 Accounts shall mean all of Borrower's accounts (as that term is defined
in the Uniform Commercial Code), accounts receivable, chattel paper, contract
rights, documents and instruments; all other obligations or indebtedness owed to
Borrower from whatever source arising; all guarantees of any of the foregoing
and all security therefor; all of the right, title and interest of Borrower in
and with respect to the goods, services or other property which gave rise to or
which secure any of the foregoing and all insurance policies and proceeds
relating thereto; all of the foregoing whether now owned by Borrower or
hereafter acquired or in existence.
1.2 Affiliate shall mean any person, company or business entity
controlling, controlled by or under common control with, Borrower, whether such
common control is direct or indirect, and all of the partners, officers,
directors and shareholders of Borrower and such entities.
1.3 Cash Collateral Account shall mean that deposit account maintained by
Borrower at Bank into which all collections on the Collateral shall be deposited
and over which Bank shall have the sole power of withdrawal as provided in
Section 7.1.
1.4 Collateral shall mean (a) all of Borrower's Accounts, Equipment,
General Intangibles, Inventory and all other items of personal property now
owned or hereafter acquired by Borrower or in which Borrower has granted or may
in the future grant a security interest to Bank hereunder or in any supplement
hereto or otherwise; (b) all of Borrower's right, title and interest in and to
all goods or other property represented by or securing any of the Accounts,
including all goods that may be reclaimed or repossessed from or returned by
Debtors; (c) all of Borrower's rights as an unpaid seller, including
-2-
stoppage in transit, detinue and reclamation; (d) all additional amounts due to
Borrower from any Debtor, irrespective of whether such additional amounts have
been specifically assigned to Bank; (e) all guaranties or other agreements or
property securing or relating to any of the items referred to in (a) above, or
acquired for the purpose of securing and enforcing any of such items; (f) all
instruments, documents, securities, cash, property, deposit accounts (including
but not limited to deposits made to Borrower's Cash Collateral Account), and the
proceeds of any of the foregoing, owned by Borrower or in which it has an
interest, which are now or may hereafter be in the possession or control of Bank
or in transit by mail or carrier to or from Bank, or in possession of any third
party acting on behalf of Bank, without regard to whether Bank received same in
pledge, for safekeeping, as agent for collection or transmission or otherwise or
whether Bank had conditionally released the same; (g) all ledger sheets, files,
records, documents, blueprints, drawings and instruments (including, without
limitation, computer programs, tapes and related electronic data processing
software) evidencing an interest in or relating to the foregoing; and (h) all
proceeds and products of the collateral described above, including, without
limitation, all claims against third parties for damage to or loss or
destruction of any of the foregoing, including insurance proceeds, and accounts,
contract rights, chattel paper and general intangibles arising out of any sale,
lease or other disposition of any of the foregoing.
1.5 Debtor shall mean the account debtor with respect to any of Borrower's
Accounts and/or the prospective purchaser with respect to any contract right,
and/or any party who enters into or proposes to enter into any contract or other
arrangement with Borrower pursuant to which Borrower is to deliver any personal
property or perform any service.
1.6 Eligible Inventory shall mean such of Borrower's Inventory as is
acceptable to Bank in its sole discretion and in which Bank shall have a
perfected first priority security interest.
1.7 Eligible Accounts shall mean such Accounts which are and at all times
shall continue to be acceptable to Bank in all respects and in which Bank shall
have a perfected first priority security interest. Criteria for eligibility
shall be fixed and revised from time to time solely by Bank in its exclusive
judgment. In general, an Account shall in no event be deemed to be eligible
unless (a) delivery of the merchandise or the rendition of services has been
completed; (b) no return, rejection or repossession has occurred; (c) such
merchandise or services have been finally accepted by the customer without
dispute, offset, defense or counterclaims; (d) such Account continues to be in
full conformity with the representations and warranties made by Borrower to Bank
with respect thereto; (e) no more than 90 days have elapsed from the invoice
date; and (f) Bank is and continues to be satisfied with the credit standing
-3-
of the Debtor in relation to the amount of credit extended. Accounts due from
Debtors who are Affiliates of Borrower shall in no event be deemed to be
eligible.
1.8 Equipment shall mean all of Borrower's equipment (as that term is
defined in the Uniform Commercial Code), including, without limitation, all
furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor, all
whether now owned or hereafter acquired by Borrower.
1.9 General Intangibles shall mean all of Borrower's general intangibles
(as that term is defined in the Uniform Commercial Code), including, without
limitation, all goodwill, patents, formulas, blueprints, proprietary
manufacturing processes, trademarks, trade names, licenses, franchises,
beneficial interests in trusts, joint venture interests, partnership interests,
rights to tax refunds, rights to insurance proceeds (including, but not limited
to, any proceeds of credit insurance policies on Borrower's customers), rights
under causes of action, rights to pension plan overfundings, literary rights and
other contractual rights of Borrower, all whether now owned or hereafter
acquired by Borrower.
1.10 Guarantors shall mean the collective reference to Take-Two Interactive
Software, Inc., a Delaware corporation ("Take-Two"), Xxxxx Xxxxxxxxx
("Xxxxxxxxx") and Xxxxxx Xxxxxxxxx.
1.11 Inventory shall mean all of Borrower's inventory (as that term is
defined in the Uniform Commercial Code), including, without limitation, all
goods, merchandise and other personal property which are held for sale or lease,
or are furnished or to be furnished under any contract of service by Borrower,
or are raw materials, work-in-progress, supplies or materials used or consumed
in Borrower's business, and all products thereof, and all substitutions,
replacements, additions and accessories thereto, all whether now owned or
hereafter acquired by Borrower; and all of Borrower's right, title and interest
in and to any leases or rental agreements for such inventory.
1.12 Inventory Cap shall mean $7,500,000 during the months of August
through January and shall mean $6,000,000 during the months of February through
July.
1.13 Loan Documents shall mean the collective reference to this Agreement,
the Notes, the Xxxxxxxxx Guaranty, the Xxxxxx Xxxxxxxxx Guaranty, the Take-Two
Guaranty, the Xxxxxxxxx Life Insurance Assignment, the Xxxxxx Xxxxxxxxx Life
Insurance Assignment, the Xxxxxxxx Xxxxxxxxx Life Insurance Assignment, the
Warrant Agreement, the Warrant and all other documents, instruments,
certificates and agreements (including without limitation financing statements)
executed or delivered in connection with the transactions contemplated under
this Agreement.
-4-
1.14 Loans shall mean the collective reference to the Revolving Credit
Loans, the Term Loan A and the Term Loan B.
1.15 Notes shall mean the collective reference to the Revolving Credit
Note, the Term Note A and the Term Note B.
1.16 Obligations shall mean, without limitation, all Loans and all other
debts, obligations and liabilities of every kind and description of Borrower to
Bank, now due or to become due, direct or indirect, absolute or contingent,
presently existing or hereafter arising, joint or several, secured or unsecured,
whether for payment or performance, regardless of how the same arise or by what
instrument, agreement or book account they may be evidenced, or whether
evidenced by any instrument, agreement or book account, including, without
limitation, all loans (including any loan by renewal or extension), all
overdrafts, all guarantees, all bankers acceptances, all agreements, all letters
of credit issued by Bank for Borrower and the applications relating thereto, all
indebtedness of Borrower to Bank, all undertakings to take or refrain from
taking any action and all indebtedness, liabilities and obligations owing from
Borrower to others which Bank may obtain by purchase, negotiation, discount,
assignment or otherwise. Obligations shall also include all interest and other
charges chargeable to Borrower or due from Borrower to Bank from time to time
and all costs and expenses referred to in Section 12.
1.17 Permitted Liens shall mean the liens and interests in favor of Bank
granted in connection herewith and, to the extent reflected on Borrower's books
and records and not impairing the operations of Borrower or any performance
hereunder or contemplated hereby:
(i) liens arising by operation of law for taxes not yet due and
payable;
(ii) statutory liens of mechanics, materialmen, shippers and
warehousemen for services or materials for which payment is not yet due;
(iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(iv) liens, if any, specifically permitted by Bank from time to time
in writing; and (v) the following if the validity or amount thereof is
being contested in good faith and by appropriate and lawful proceedings
promptly initiated and diligently conducted of which Borrower has given
prior notice to Bank and for which appropriate reserves (in Bank's
reasonable judgment) have been established and so long as levy and
execution have been and continue to be stayed: claims and liens for taxes
due and payable and claims of mechanics, materialmen, shippers,
warehousemen, carriers and landlords.
