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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 24, 1997
TAKE-TWO INTERACTIVE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-29230 51-0350842
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
575 Broadway, New York, New York 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)941-2988
Not Applicable
Former name or former address, if changed since last report
Item 2. Acquisition and Disposition of Assets.
On December 24, 1997, Take-Two Interactive Software, Inc. (the "Company")
acquired all of the outstanding capital stock of L&J Marketing Inc. d/b/a
Alliance Distributors ("Alliance"), a company engaged in the business of
distributing software games. Pursuant to an Agreement and Plan of Merger by and
among the Company, Inventory Management Systems, Inc., a wholly-owned subsidiary
of the Company ("IMSI"), Alliance Inventory Management, Inc., a wholly-owned
subsidiary of IMSI ("AIM"), Alliance, Jay Gelman, Larry Muller and Andre Muller,
Alliance was merged with and into AIM and all of the outstanding shares of the
capital stock of Alliance were converted into an aggregate of 500,000 shares of
restricted Common Stock of the Company (the "Merger"). As additional
consideration for the Merger, the Company made a capital contribution to
Alliance in the amount of $1.5 million and granted five-year options to purchase
an aggregate of 76,000 shares of Common Stock at a price of $2.00 per share. The
Company intends to account for the acquisition of Alliance as a purchase.
Simultaneously with the consummation of the Merger, AIM entered into a
four-year employment agreement with each of Messrs. Gelman and Muller. Such
agreements provide that each of Messrs. Gelman and Muller is entitled to receive
an annual salary of $183,500 and incentive compensation equal to 5% of AIM's
earnings before taxes. In addition, each of Messrs. Gelman and Muller are
entitled to receive a bonus equal to 0.125% of the first $20 million in combined
sales of AIM and the Company during each year.
The source of the consideration paid in the foregoing transaction was
authorized but unissued shares of Common Stock of the Company and cash on hand.
The amount of consideration paid by the Company in connection with the
transaction was determined by arm's-length negotiations.
The descriptions of the agreements discussed above are qualified in their
entirety by reference to such agreements, which are attached as exhibits and are
incorporated herein by reference.
Item 5. Other Events.
On December 24, 1997, IMSI and AIM entered into a revolving line of credit
agreement with NationsBank, N.A. which provides for borrowings of up to
$5,000,000. Advances under the line of credit are based on a borrowing formula
equal to the lesser of (i) $5,000,000 or (ii) 80% of eligible accounts
receivable, plus 50% of eligible inventory. Interest accrues on such advances at
a rate of .75% over NationsBank's prime rate and is payable monthly. Borrowings
under the line of credit are secured by a lien on accounts receivable and
inventory of IMSI
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and AIM and are guaranteed by the Company. The loan agreement limits or
prohibits IMSI and AIM, subject to certain exceptions, from declaring or paying
cash dividends, merging or consolidating with another corporation, selling
assets (other than in the ordinary course of business), creating liens and
incurring additional indebtedness. The line of credit expires on May 31, 1998.
The description of the terms of the line of credit contained herein is
qualified in its entirety by reference to the loan documents, which are attached
as exhibits and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of the Business Acquired.
Audited financial statements relating to the acquisition will be filed by
amendment within 60 days of the date this Report was required to be filed.
(b) Pro Forma Financial Information and Exhibits.
Pro Forma financial information relating to the acquisition will be filed
by amendment within 60 days of the date this report was required to be filed.
(c) Exhibits
Exhibit 1 - Agreement and Plan of Merger dated as of December 22, 1997
by and among the Company, IMSI, AIM, Alliance, Jay Gelman, Larry
Muller and Andre Muller.
Exhibit 2 - Employment Agreement between AIM and Jay Gelman.
Exhibit 3 - Employment Agreement between AIM and Larry Muller.
Exhibit 4 - Loan Documents by and among NationsBank, N.A., IMSI, AIM
and the Company, as guarantor.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 7, 1998
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By /s/ Ryan A. Brant
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Name: Ryan A. Brant
Title: Chairman
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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 JAY GELMAN ("Jay"), LARRY MULLER ("Larry")
and ANDRE MULLER (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 Larry and Jay, 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 Jay and
Larry, 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
Larry and Jay, 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
129 Street, College Point, New York 11356 with Marinelli 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 Larry and
Jay, 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 Larry and Jay,
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 Larry and Jay, 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 Larry and Jay, Alliance has not
received any notice of written default with respect to any such agreements
or arrangements which remains uncured.
-11-
2.18. Customers and Suppliers.
(a) To the best of knowledge of Larry and Jay, 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
-12-
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 Larry and Jay,
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 Larry and Jay
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 Jay and Larry 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
---- ---------------
Steve Glickstein 19,000
Eric Markowitz 38,000
Andre Muller 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 Larry and Jay 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.
575 Broadway
New York, New York
Attn: Ryan Brant
with a copy to: Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Barry S. Rutcofsky, Esq.
If to Alliance: L&J Marketing, Inc.
14-20B 129th Street
College Point, NY 11356
Attn: Jay Gelman
with a copy to: Law Offices of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attn: Brian J. Herman
Fax: (718) 847-0025
As for the Alliance Shareholders:
If to Larry: 61 Hearthstone Drive
Dix Hills, NY 11746
with a copy to: Law Offices of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attn: Brian J. Herman
Fax: (718) 847-0025
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If to Jay:
27 Copper Beach Lane
Lawrence, NY 11354
with a copy to: Law Offices of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attn: Brian J. Herman
Fax: (718) 847-0025
If to Andre Muller:
120 Village Hill Drive
Dix Hills, NY 11746
with a copy to: Law Offices of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attn: Brian J. Herman
Fax: (718) 847-0025
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:
----------------------------
Ryan Brant, CEO
INVENTORY MANAGEMENT SYSTEMS, INC.
By:
----------------------------
ALLIANCE INVENTORY MANAGEMENT, INC.
By:
----------------------------
L&J MARKETING, INC.
By:
----------------------------
-------------------------------
JAY GELMAN
-------------------------------
ANDRE MULLER
-------------------------------
LARRY MULLER
-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 (Larry)....................................19
Exhibit 5.4B Employment Agreement (Jay)......................................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
JAY GELMAN, LARRY MULLER and ANDRE MULLER
-------------------------
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-
EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 22, 1997 between Alliance Inventory
Management, Inc. a New York corporation (the "Employer" or the "Company"), and
Jay Gelman (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as Senior
Vice-President, Sales and to be assured of his services as such on the terms and
conditions hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to be so employed by Employer for a four (4) year period commencing as of
the date of this Agreement (the "Effective Date") (such period being herein
referred to as the "Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year") unless earlier terminated pursuant to Section 6 hereof.
2. Employee Duties.
(a) During the term of this Agreement, the Employee shall have the duties
and responsibilities of Senior Vice-President, Sales, of the Employer, reporting
directly to the Chairman of the Employer and the Board of Directors of the
Employer (the "Board"). It is understood that such duties and responsibilities
shall be reasonably related to the Employee's position.
(b) The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices located at 14-20B 129th Street,
College Point, New York, although the Employee may, for business reasons, be
required from time to time to travel outside of the area where the Company's
principal executive offices are located in connection with the business of the
Company.
3. Compensation.
(a) Subject to adjustment for cost of living pursuant to subparagraph 3(b)
hereof, the Employer shall pay the Employee a salary (the "Salary") at a rate of
$183,500 per annum in respect of each Employment Year during the Term, payable
in equal installments bi-weekly, or at such other times as may mutually be
agreed upon between the Employer and the Employee.
(b) Effective as of the first day of the second, third and fourth
Employment Years of the Term, there shall be made a cost of living adjustment of
the Salary payable hereunder. Such adjustment shall be based on the percentage
difference between the Price Index (as defined herein) for the first month of
each new Employment Year and the Price Index for the Base Month (as defined
herein). In the event the Price Index for the first month in any Employment Year
calendar year during the Term reflects an increase over the Price Index for the
Base Month, then the Salary shall be multiplied by the percentage difference
between the Price Index for such first month and the Price Index for the Base
Month, and the resulting sum shall be added to the Salary, effective as of such
first month. Such Salary, as adjusted, shall thereafter be payable, in equal
bi-weekly installments, until it is readjusted in the following Employment Year
pursuant to the terms hereof. In the event any cost of living adjustment is not
available as of the first month of the Employment Year, payments of Salary shall
be made on the basis of the preceding Employment Year until the cost of living
adjustment is available at which time the bi-weekly installment payment next due
shall be computed on the basis of the cost of living adjustment increased as
provided hereinabove to retroactively adjust the payments paid during such
Employment Year at the previous Salary, and all subsequent bi-weekly installment
payments of the Salary in such Employment Year shall be at the newly adjusted
Salary. In no event shall any adjustment pursuant to this Section result in a
reduction of salary rate from the prior period.