-5-
1.18 Prime Rate shall mean that annual percentage rate of interest which is
established by Bank from time to time as its prime rate, whether or not such
rate is publicly announced, and which provides a base to which loan rates may be
referenced. The Prime Rate is not necessarily the lowest lending rate of Bank.
1.19 Subordinated Debt shall mean indebtedness subordinated to the
Obligations of Borrower to Bank in form and substance satisfactory to Bank.
2. Loans
2.1 Revolving Credit Loans. Bank will make revolving credit loans to
Borrower (the "Revolving Credit Loans") in an aggregate amount not to exceed the
lesser of (a) $20,000,000 (the "Revolving Loan Cap") or (b) (i) the lesser of
(A) 50% of the cost or market value, whichever is lower, of Borrower's Eligible
Inventory or (B) the then-applicable Inventory Cap plus (ii) 85% of the
outstanding amount of Borrower's Eligible Accounts owed by Debtors with respect
to which Borrower has credit insurance in amounts and in formats acceptable to
Bank ("Insured Customers") plus (iii) 75% of the outstanding amount of
Borrower's other Eligible Accounts plus (iv) 100% of the balance of the Cash
Collateral Account (the amount calculated under (b) being sometimes referred to
herein as the "Borrowing Base" and the lesser of (a) and (b) being sometimes
referred to herein as the "Maximum Revolving Loan Amount"). Should the
outstanding amount of Revolving Credit Loans at any time exceed the upper limits
therefor set forth in the immediately preceding sentence, Borrower shall on
demand immediately repay such excess amount. The Revolving Credit Loans shall be
evidenced by, and shall bear interest and be payable in accordance with, an
Amended and Restated Promissory Note (the "Revolving Credit Note") in
substantially the form attached hereto as Exhibit A. If the average outstanding
principal balance of the Revolving Credit Loans during any calendar quarter is
less than the Revolving Loan Cap, Borrower shall pay Bank a fee, in arrears on
the first day after the end of such calendar quarter, equal to .25% per annum of
the amount of the difference between the average outstanding principal amount of
the Revolving Credit Loans during such quarter and the Revolving Loan Cap.
2.2 Term Loan A. Bank has made a term loan (the "Term Loan A") to Borrower
in the principal amount of $200,000. The Term Loan A shall be evidenced by, and
shall bear interest and be payable in accordance with, the Promissory Note (the
"Term Note A") dated as of August 27, 1997 given by Borrower to Bank, a copy of
which is attached hereto as Exhibit B. No repayment or prepayment of Term Loan A
shall be reason for any relending or additional lending of Term Loan A proceeds
to Borrower.
-6-
2.3 Term Loan B. Bank has made another term loan (the "Term Loan B") to
Borrower in the principal amount of $2,000,000. The Term Loan B shall be
evidenced by, and shall bear interest and be payable in accordance with, an
Amended and Restated Promissory Note (the "Term Note B") in substantially the
form attached hereto as Exhibit C. No repayment or prepayment of Term Loan B
shall be reason for any relending or additional lending of Term Loan B proceeds
to Borrower.
2.4 Default Rate. Upon the occurrence of an Event of Default, the Loans
shall bear interest at a rate of 4% per annum greater than the rate otherwise
applicable to the Loans (the "Default Rate").
2.5 Interest Calculation. Interest on the Loans will be calculated on the
basis of the actual number of days elapsed over an assumed year consisting of
360 days.
2.6 Change in Law. In case of any change in law or governmental rules,
regulations, guidelines or orders (or any interpretations thereof) or the
introduction of new laws, regulations or guidelines, which require Bank to
reserve for unfunded credit commitments, Bank may charge Borrower an additional
fee which will reasonably compensate Bank for such requirements. Bank agrees to
provide Borrower with written notice setting forth such requirements.
2.7 Loan Payments. All payments of interest, principal and all other
amounts owing hereunder or under the Notes shall be made by Borrower to Bank in
immediately available funds at its principal office in Cincinnati, Ohio or at
such other place as Bank may designate in writing, at such times as shall be set
forth herein or in the Notes or if not so set forth, such amounts shall be
payable on demand. Borrower hereby authorizes Bank, at Bank's option, to charge
any account or charge or increase any Loan balance of Borrower at Bank for the
payment or repayment of any interest or principal of the Loans or any fees,
charges or other amounts due to Bank hereunder.
2.8 Prepayment, Refinancing. In the event of prepayment of the principal
amount of any of the Loans in whole or in part prior to the maturity date
thereof (except for regularly-scheduled installments due on Term Loan A and
except for prepayment of the Revolving Credit Loans in full) with cash obtained
from any source (including without limitation another lender) other than the
operation of Borrower's business in the ordinary course, Borrower shall pay Bank
a fee in the amount of 2% of the amount so prepaid, and in the event of
prepayment of the principal amount of the Revolving Credit Loans in full prior
to the maturity date thereof with cash obtained from any source (including
without limitation another lender) other than the operation of Borrower's
business in the ordinary course, Borrower shall pay Bank a fee in the amount of
$400,000. In the event that at any time prior to June 1, 1999 Borrower should
receive a bona fide commitment for refinancing of any of the Loans, Borrower
-7-
shall notify Bank thereof in writing, and Bank shall have the right of first
refusal to provide financing to Borrower on the same general terms as are
provided in such commitment, and Bank shall notify Borrower within two weeks
after receipt of such notification whether Bank elects to exercise such right.
2.9 Letters of Credit. Bank proposes, subject to the terms and conditions
of this Agreement, to issue commercial and/or standby letters of credit for the
account of Borrower (the "Letters of Credit"), which shall be secured by the
Collateral, shall have expiration dates that are not later than the Revolving
Credit Maturity Date, and shall be in such amounts as Borrower may from time to
time request and as are acceptable to Bank; provided, however, that in no event
shall the total aggregate face amount of all Letters of Credit outstanding at
any time exceed the difference between (a) the Maximum Revolving Loan Amount and
(b) the outstanding principal balance of the Revolving Credit Loans. Bank's
approval or disapproval of each Letter of Credit shall be made no later than
five business days after a written request from Borrower is received by Bank
accompanied by an original of Bank's standard form letter of credit application
and agreement duly executed by Borrower. Each Letter of Credit shall be fully
reserved from and subject to the limitations of the availability to Borrower of
the Revolving Credit Loans, and upon any draw under a Letter of Credit, the
amount so drawn shall immediately and automatically be deemed a Revolving Credit
Loan advance by Bank to Borrower hereunder. Borrower shall pay Bank a per annum
fee in the amount of 1.5% of the face amount of each standby Letter of Credit
and shall pay Bank's standard fee for each commercial Letter of Credit, as well
as Bank's customary fees ancillary to the issuance, transfer, cancellation and
payment of letters of credit; such fees shall be due and payable upon the
issuance, transfer, cancellation or payment, as applicable, of such Letter of
Credit.
2.10 Use of Proceeds. Borrower shall use the proceeds of Term Loan A only
for the purpose of financing capital expenditures and shall use the proceeds of
the Revolving Credit Loans and Term Loan B only for refinancing existing loans
and providing for future working capital needs.
3. Security for the Obligations.
3.1 Grant of Security Interest. To secure the payment and performance of
all of the Obligations, as herein defined, Borrower hereby grants to Bank a
continuing security interest in and assigns to Bank all of the Collateral.