For the purpose of calculating the cost of living adjustments, the
following definitions shall apply: (i) the term "Base Month" shall mean the
calendar month immediately preceding the calendar month in which the Term
commences; and (ii) the term "Price Index" shall mean the "Revised Consumer
Price Index for Urban Consumers" published by the Bureau of Labor Statistics of
the United States Department of Labor, for the New York, Northeastern, New
Jersey, All Items, (1967 = 100) or a term "Price Index for the Base Month" shall
mean the Price Index for the Base Month.
(c) The Employee shall be entitled to an incentive compensation in respect
of each year during the term of this Agreement (pro rated for any partial year
during the term of this Agreement) equal to 5% of Net Income (as defined
-2-
hereinbelow). The term "Net Income" means, for any applicable fiscal year,
earnings of the Company before taxes, as calculated in accordance with generally
accepted accounting principles applied on a basis consistent with those utilized
in the preparation of the Company's financial statements for such year;
provided, however, that goodwill attributable to the merger of L&J Marketing,
Inc. with and into the Company shall not be greater than $150,000 per annum. The
amount of Net Income for each year shall be determined no later than 90 days
following the end of such year. Such incentive compensation shall be paid in
cash to Employee within ten (10) business days following the date of such
determination, and shall be accompanied by a copy of the determination of such
amount, certified by the Chief Financial Officer or Controller of Take-Two
Interactive Software, Inc. (the "Parent") as having been determined in
accordance with the provisions of this subparagraph 3(c).
(d) In addition to the foregoing, the Employee shall receive a bonus equal
to 0.125% of the first $20 million in combined sales of the Parent and Company
for each fiscal year during each year of the Term.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company and Parent
may from time to time institute during such period for its employees and for
which the Employee is eligible, including without limitation D&O and disability
Insurance. The Company will also purchase an insurance policy on Employee's life
consistent with that coverage offered by the Company from time to time to its
executive officers. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee will be entitled to
five (5) weeks of vacation time and that number of paid holidays, personal days
off and sick leave days in each calendar year as are determined pursuant to the
Company's Policies as in effect from time to time. Such vacation may be taken in
the Employee's discretion with the prior approval of the Employer, and at such
time or times as are not inconsistent with the reasonable business needs of the
Company.
(c) During the term of this Agreement, the Employee shall be entitled to
receive an automobile allowance of $650.00 per month payable in accordance with
Section 3(a) above. In addition, the Employer shall be responsible for providing
Employee with automobile insurance.
-3-
5. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged for
cause (as hereinafter defined), effective as of such time as the Board
shall determine. Upon discharge of the Employee pursuant to this
subparagraph 5(a), the Employer shall have no further obligation or duties
to the Employee, except for payment of Salary and such incentive
compensation, if any, having accrued to the Employee pursuant to
subparagraph 3(c) hereof through the effective date of termination, and the
Employee shall have no further obligations or duties to the Employer,
except as provided in Section 6.
(b) In the event of (i) the death of the Employee or (ii) by action of
the Board and the inability of the Employee, by reason of physical or
mental disability, to continue substantially to perform his duties
hereunder for a period of 90 days, for which 90 day period Salary and any
other benefits hereunder shall not be suspended or diminished. Upon any
termination of the Employee's employment under this subparagraph 5(b), the
Employer shall have no further obligations or duties to the Employee except
for payment of Salary and such incentive compensation, if any, having
accrued to the Employee pursuant to subparagraph 3(c) hereof through the
date of death or effective date of termination in the case of disability.
Anything contained herein to the contrary notwithstanding, in the event of
termination pursuant hereto for disability, the Employer shall pay in
addition to any accrued Salary and incentive compensation, a severance
payment equal to three (3) months Salary.