3.2 Additional Security. The full and timely payment and performance of all
of the Obligations shall be further secured by (a) the payment guaranty of
Xxxxxxxxx in substantially the form of Exhibit D attached hereto (the "Xxxxxxxxx
Guaranty"); (b) the payment guaranty of Xxxxxx Xxxxxxxxx in
-8-
substantially the form of Exhibit E attached hereto (the "Xxxxxx Xxxxxxxxx
Guaranty"); (c) the payment guaranty of Take-Two in substantially the form of
Exhibit F attached hereto (the "Take-Two Guaranty"); (d) an assignment of the
proceeds of a $1,000,000 insurance policy on the life of Xxxxxxxxx as previously
provided to Bank (the "Xxxxxxxxx Life Insurance Assignment"), and in the event
of the death of Xxxxxxxxx, the proceeds of the insurance thereunder shall be
applied to the Obligations in such order of application as Bank may, in its sole
discretion, elect; (e) an assignment of the proceeds of a $2,000,000 insurance
policy on the life of Xxxxxx Xxxxxxxxx as previously provided to Bank (the
"Xxxxxx Xxxxxxxxx Life Insurance Assignment"), and in the event of the death of
Xxxxxx Xxxxxxxxx, proceeds of the insurance thereunder shall be applied to the
Obligations in such order of application as Bank may, in its sole discretion,
elect; and (f) an assignment of the proceeds of a $2,000,000 insurance policy on
the life of Xxxxxxxx Xxxxxxxxx pursuant to an Assignment of Life Insurance
Policy as Collateral in substantially the form of Exhibit G attached hereto (the
"Xxxxxxxx Xxxxxxxxx Life Insurance Assignment"), which shall be duly completed,
executed and delivered to Bank within 60 days after the date hereof, together
with the original life insurance policy therefor and evidence of the payment of
all premiums due thereon, and in the event of the death of Xxxxxxxx Xxxxxxxxx,
the proceeds of the insurance thereunder shall be applied to the Obligations in
such order of application as Bank may, in its sole discretion, elect. The
Xxxxxxxxx Guaranty and the Xxxxxx Xxxxxxxxx Guaranty shall be released at such
time after December 1, 1998, if any, as: (i) Take-Two has provided at least
$2,000,000 in capital (in addition to any capital provided prior to the date
hereof or contemporaneously with the closing of the transactions contemplated
hereunder) or Subordinated Debt to Borrower, (ii) Borrower's Consolidated
Tangible Net Worth (as hereinafter defined) as reflected in Borrower's financial
statements provided to Bank pursuant to Section 5.4 as of the end of any
calendar quarter, commencing with the calendar quarter ended December 31, 1998,
is at least $5,000,000, and (iii) no Event of Default hereunder has occurred.
4. Representations and Warranties. Borrower hereby represents and warrants
to Bank that:
4.1 (a) Organization and Authority. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has the corporate power and authority to conduct its business as now
conducted and as proposed to be conducted while this Agreement is in effect; (b)
the execution and delivery of this Agreement, the Notes and the other Loan
Documents to which Borrower is a party and the performance of the transactions
contemplated hereby and thereby are within the corporate authority of Borrower
and have been duly authorized by all proper and necessary corporate
-9-
action; (c) the execution and delivery of this Agreement, the Notes and the
other Loan Documents to which Borrower is a party and the performance of the
transactions contemplated hereby and thereby will not violate or contravene any
provisions of law or the articles of incorporation or code of regulations of
Borrower, or result in a breach or default in respect of the terms of any other
agreement to which Borrower is a party or by which it is bound, which breach or
default would result in the creation, imposition or enforcement of any lien
against any of the Collateral, or would have a material adverse affect on the
conduct of Borrower's business as it is now being conducted and proposed to be
conducted while this Agreement is in effect, or would otherwise impair the value
of the security interest granted to Bank hereunder; and (d) Borrower is duly
qualified as a foreign corporation and is in good standing and duly authorized
to do business in every jurisdiction where the nature of its properties or the
conduct of its business requires such qualification and authorization.
4.2 Binding Effect of Documents. This Agreement, the Notes and the other
Loan Documents to which it is a party are legal and binding obligations of
Borrower enforceable in accordance with their terms.
4.3 Government Consent. The execution and delivery of this Agreement, the
Notes and the other Loan Documents to which it is a party and the performance of
the transactions contemplated hereby and thereby do not require any approval or
consent of any governmental agency or authority, or of any other party.
4.4 Financial Statements. Borrower has delivered to Bank copies of its
audited financial statements as of and for the year ending December 31, 1997 and
its internally-prepared financial statements as of and for the interim period
ending July 31, 1998. All of these financial statements are true and correct,
are in accordance with the respective books of account and records of Borrower
and its subsidiaries (if any) and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods, and accurately present the financial condition of Borrower
and its subsidiaries (if any) and their assets and liabilities and the results
of their operations as at such date.
4.5 No Change in Financial Condition. Since the ending date of the interim
financial statements described in Section 4.4, there has been no change in the
assets, liabilities, financial condition or operation of Borrower, other than
changes in the ordinary course of business, the effect of which have not,
individually or in the aggregate, been materially adverse.
-10-
4.6 No Other Liabilities. Except to the extent reflected in the interim
financial statements described in Section 4.4 or as otherwise disclosed to Bank
by Borrower in writing, Borrower, as of the date of this Agreement, does not
know or have reasonable grounds to know of any basis for the assertion against
it of any material liabilities or obligations of any nature, direct or indirect,
accrued, absolute or contingent, including, without limitation, liabilities for
taxes then due or to become due whether incurred in respect of or measured by
the income of Borrower for any period prior to the date of this Agreement or
arising out of transactions entered into, or any state of facts existing, prior
thereto.
4.7 Taxes. Borrower has filed all federal, state, local and other tax
returns and reports required to be filed by it and such returns and reports are
true and correct. Borrower has paid all taxes, assessments and other
governmental charges lawfully levied or imposed on or against it or its
properties, other than those presently payable without penalty or interest.
4.8 No Litigation. Except as reflected on Schedule 4.8 attached hereto,
there is no litigation or proceeding or governmental investigation pending or,
to the knowledge of Borrower, threatened against or relating to Borrower, its
properties or business which is not reflected in the interim financial
statements described in Section 4.4.
4.9 Compliance with Laws. Borrower is not, to its knowledge, in violation
of or default under any statute, regulation, license, permit, order, writ,
injunction or decree of any government, governmental department, commission,
board, bureau, agency, instrumentality or court, which violation or default
would have a material adverse effect on the business, properties or condition,
financial or otherwise, of Borrower.
4.10 No Default. Borrower is not, to its knowledge, in default under a
material order, writ, judgment, injunction, decree, indenture, agreement, lease
or other instrument or contract, which default would have a material adverse
effect on the business, properties or condition, financial or otherwise, of
Borrower, or in the performance of any covenants or conditions respecting any of
its indebtedness, and no holder of any indebtedness of Borrower has given notice
of any asserted default thereunder, and no liquidation or dissolution of
Borrower and no receivership, insolvency, bankruptcy, reorganization or other
similar proceedings relative to Borrower or its properties is pending or, to the
knowledge of Borrower, is threatened against Borrower.
4.11 Location of Collateral. Borrower maintains places of business and owns
collateral only at 0000 Xxxxxxxxxxxxx Xxxx, Xxxx Xxxxxxx, Xxxx 00000 and
maintains its books of account and records, including all records concerning
Collateral, only at 0000 Xxxxxxxxxxxxx Xxxx, Xxxx Xxxxxxx, Xxxx 00000.
-11-
Borrower maintains its chief executive office at 0000 Xxxxxxxxxxxxx Xxxx, Xxxx
Xxxxxxx, Xxxx 00000.
4.12 Title to Collateral. With respect to the Collateral, at the time the
Collateral becomes subject to Bank's security interest, Borrower is and at all
times will be the sole owner of and have good and marketable title to the
Collateral, free from all liens, encumbrances and security interests in favor of
any person other than Bank except Permitted Liens and except as reflected on
Schedule 4.12 attached hereto, and has full right and power to grant Bank a
security interest therein. All information furnished to Bank concerning the
Collateral is and will be complete, accurate and correct in all material
respects when furnished.
4.13 Rights of Borrower to Accounts. As to each and every Account (a) it is
a bona fide existing obligation, valid and enforceable against the Debtor for a
sum certain for sales of goods shipped or delivered, or goods leased, or
services rendered in the ordinary course of business; (b) all supporting
documents, instruments, chattel paper and other evidence of indebtedness, if
any, delivered to Bank are complete and correct and valid and enforceable in
accordance with their terms, and all signatures and endorsements that appear
thereon are genuine, and all signatories and endorsers have full capacity to
contract; (c) the Debtor is liable for and is obligated to make payment of the
amount expressed in such Account according to its terms; (d) it will be subject
to no discount, allowance or special terms of payment without the prior approval
of Bank, except for discounts, allowances and special terms of payments offered
in the ordinary course of business; (e) with respect to each Eligible Account,
it is subject to no dispute, defense or offset, real or claimed; (f) it is not
subject to any prohibition or limitation upon assignment; (g) Borrower has full
right and power to grant Bank a security interest therein and the security
interest granted in such Account to Bank in Section 3 hereof is a valid first
security interest which will inure to the benefit of Bank without further
action. The warranties set out herein shall be deemed to have been made with
respect to each and every Account now owned or hereafter acquired by Borrower.
4.14 Rights of Borrower in Inventory. (a) The Inventory is and will be of
good and merchantable quality, free from defects and (b) none of the Inventory
is or will be stored with a bailee without the prior written consent of Bank.
4.15 Employee Benefit Plans. Borrower has complied with, and shall continue
to comply with, all applicable state and federal laws and regulations governing
employee benefit plans, including, but not limited to all regulations under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Borrower
has not received any notice to the effect that is not in full compliance with
any
-12-
of the requirements of ERISA, and no fact or situation, including but not
limited to any "Reportable Event," or "Prohibited Transaction," as such terms
are defined in ERISA, exists which is or could in any way be construed as a
violation of ERISA in connection with any Plan. Borrower has complied with all
applicable provisions of ERISA, including minimum funding requirements, has made
all filings required to be made by Borrower or any of its Plans (now or at any
time in the past maintained) under ERISA, has not applied for any extensions of
time in which to make contributions to any Plan maintained (now or at any time
in the past) by it or to which it is, or has been, required to contribute, has
timely made all contributions and paid all premiums required to be paid to the
Pension Benefit Guaranty Corporation, and no matters are presently pending
before the United States Labor Department or the Internal Revenue Service
concerning any Plan maintained (now or at any time in the past) by Borrower to
which it is or was required to contribute. Each employee pension benefit plan
(as defined in Section 3 (2) of ERISA) maintained by Borrower is qualified and
tax exempt under the Internal Revenue Code. Borrower has never had any
obligation or liability with respect to a multi-employer plan as defined in
Section 4001 (a)(3) of ERISA.
4.16 Accuracy of Representations. No representation or warranty by or with
respect to Borrower contained herein or in any certificate or other document
furnished by Borrower pursuant hereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made.
4.17 Representations as Inducement to Bank. The foregoing representations and
warranties are made by Borrower with the knowledge and intention that Bank will
rely thereon, and shall survive the execution and delivery of this Agreement and
the making of all Loans hereunder. The receipt of Borrower of each Loan advance
shall constitute a representation and warranty by Borrower that the
representations and warranties of Borrower contained in this Section 4 are true
and correct as of the date of such Loan advance, except to the extent such
representations and warranties expressly relate to an earlier date.
5. Affirmative Covenants. Borrower covenants and agrees that until all of the
Obligations have been paid in full, unless Bank shall otherwise consent in
writing, it shall:
5.1 Books and Records. Maintain complete and accurate books of account and
records pertaining to the Collateral and the operations of Borrower, and all
such books of account and records shall be kept and maintained at the location
specified in Section 4.11. Borrower shall not move such books of account and
records or change its chief executive office or open any new office without
giving Bank at least 30
-13-
days prior written notice. Prior to moving any of such books of account and
records or changing the location of its chief executive office or opening any
new office, Borrower shall execute and deliver to Bank financing statements
satisfactory to Bank. All such books of account and records and all financial
statements and reports furnished to Bank shall be maintained and prepared in
accordance with GAAP applied on a basis consistent with prior periods.
5.2 Access to Information. Grant Bank, or its representatives, full and
complete access to the Collateral and to all books of account, records,
correspondence and other papers relating to the Collateral during normal
business hours and the right to inspect, examine, verify and make abstracts from
the copies of such books of account, records, correspondence and other papers,
and to investigate such other records, activities and business of Borrower as
they may deem necessary or appropriate at the time.
5.3 Evidence of Accounts. Upon the creation of Accounts, or from time to
time as Bank may require, deliver to Bank schedules of all outstanding Accounts.
Such schedules shall be in form satisfactory to Bank and shall show the age of
such Accounts in intervals of not more than 30 days, and contain such other
information and be accompanied by such supporting documents as Bank may from
time to time prescribe. Borrower shall also deliver to Bank copies of Debtor's
invoices, evidences of shipment or delivery and such other schedules and
information as Bank may reasonably request. The items to be provided under this
Section are to be prepared and delivered to Bank from time to time solely for
its convenience in maintaining records of the Collateral and Borrower's failure
to give any of such items to Bank shall not affect, terminate, modify or
otherwise limit Bank's security interest granted herein.
5.4 Financial Statements. Deliver to Bank not more than 30 days after the
close of each month, or within such further time as Bank may permit,
consolidated and consolidating financial statements for Borrower and its
subsidiaries, including a balance sheet and related profit and loss statement,
prepared in accordance with GAAP (excluding footnotes and year-end adjustments
or accruals) by Borrower, which financial statements shall be accompanied by a
certification, signed by an officer of Borrower, certifying the accuracy of the
financial statements.
Deliver to Bank not more than 90 days after the close of each fiscal year
of Borrower, or within such further time as Bank may permit, consolidated and
consolidating audited financial statements for Borrower and its subsidiaries,
including a balance sheet and related profit and loss statement, prepared in
accordance with GAAP by independent certified public accountants acceptable to
Bank, who shall give their unqualified opinion with respect hereto.
-14-
Deliver to Bank a copy of Take-Two's quarterly report on Form 10-Q promptly
after the filing thereof with the Securities Exchange Commission.
5.5 Other Information. Furnish to Bank such other financial and business
information and reports, including without limitation accounts receivable
agings, accounts payable agings, listings of inventory and borrowing base
reports, in form and substance satisfactory to Bank as and when Bank may from
time to time request.
5.6 Maintenance of Existence and Licenses. While this Agreement remains in
effect and until the Obligations have been paid in full, (a) maintain its
corporate existence in good standing; (b) make no material change in the nature
or character of its business; (c) maintain and keep in full force and effect all
licenses and permits necessary to the proper conduct of its business and (d) at
the request of Bank, qualify as a foreign corporation and obtain all requisite
licenses and permits in each state (other than the state of its incorporation)
where Borrower does business and is required to qualify.
5.7 Maintenance and Insurance of Properties. Maintain and keep all of its
properties, real and personal, in good working order, condition and repair and
insure and keep insured all such properties at all times against loss of damage
by fire, theft, and such other risks and hazards as are customarily insured
against by corporations in similar circumstances, or as Bank may specify from
time to time, with insurers and in amounts reasonably acceptable to Bank. If
Borrower fails to do so, Bank may obtain such insurance and charge the cost
thereof to Borrower's account and add it to the Obligations. Borrower agrees
that, if any loss should occur, the proceeds of all such insurance policies may
be applied to the payment of all or any part of the Obligations, as Bank may
direct. Bank shall be named loss payee, with a lender's loss payable
endorsement, on such insurance policies to the extent that such policies insure
the Collateral. All policies shall provide for at least 10 days prior written
notice of cancellation to Bank. Borrower shall deliver at least annually to
Bank, or sooner if requested by Bank, certificates of insurance evidencing
Borrower's compliance herewith. Bank or Bank's designated agent is hereby
irrevocably constituted and appointed Borrower's attorney-in-fact to (either in
the name of Borrower or in the name of Bank) make adjustments of all insurance
losses, sign all applications, releases and other papers necessary for the
collection of any such loss, make settlements and endorse and collect all
instruments payable to Borrower or issued in connection therewith; provided,
however, that so long as no Event of Default has occurred, Borrower may exercise
all of the foregoing rights relating to insurance losses.
-15-
5.8 Liability Insurance. At all times, maintain in full force and effect
such liability insurance with respect to its activities and business
interruption and other insurance as may be reasonably required by Bank, such
insurance to be provided by insurer(s) acceptable to Bank, and if requested by
Bank, such insurance shall name Bank as an additional insured. Borrower shall
deliver at least annually to Bank, or sooner if requested by Bank, certificates
of insurance evidencing Borrower's compliance herewith.
5.9 Notice of Certain Events. Give prompt notice in writing to Bank of any
Event of Default hereunder, or of any condition which with the passage of time
or the giving of notice or both would give rise to an Event of Default, and of
any development, financial or otherwise, which would materially adversely affect
its business, properties or affairs or the ability of Borrower to perform its
obligations under this Agreement, the Notes or any of the other Loan Documents.
5.10 Payment of Taxes. Pay all taxes, assessments or governmental charges
lawfully levied or imposed on or against it and its properties prior to the date
when such taxes, assessments or charges shall become delinquent, unless Borrower
shall contest the validity thereof in good faith and shall post any bond or
other security required by applicable law or by Bank against the payment
thereof.