(c) In the event that Employee's employment with the Employer is
terminated by action taken by the Board without cause, then the Employer
shall have no further obligation or duties to Employee, except for payment
of Salary and such incentive compensation, if any, having accrued to the
Employee pursuant to subparagraph 3(b) hereof through the effective date of
termination and as provided in Section 7, and Employee shall have no
further obligations or duties to the Employer except as provided in Section
6 and for payment by the Company of a severance amount in the sum of
$183,500 or the Salary due and owing for the balance of the term of the
agreement, whichever is less, which severance payment shall be paid, in
full, to the Employee within two (2) weeks of the date of termination
hereunder.
(d) For purposes of this Agreement, the Company shall have "cause" to
terminate the Employee's employment under this Agreement upon (i) the
failure by the Employee to substantially perform his duties under this
Agreement, (ii) the engaging by the Employee in criminal misconduct
(including embezzlement and criminal fraud) which is materially injurious
to the Company,
-4-
monetarily or otherwise, (iii) the conviction of the Employee of a felony
or (iv) gross negligence to the Company on the part of the Employee. The
Company shall give written notice to the Employee, which notice shall
specify the grounds for the proposed termination and the Employee shall be
given thirty (30) days to cure if the grounds arise under clauses (i)
through (iv) above.
6. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company,
Inventory Management Systems, Inc. ("IMSI") and the Parent. The term
"confidential information" shall mean any and all information (verbal and
written) relating to the Company, IMSI, the Parent or any of their respective
affiliates, or any of their respective activities, other than such information
which can be shown by the Employee to be in the public domain (such information
not being deemed to be in the public domain merely because it is embraced by
more general information which is in the public domain) other than as the result
of breach of the provisions of this subparagraph 6(a). Subject to the last
sentence of this subparagraph 6(a), the Employee agrees that he will not, at any
time during his employment or for a period of one (1) year following such
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Company, IMSI or Parent and that
Employee agrees that all confidential information shall be the sole property of
the Company. In the event that Employee is requested or becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any confidential information or the fact that the confidential information has
been made available to you, Employee will provide the Company with prompt
written notice of such request(s) so that the Company may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions
hereof.
(b) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, within any county (or adjacent county) in the State of New York
or in any State within the United States or territory outside the United States
in which the Company is engaged in business during the period of the Employee's
employment or on the date of termination of the Employee's employment, engage,
have an interest in or render any services to any business (whether as owner,
manager, operator, licensor, licensee, lender, partner, stockholder, joint
venturer, employee, consultant or otherwise)
-5-
competitive with the Parent's, IMSI's or the Company's business activities.
(c) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Parent's, IMSI's or Company's business activities
including, without limitation, the solicitations of the Parent's, IMSI's or
Company's customers, or persons listed on the personnel lists of the Parent,
IMSI or Company. At no time during the term of this Agreement, or thereafter
shall the Employee directly or indirectly, disparage the commercial, business or
financial reputation of the Parent, IMSI or Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 6(b) and (c)
above shall serve as a prohibition against him, during the period referred to
therein, directly or indirectly, (i) hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor or licensee who has been
previously contacted by either a representative of the Parent, IMSI or Company,
including the Employee, to discontinue or alter his or its relationship with the
Parent, IMSI or Company or (ii) enticing, soliciting or in any other manner
persuading or attempting to persuade any customer who has been previously
contacted by either a representative of the Parent, IMSI or Company, including
the Employee, to discontinue or alter his or its relationship with the Parent,
IMSI or Company for any business which competes with the business of the
Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company,
IMSI or Parent which are in the possession of the Employee including all copies
thereof, shall be promptly returned to the Company.
(f) The Employee agrees that all processes, intellectual property rights,
technologies and inventions relating to the business of the Parent, IMSI or
Company ("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, of the Parent, IMSI or the Company, or
conceived, developed, invented or made by Employee during his employment by
Employer, shall belong to the Company and its affiliates. The Employee shall
further: (a) promptly disclose such Inventions to the Company; (b) assign to the
Company, without additional compensation, all patent, copyright, trademark and
other rights to such Inventions for the
-6-
United States and foreign countries; (c) sign all papers necessary to carry out
the foregoing; and (d) give testimony in support of his inventorship.
(g) The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and in the course of the Employee's
employment hereunder, free and clear of any claims by the Employee (or anyone
claiming under the Employee) of any kind or character whatsoever (other than the
Employee's right to receive payments hereunder). The Employee shall, at the
request of the Company, execute such assignments, certificates or other
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend its right, or
title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 6, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
(i) The parties hereto hereby acknowledge that, in addition to any other
remedies the Company may have under subparagraph 6(h) hereof, the Company shall
have the right and remedy to require the Employee to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the Employee as the
result of any transactions constituting a breach of any of the provisions of
Section 6, and the Employee hereby agrees to account for any pay over such
Benefits to the Company.