5.11 Dealings in Inventory. With respect to the Inventory (a) sell or
dispose of the Inventory only to buyers in the ordinary course of business, (b)
immediately notify Bank of any change in location of any of the Inventory and,
prior to any such change, execute and deliver to Bank such financing statements
satisfactory to Bank as Bank may request and (c) report, in form satisfactory to
Bank and with such frequency as determined by Bank, such information as Bank may
request regarding the Inventory.
5.12 Claims Against Borrower. Immediately upon learning thereof, report to
Bank any reclamation, return or repossession of goods, any claim or dispute
asserted by any Debtor or other obligor, and any other matters affecting the
value and enforceability or collectibility of any of the Collateral which have
not arisen in the ordinary course of business. In addition, Borrower shall, at
its sole cost and expense (including attorney's fees), settle any and all such
claims and disputes and indemnify and protect Bank against any liability, loss
or expense arising therefrom or out of any such reclamation, return or
repossession of goods, provided, however, if Bank shall so elect following the
occurrence of an Event of Default, it shall have the right at all times to
settle, compromise, adjust or litigate all claims or disputes directly with the
Debtor or other obligor upon such terms and conditions as it deems advisable and
charge all costs and expenses thereof (including attorneys' fees) to Borrower's
account and add them to the Obligations.
-16-
5.13 Defense of Collateral. Defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein and
pay all costs and expenses (including attorneys' fees) incurred in connection
with such defense.
5.14 Financing Statements; Further Assurances. At the request of Bank,
execute and deliver such financing statements, documents and instruments, and
perform all other acts as Bank deems necessary or desirable, to carry out and
perform the intent and purpose of this Agreement, and pay, upon demand, all
expenses (including reasonable attorneys' fees) incurred by Bank in connection
therewith. A photocopy of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
5.15 Financial Covenants. Maintain the following financial covenants:
(a) Consolidated Tangible Net Worth at all times greater than (i)
$2,000,000 from the date hereof through November 30, 1998, (ii) $4,500,000
from December 1, 1998 through January 31, 1999 and (ii) $5,000,000 on and
after February 1, 1999.
(b) A ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth of not more than (i) 15:1 for the months of August through November,
inclusive, (ii) 10:1 for the months December through January, inclusive,
and (iii) 8:1 for the months of February through May, inclusive.
(c) Consolidated Net Working Capital of not less than $900,000.
(d) Consolidated Income Before Taxes of not less than (i) $250,000 for
the quarter ending October 31, 1998, (ii) $750,000 for the quarter ending
January 31, 1999 and (iii) $0 for the quarter ending April 30, 1999.
The following terms shall have the following meaning when used herein:
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean, at any time, all assets or liabilities, respectively, that
should, in accordance with GAAP, be classified as current assets or current
liabilities, respectively, on a consolidated balance sheet of Borrower and
its subsidiaries (if any).
"Consolidated Liabilities" shall mean all indebtedness, obligations
and other liabilities of Borrower, whether matured or unmatured, liquidated
or unliquidated, direct or contingent or joint or several, that should, in
accordance with GAAP, be classified as liabilities on a consolidated
balance sheet of Borrower and its subsidiaries (if any).
"Consolidated Net Working Capital" shall mean, at any time, the amount
by which Consolidated Current Assets exceed Consolidated Current
Liabilities.
-17-
"Consolidated Tangible Net Worth" shall mean, at any time,
Stockholder's Equity, less the sum of (i) any surplus resulting from any
write-up of assets subsequent to December 31, 1996, (ii) goodwill,
including any amounts, however designated on a consolidated balance sheet
of Borrower and its subsidiaries, representing the excess of the purchase
price paid for assets or stock acquired over the value assigned thereto on
the books of Borrower, (iii) patents, trademarks, tradenames and
copyrights, (iv) any amount at which shares of capital stock of Borrower
appear as an asset on Borrower's balance sheet, (v) deferred expenses and
(vi) any other amount in respect of an intangible that should be classified
as an asset on a consolidated balance sheet of Borrower in accordance with
GAAP.
"Stockholder's Equity" shall mean, at any time, the aggregate of the
following amounts set forth on a consolidated balance sheet of Borrower and
its subsidiaries prepared in accordance with GAAP: (i) the par or stated
value of all outstanding capital stock, (ii) capital surplus, (iii)
retained earnings and (iv) Subordinated Debt.
"Consolidated Income Before Taxes" shall mean, at any time, the net
income before taxes of Borrower and its subsidiaries, as determined in
accordance with GAAP.
5.16 Maintenance of Bank Accounts. At Bank's option, maintain all of its
depository accounts with Bank, including without limitation, all demand deposit,
lock box, time deposit, concentration and zero balance accounts. A balance of at
least $20,000 shall be maintained in Borrower's operating account at all times.
5.17 Compliance. Comply in all material respects with all applicable laws,
rules, regulations and orders applicable to Borrower or its business, operations
or properties.
6. Negative Covenants. Borrower covenants and agrees that until the
Obligations have been paid in full, unless Bank shall consent in advance in
writing, it shall not and shall not permit any subsidiary to:
6.1 Sale of Assets or Merger. Discontinue its business or liquidate, sell,
transfer, lease, assign or otherwise dispose of a material part of its assets or
of the Collateral, by sale, merger, consolidation or otherwise, provided,
however, that it may sell in the ordinary course of business and for a full
consideration in money or money's worth, any product, merchandise or service
produced, marketed or furnished by it.
6.2 Liens and Encumbrances. Sell, assign, pledge, grant or suffer to exist
a security interest, lien, mortgage or other encumbrance on any of the
Collateral or any other properties or assets of Borrower to any person other
than Bank, or permit any lien, encumbrance or security interest to attach to any
of
-18-
the Collateral or any other properties or assets of Borrower, except in favor of
Bank and except Permitted Liens, without the prior written consent of Bank.
6.3 Contingent Liabilities. Endorse, guarantee or become surety for the
obligations of any person, firm or corporation, except that Borrower may endorse
checks and negotiable instruments for collection or deposit in the ordinary
course of business.
6.4 Loans. Not make loans, advances or extensions of credit to others in
excess of $10,000 in aggregate without the prior written consent of Bank.
6.5 Distributions. Declare or pay any dividends or make any other payments
on its capital stock, issue, redeem, repurchase, retire or otherwise acquire,
directly or indirectly, any of its capital stock, or grant or issue any warrant,
right or option pertaining thereto or other security convertible into any of the
foregoing, or make any other distribution to its shareholders; provided,
however, that Borrower may distribute funds to its shareholders, no more
frequently than quarterly, in order to enable such shareholders to pay estimated
federal and state taxes on Borrower's taxable income for each taxable year of
Borrower. A fiscal year-end reconciliation of such distributions shall be made
taking into consideration the actual taxable income of Borrower each year. In
the event that it is determined that the shareholders have received
distributions in excess of those allowable under this Section 6.5, then the
excess amount received by any such shareholder shall be immediately repaid to
Borrower.
6.6 Dealings with Accounts. Compromise or discount any Account except for
ordinary trade discounts or allowances for prompt payment in the ordinary course
of Borrower's business, consistent with past practices.
6.7 Investments. Change its name, dissolve or consolidate or merge with any
other corporation or acquire or purchase any equity interest in any other
entity, including shares of stock of other corporations, or acquire or purchase
any assets or assume any obligations of any other entity , except that Borrower
is permitted to own notes and other receivables acquired in the ordinary course
of business.
6.8 Change in Management or Business. Change its management or its capital
structure or make any material change in any of its business objectives,
purposes and operations which might in any way adversely affect the repayment of
the Loans; provided, however that Bank's consent to any change in management
shall not be unreasonably withheld.
6.9 Change in Ownership. Permit to occur a change in record or beneficial
ownership of voting stock of Borrower which Bank, in its sole discretion, deems
material with respect to the control over Borrower, without the prior written
consent of Bank.
-19-
6.10 Transaction with Affiliates. Enter into, or be a party to, any
transaction with any of Borrower's Affiliates, except in the ordinary course of
business, pursuant to the reasonable requirements of Borrower's business, and
upon fair and reasonable terms which are fully disclosed to Bank and are no less
favorable to Borrower than Borrower could obtain in a comparable arm's length
transaction with a person not an Affiliate of Borrower.
6.11 Indebtedness. Directly or indirectly create, incur, assume, guaranty
or be or remain liable with respect to any indebtedness, except for (a) the
Obligations, (b) any existing indebtedness disclosed in the financial statements
referenced in Section 4.4 hereof, (c) any purchase money indebtedness not to
exceed $20,000 in the aggregate, (d) any other indebtedness to which Bank has
consented in writing and (e) trade obligations arising in the normal course of
business.
7. Collection of Collateral and Notice of Assignment
7.1 Collections on Collateral. So long as Bank does not request that the
Debtors on the Collateral be notified of the consignment thereof to Bank or that
all collections be directed to a lock box at Bank, Borrower may make collections
on the Collateral. All collections on the Collateral shall be the property of
Bank, shall be held in trust for Bank by Borrower and shall not be commingled
with Borrower's other funds or be deposited in any bank account of Borrower
(except for the Cash Collateral Account), or used in any manner except to pay
the Obligations. Borrower shall immediately deposit all collections on the
Collateral in the Cash Collateral Account of Borrower maintained at Bank for
that purpose, over which Bank alone shall have the sole power of withdrawal. On
a daily basis, Bank will apply all or part of the collected balance of the Cash
Collateral Account against the Obligations, the amount, order and method of such
application to be in the sole discretion of Bank. In no event shall Bank be
obligated to apply any funds deposited in the Cash Collateral Account before the
first business day after the day of deposit. Any part of the collected balance
in the Cash Collateral Account which Bank elects not to apply to Borrower's
obligations may be paid over and deposited by Bank to Borrower's commercial
account. The crediting of items deposited in the Cash Collateral Account to the
reduction of the Obligations shall be conditioned upon final payment of the item
and if any item is not so paid, the amount of any credit given for it may be
charged to the Obligations or to any other deposit account of Borrower, whether
or not the item is returned.
7.2 Notice of Assignment. Bank shall have the right at any time following
an Event of Default to notify Debtors of its security interest in the Accounts
and to require payments to be made directly to Bank. Upon request of Bank at any
time following an Event of Default, Borrower will so notify the
-20-
Debtors and will indicate on all xxxxxxxx to the Debtors that the Accounts are
payable to Bank. To facilitate direct collection, Borrower hereby appoints Bank
and any officer or employee of Bank, as Bank may from time to time designate, as
attorney-in-fact for Borrower to (a) receive, open and dispose of all mail
addressed to Borrower and take therefrom any payments on or proceeds of
Accounts; (b) take over Borrower's post office boxes or make other arrangements,
in which Borrower shall cooperate, to receive Borrower's mail, including
notifying the post office authorities to change the address for delivery of mail
addressed to Borrower to such address as Bank shall designate; (c) endorse the
name of Borrower in favor of Bank upon any and all checks, drafts, money orders,
notes, acceptances or other evidences or payment or Collateral that may come
into Bank's possession; (d) sign and endorse the name of Borrower on any invoice
or xxxx of lading relating to any of the Accounts, on verifications of Accounts
sent to any Debtor, to drafts against Debtors, to assignments of Accounts and to
notices to Debtors; and (e) do all acts and things necessary to carry out this
Agreement, including signing the name of Borrower on any instruments required by
law in connection with the transactions contemplated hereby and on financing
statements as permitted by the Uniform Commercial Code. Borrower hereby ratifies
and approves all acts of such attorneys-in-fact pursuant to this section, and
neither Bank nor any other such attorney-in-fact shall be liable for any acts of
commission or omission, or for any error of judgment or mistake of fact or law.
This power, being coupled with an interest, is irrevocable so long as any of the
Obligations remain unsatisfied.
7.3 Enforcement of Accounts. In the event Bank exercises its rights under
Section 7.2, Bank (a) shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any Accounts or any instruments received in payment thereof or for
any damage resulting therefrom; (b) may, without notice to or consent from
Borrower, xxx upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts or any securities, instruments or insurance applicable thereto and/or
release the obligor thereon; and (c) is authorized to accept the return of the
goods represented by any of the Accounts, without notice to or consent by
Borrower, or without discharging or any way affecting the Obligations hereunder.
7.4 Returned or Rejected Goods. In the event Bank exercises its rights
under Section 7.2, upon receipt of any returned or rejected goods Borrower shall
immediately issue and deliver a copy of the credit memo to Bank with respect
thereto. Or, at Bank's election, Borrower shall set aside such goods, xxxx them
in Bank's name and hold them in trust for Bank at Borrower's expense and shall,
upon
-21-
Bank's request, deliver such goods to Bank. Bank may sell or cause the goods to
be sold, at public or private sale, at such prices, to such purchasers and upon
such terms as Bank deems advisable. Borrower shall remain liable to Bank for any
deficiency and shall pay the costs and expenses of such sale, including
reasonable attorneys' fees.
7.5 Limitation of Bank's Liability. Bank shall not be liable for or
prejudiced by any loss, depreciation or other damage to Accounts or other
Collateral unless caused by Bank's willful and malicious act, and Bank shall
have no duty to take any action to preserve or collect any Account or other
Collateral.
7.6 Verification of Accounts. Bank may confirm and verify all Accounts in a
manner consistent with its usual practices at any time. Bank shall have no
obligation to disclose or discuss with Borrower the names or identities of any
Debtors from whom Bank obtains or requests information as to Accounts. Borrower
agrees to cooperate with Bank in the confirmation and verification of any
Accounts, or reconciling any discrepancy between those amounts verified by Bank
and information provided to Bank by Borrower.
8. Service Charges. In addition to the principal and interest on the Loans
and the reimbursement of expenses to Bank pursuant to this Agreement, Borrower
shall pay to Bank a monthly service charge for the services provided by Bank in
connection with this Agreement in the amount of $500.00. In addition to the
monthly service charge, Borrower shall pay to Bank a service charge of 3% per
annum on the excess amount for each day on which the outstanding principal
balance of the Revolving Credit Loans exceeds the Maximum Revolving Loan Amount.
All service charges shall be payable monthly on the due date for the payment of
principal and/or interest on the Loans.
9. One General Obligation: Cross Collateral. All Loans and advances by Bank
to Borrower under this Agreement and under all other agreements constitute one
loan, and all indebtedness and Obligations of Borrower to Bank under this and
under all other agreements, present and future, constitute one general
obligation secured by the Collateral and security held and to be held by Bank
hereunder and by virtue of all other assignments and security agreements between
Borrower and Bank now and hereafter existing. It is expressly understood and
agreed that all of the rights of Bank contained in this Agreement shall likewise
apply insofar as applicable to any modification of or supplement to this
Agreement and to any other agreements, present and future, between Bank and
Borrower.
10. Conditions Precedent. The agreement of Bank to make the Loans is
subject to the satisfaction prior to or concurrently with the making of the
Loans, of each of the following conditions precedent:
-22-
10.1 Bank shall have received the following, each of which shall be
reasonably acceptable in form and substance to Bank:
(a) The Revolving Credit Note, duly executed and delivered to Bank;
(b) The Term Note B, duly executed and delivered to Bank;
(c) The Xxxxxxxxx Guaranty, duly executed and delivered to Bank;
(d) The Xxxxxx Xxxxxxxxx Guaranty, duly executed and delivered to
Bank;
(e) The Take-Two Guaranty, duly executed and delivered to Bank;
(f) A Warrant Certificate for shares of Take-Two in substantially the
form of Exhibit H attached hereto (the "Warrant Certificate");
(g) Evidence, satisfactory to Bank, that Take-Two has provided at
least $500,000 of additional capital or Subordinated Debt to Borrower
contemporaneously with the closing of the transactions contemplated
hereunder;
(h) Payment to Bank of a closing fee in the amount of $50,000;
(i) An opinion or opinions from counsel to Borrower, Take-Two,
Xxxxxxxxx and Xxxxxx Xxxxxxxxx, in form satisfactory to Bank and its
counsel, to the effect that: (i) Borrower is duly incorporated, validly
existing and in good standing under the laws of the State of Ohio, and
Take-Two is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware; (ii) Borrower has full power and
authority to carry on its business as presently conducted by it, to own and
operate the properties used in such business, and to execute and deliver
this Agreement, the Notes and the other Loan Documents to which it is a
party and to perform its obligations hereunder and thereunder, and Take-Two
has full power and authority to carry on its business as presently
conducted by it, to own and operate the properties used in such business,
and to execute and deliver the Take-Two Guaranty and the Warrant
Certificate and to perform its obligations thereunder; (iii) the execution
and delivery by Borrower of this Agreement, the Notes and the other Loan
Documents to which it is a party, and the performance by Borrower of its
obligations hereunder and thereunder, have been duly authorized by all
necessary corporate action, and are not in conflict with any provision of
law or any provision of the Articles of Incorporation or Regulations of
Borrower or, to such counsel's knowledge, with any agreement, order or
decree binding upon Borrower; the execution and delivery by Take-Two of the
Take- Two Guaranty and the Warrant Certificate, and the performance by
Take-Two of its obligations thereunder, have been duly authorized by all
necessary corporate action, and are not in conflict with any provision of
law or any provision of the Certificate of Incorporation or Bylaws of
Take-Two or, to such
-23-
counsel's knowledge, with any agreement, order or decree binding upon
Take-Two; the execution and delivery by Xxxxxxxxx of the Xxxxxxxxx
Guaranty, and the performance by Xxxxxxxxx his obligations thereunder, are
not in conflict with any provision of law or, to such counsel's knowledge,
with any agreement, order or decree binding upon Xxxxxxxxx; and the
execution and delivery by Xxxxxx Xxxxxxxxx of the Xxxxxx Xxxxxxxxx
Guaranty, and the performance by Xxxxxx Xxxxxxxxx of his obligations
thereunder, are not in conflict with any provision of law or, to such
counsel's knowledge, with any agreement, order or decree binding upon
Xxxxxx Xxxxxxxxx; (iv) this Agreement, the Notes and the other Loan
Documents to which Borrower is a party have been duly authorized, executed
and delivered by Borrower and constitute the legal, valid and binding
obligation of Borrower, enforceable in accordance with their terms against
Borrower; the Take-Two Guaranty and the Warrant Certificate have been duly
authorized, executed and delivered by Take-Two and constitute the legal,
valid and binding obligation of Take-Two, enforceable in accordance with
their terms against Take-Two; the Xxxxxxxxx Guaranty has been duly executed
and delivered by Xxxxxxxxx and constitutes the legal, valid and binding
obligation of Xxxxxxxxx, enforceable against Xxxxxxxxx in accordance with
its terms; and the Xxxxxx Xxxxxxxxx Guaranty has been duly executed and
delivered by Xxxxxx Xxxxxxxxx and constitutes the legal, valid and binding
obligation of Xxxxxx Xxxxxxxxx, enforceable against Xxxxxx Xxxxxxxxx in
accordance with its terms; (v) no governmental or third party approvals,
authorizations, licenses or consents are required to be obtained in
connection with the execution and delivery by Borrower of this Agreement,
the Notes or the other Loan Documents to which it is a party, the execution
and delivery by Take-Two of the Take-Two Guaranty or the Warrant
Certificate, the execution and delivery by Xxxxxxxxx of the Xxxxxxxxx
Guaranty, or the execution and delivery by Xxxxxx Xxxxxxxxx of the Xxxxxx
Xxxxxxxxx Guaranty, or the performance by any of them of their respective
obligations in accordance therewith, or the exercise by Bank of its rights
thereunder; (vi) to such counsel's knowledge, there is no threatened or
pending legal or governmental proceeding or action to which any of
Borrower, Take-Two, Xxxxxxxxx or Xxxxxx Xxxxxxxxx is a party or to which
any of its or his property is subject, which, if adversely determined,
could materially and adversely affect its or his condition, assets or
operation or result in an Event of Default under this Agreement; and (vii)
the shares of Common Stock, par value $.01 per share, of Take-Two to be
issued to Bank upon the exercise of the Warrants provided under the Warrant
Certificate have been duly authorized and, when issued in accordance with
the terms of the Warrant Certificate and upon payment in full of the
exercise price as provided therein, will be duly and validly issued and
outstanding, fully paid and nonassessable.
-24-
(j) A copy of the resolutions of the Board of Directors of Borrower
authorizing (i) the execution, delivery and performance of this Agreement,
the Notes and the other Loan Documents to which Borrower is a party, (ii)
the borrowings contemplated hereunder and (iii) the granting by Borrower of
the liens and security interests pursuant to this Agreement, certified by
the President, Secretary or Assistant Secretary of Borrower as of the date
hereof as being in full force and effect and not amended, modified, revoked
or rescinded;
(k) A copy of the resolutions of the Board of Directors of Take-Two
authorizing the execution, delivery and performance of the Take-Two
Guaranty and the Warrant Certificate, certified by the Secretary or
Assistant Secretary of Take-Two as of the date hereof as being in full
force and effect and not amended, modified, revoked or rescinded;
(l) A certificate of the President, Secretary or Assistant Secretary
of Borrower dated as of the date hereof as to the incumbency and signature
of the officers of Borrower executing this Agreement, the Notes and the
other Loan Documents to which Borrower is a party;
(m) A certificate of the Secretary or Assistant Secretary of Take-Two
dated as of the date hereof as to the incumbency and signature of the
officers of Take-Two executing the Take-Two Guaranty, the Warrant Agreement
and the Warrant;
(n) Copies of (i) the Articles of Incorporation of Borrower certified
as correct and complete by the President, Secretary or Assistant Secretary
of Borrower as of the date hereof and by the Ohio Secretary of State as of
a recent date, (ii) the Regulations of Borrower certified as correct and
complete by the President, Secretary or Assistant Secretary of Borrower as
of the date hereof and (iii) a certificate of good standing of Borrower as
of a recent date from the Ohio Secretary of State;
(o) Copies of (i) the Certificate of Incorporation of Take-Two
certified as correct and complete by the Secretary or Assistant Secretary
of Take-Two as of the date hereof and by the Delaware Secretary of State as
of a recent date, (ii) the Bylaws of Take-Two certified as correct and
complete by the Secretary or Assistant Secretary of Take-Two as of the date
hereof, and (iii) a certificate of good standing of Take-Two as of a recent
date from the Delaware Secretary of State; and
(p) Borrower shall have delivered to Bank its internally-prepared
financial statements as of and for the interim period ending July 31, 1998.
10.2 Borrower shall have provided such other documents, instruments and
information, executed such other agreements and certificates, and generally
taken such other actions as Bank may reasonably require.
-25-
11. Events of Default and Remedies.
11.1 Event of Default. The following shall constitute Events of Default
under this Agreement, it being agreed that time is of the essence hereof: (a)
failure of Borrower to pay when due any of the Obligations; (b) failure of
Borrower to observe or perform any covenant contained in this Agreement, the
Notes, the other Loan Documents or any other agreement between Borrower and
Bank, and such default is not fully cured within 30 days after Bank has given
written notice thereof to Borrower; (c) any representation or warranty at any
time made orally or in this Agreement, the Notes, the other Loan Documents or
any other agreement between Borrower and Bank, or in any document or instrument
delivered to Bank pursuant to this Agreement, the Notes, the other Loan
Documents or any such other agreement is, or becomes, untrue or misleading in
any material respect; (d) acceleration of the maturity of any of the
Obligations; (e) Borrower shall be in default or breach under any material
obligation for the payment of borrowed money or for the payment of rent under
any lease agreement covering real or personal property, which default is not
cured within any applicable grace period; (f) failure of Borrower or any
Guarantor, after request by Bank, to furnish financial information or to permit
the inspection of its or his books of account and records; (g) suspension by
Borrower or any Guarantor of the operation of its or his present business, or
the insolvency of Borrower or any Guarantor, or the inability of Borrower or any
Guarantor to meet its or his debts as they mature, or its or his admission in
writing to such effect, or its or his calling any meeting of all or any of its
or his creditors or committing any act of bankruptcy, or the filing by or
against Borrower or any Guarantor of any petition under any provision of the
Bankruptcy Act, as amended, or the entry of any judgment or filing of any lien
against Borrower or any Guarantor; (h) there shall occur any material adverse
change in Borrower's condition or affairs (financial or otherwise) or in that of
any endorser, Guarantor or surety for any of the Obligations; (i) loss, theft,
damage, destruction or encumbrance of or on any of the Collateral or any levy,
seizure or attachment thereof; (j) any Guarantor of the Obligations denies its
or his obligation to guarantee any Obligations then existing or attempts to
limit or terminate its or his obligation to guarantee any future Obligations,
including future Loan advances; and (k) the death of any co-maker, Guarantor or
surety of the Loans if, within fifteen (15) days after the date of such death,
Borrower has failed to satisfy Bank, in the exercise of Bank's sole discretion,
that such death will not adversely affect Borrower's business operations.
11.2 Rights of Bank upon Default. Upon the occurrence of an Event of
Default described in Section 11.1, Bank at its option may: (a) declare the
Obligations of Borrower immediately due and
-26-
payable (except upon the occurrence of any Event of Default described in Section
11.1(g), the Obligations shall automatically become due and payable), without
presentment, notice, protest or demand of any kind for the payment of all or any
part of the Obligations (all of which are expressly waived by Borrower) and
exercise all of its rights and remedies against Borrower and any Collateral
provided in this Agreement, the Notes, the other Loan Documents or any other
agreement between Borrower and Bank, at law or in equity and (b) exercise all
rights granted to a secured party under the Ohio Uniform Commercial Code or
otherwise. Upon the occurrence of an Event of Default, or in the event of
non-payment of the Loan when due in the case of a demand Loan, Bank may take
possession of the Collateral, or any part thereof, and Borrower hereby grants
Bank authority to enter upon any premises on which the Collateral may be
situated, and remove the Collateral from such premises or use such premises,
together with the materials, supplies, books and records of Borrower, to
maintain possession and/or the condition of the Collateral and to prepare the
Collateral for sale. Borrower shall, upon demand by Bank, assemble the
Collateral and make it available at a place designated by Bank which is
reasonably convenient to both parties. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Bank will give Borrower reasonable notice of the time and
place of any public sale thereof or of the time after which any private sales or
other intended disposition thereof is to be made. The requirement of reasonable
notice shall be met if such notice is mailed, postage prepaid, to the address of
Borrower shown at the beginning of this Agreement at least 5 days prior to the
time of such sale or disposition. Bank shall have the widest possible latitude
to preserve and protect the Collateral and Bank's security interest therein, and
Bank, at its option, shall have the right to appointment of a receiver for the
preservation, possession, protection and disposition of all or any part of the
Collateral and the collection and protection for Bank of any proceeds of use or
disposition of the Collateral and to do any other thing and exercise any other
right or remedy which Bank may, with or without judicial process, do or
exercise.
11.3 Application of Proceeds. Bank shall have the right to apply the
proceeds of any disposition of the Collateral to the payment of the Obligations
in such order of application as Bank may, in its sole discretion, elect. Bank
shall have no obligation to xxxxxxxx any assets in favor of Borrower or any
other party.
11.4 Remedies Cumulative. The rights, options and remedies of Bank shall be
cumulative and no failure or delay by Bank in exercising any right, option or
remedy shall be deemed a waiver thereof or of any other right, option or remedy,
or waiver of any Event of Default hereunder, nor shall any single
-27-
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. Bank shall not be deemed to have waived any of Bank's rights
hereunder or under any other agreement, instrument or paper signed by Borrower
unless such waiver be in writing and signed by Bank.
12. Miscellaneous
12.1 Governing Law; Jurisdiction and Venue. The provisions of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Ohio. Bank and Borrower hereby designate all courts of record
sitting in Cincinnati, Ohio, both state and federal, as forums where any action,
suit or proceeding in respect of or arising out of this Agreement or the
transactions contemplated by this Agreement may be prosecuted as to all parties,
their successors and assigns, and by the foregoing designation Bank and Borrower
consent to the jurisdiction and venue of such courts.
12.2 MUTUAL WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR BANK TO EXTEND CREDIT TO BORROWER AND FOR BORROWER TO BORROW FROM BANK, AND
AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL, BORROWER AND BANK HEREBY
EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING
TO THIS AGREEMENT OR ARISING IN ANY WAY FROM THE OBLIGATIONS.
12.3 Other Waivers. Borrower waives notice of nonpayment, demand, notice of
demand, presentment, protest and notice of protest with respect to the
Obligations, or notice of acceptance hereof, notice of Loans made, credit
extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
12.4 Collection Costs. All costs and expenses incurred by Bank to obtain,
enforce or preserve the security interests granted by this Agreement or the
other Loan Documents and to collect the Obligations, including, without
limitation, stationery and postage, telephone and telegraph, secretarial and
clerical expenses, the fees or salaries of any collection agents utilized, all
costs to maintain and preserve the Collateral and all reasonable attorneys' fees
and legal expenses incurred in obtaining or enforcing payment of any of the
Obligations or foreclosing Bank's security interest in any of the Collateral,
whether through judicial proceedings or otherwise, or in enforcing or protecting
its rights and interests under this Agreement, the Notes or any other Loan
Document, or in protecting the rights of any holder or holders with respect
thereto, or in defending or prosecuting any actions or proceedings arising out
of or relating to Bank's transactions with Borrower, shall be paid by Borrower
to Bank, upon demand, or, at Bank's election, charged to Borrower's account and
added to the Obligations, and Bank may take
-28-
judgment against Borrower for all such costs, expenses and fees in addition to
all other amounts due from Borrower hereunder.
12.5 Expenses. Borrower shall reimburse Bank for all out-of-pocket costs
and expenses incurred by Bank in connection with the preparation of this
Agreement, the Notes and the other Loan Documents and the making of the Loans
hereunder, including all reasonable attorneys' fees and legal expenses, and for
all UCC search, filing, recording and other costs connected with the perfection
of Bank's security interest in the Collateral.
12.6 Notices. All notices, requests, directions, demands, waivers and other
communications provided for herein shall be in writing and shall be deemed to
have been given or made when delivered personally, by telecopy (if to Borrower,
at (000) 000-0000, and if to Bank, at (000) 000-0000), or sent by registered or
certified mail, postage prepaid and return receipt requested, addressed to
Borrower or Bank, as the case may be, at their respective addresses set forth at
the beginning of this Agreement (if to Borrower, Attention: Xxxxxxxx X.
Xxxxxxxxx, and if to Bank, Attention: Xxxx X. Xxxxx). Notices of changes of
address shall be given in the same manner.
12.7 Severability. Any provision of this Agreement which is prohibited and
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 or affecting the validity or enforceability of such
provision in any other jurisdiction.
12.8 Entire Agreement, Modification, Benefit. This Agreement shall
constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified, deleted or
amended in any manner except by agreement in writing executed by the parties.
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
assigns, provided, however, that Borrower shall not assign or transfer its
rights hereunder.
12.9 Construction. All references in this Agreement to the single number
and neuter gender shall be deemed to mean and include the plural number and all
genders, and vice versa, unless the context shall otherwise require.
12.10 Headings. The underlined headings contained herein are for
convenience only and shall not affect the interpretation of this Agreement.
12.11 Counterparts. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original.
-29-
12.12 Nonliability of Bank. The relationship between Borrower and Bank
shall be solely that of borrower and lender. Bank shall not have any fiduciary
responsibilities to Borrower. Bank undertakes no responsibility to Borrower to
review or inform Borrower of any matter in connection with any phase of
Borrower's business or operations.
12.13 Limitation of Liability. No claim may be made by Borrower against
Bank, or the Affiliates, directors, officers, employees, attorneys or agents of
Bank, for any special, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and agrees not to xxx upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
12.14 Warrant of Attorney. Borrower authorizes any attorney at law,
including an attorney engaged by Bank, to appear in any court of record in the
State of Ohio or any other State or Territory of the United States, after the
occurrence of an Event of Default hereunder, and waive the issuance and service
of process and confess judgment against Borrower in favor of Bank, for the
amount of the Obligations then appearing due, together with costs of suit and,
thereupon, to release all errors and waive all rights of appeal and stay of
execution, but no such judgment or judgments against Borrower shall be a bar to
a subsequent judgment or judgments against any one or more than one of persons
against whom judgment has not been obtained hereon. Borrower hereby expressly
waives any conflict of interest that Bank's attorney may have in confessing such
judgment against Borrower and expressly consents to the confessing attorney
receiving a legal fee from the holder for confessing such judgment against
Borrower. This warrant of attorney to confess judgment is a joint and several
warrant of attorney. The foregoing warrant of attorney shall survive any
judgment; and if any judgment be vacated for any reason, Bank nevertheless may
thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against Borrower.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers as of the date first
set forth above.
WARNING-BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
XXXX OF ALL GAMES, INC.
BY:________________________________________
TITLE:_____________________________________
BY:________________________________________
TITLE:_____________________________________
ATTEST:____________________________________
Secretary or Assistant Secretary
THE PROVIDENT BANK
BY:________________________________________
TITLE:_____________________________________