(j) Each of the rights and remedies enumerated in subparagraphs 6(h) and
(i) shall be independent of the other, and shall be severally enforceable, and
all of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
(k) If any provision contained in this Section 6 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
-7-
(l) If any provision contained in this Section 6 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
restriction shall thereafter be enforceable as contemplated hereby.
(m) It is the intent of the parties hereto that the covenants contained in
this Section 6 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Company). Accordingly, it is hereby agreed
that if any of the provisions of this Section 6 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
7. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an officer of
the Company, whether or not he continues to be such an officer at the time of
incurring such expenses, except insofar as such indemnification is prohibited by
law. Such expenses shall include, without limitation, the fees and disbursements
of attorneys of Employee's choosing (subject to the prior consent of the
Employer, which consent shall not be unreasonably withheld), amounts of
judgments and amounts of any settlements, provided that such expenses are agreed
to in advance by the Employer or a result of a settlement or judgment of a court
or other governmental agency. The foregoing indemnification obligation is in
addition to any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws.
8. General. This Agreement is further governed by the following provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, mailed by certified mail,
return receipt requested, to be delivered at such address as is indicated
below, or at such other address or to the attention of such other person as
the recipient has specified by prior written notice to the sending party.
Notice shall be effective when received.
-8-
To the Employer: Alliance Inventory Management, Inc.
14-20B 129th Street
College Point, New York
Attention: Chairman
With copies to: Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant,
Chief Executive Officer
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Barry Rutcofsky, Esq.
To the Employee: Jay Gelman
27 Copper Beach Lane
Lawrence, NY 11354
With a copy to: Law Office of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attention: Brian J. Herman, Esq.
Telecopier: 718-847-0025
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification or termination of
this Agreement will be effective only if it is in writing signed by the
party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Employee agrees to
and hereby does submit to jurisdiction before any state or federal court of
record in New York City, New York, or in the state and county in which such
violation may occur, at Employer's election.
(e) Warranty. Employee and Employer hereby warrant and represent that
the execution of this Agreement and the discharge of its respective
obligations hereunder will not
-9-
breach or conflict with any other contract, agreement, or understanding
between himself or itself, as the case may be, and any other party or
parties.
(f) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
(g) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
ALLIANCE INVENTORY MANAGEMENT, INC.
By:
----------------------------------
Name:
Title:
-------------------------------------
Jay Gelman
-10-
EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 22, 1997 between Alliance Inventory
Management, Inc. a New York corporation (the "Employer" or the "Company"), and
Larry Muller (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as Chief Operating
Officer and to be assured of his services as such on the terms and conditions
hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to be so employed by Employer for a four (4) year period commencing as of
the date of this Agreement (the "Effective Date") (such period being herein
referred to as the "Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year") unless earlier terminated pursuant to Section 6 hereof.
2. Employee Duties.
(a) During the term of this Agreement, the Employee shall have the duties
and responsibilities of Chief Operating Officer, of the Employer, reporting
directly to the Chairman of the Employer and the Board of Directors of the
Employer (the "Board"). It is understood that such duties and responsibilities
shall be reasonably related to the Employee's position.
(b) The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices located at 14-20B 129th Street,
College Point, New York, although the Employee may, for business reasons, be
required from time to time to travel outside of the area where the Company's
principal executive offices are located in connection with the business of the
Company.
3. Compensation.
(a) Subject to adjustment for cost of living pursuant to subparagraph 3(b)
hereof, the Employer shall pay the Employee a salary (the "Salary") at a rate of
$183,500 per annum in respect of each Employment Year during the Term, payable
in equal installments bi-weekly, or at such other times as may mutually be
agreed upon between the Employer and the Employee.
(b) Effective as of the first day of the second, third and fourth
Employment Years of the Term, there shall be made a cost of living adjustment of
the Salary payable hereunder. Such adjustment shall be based on the percentage
difference between the Price Index (as defined herein) for the first month of
each new Employment Year and the Price Index for the Base Month (as defined
herein). In the event the Price Index for the first month in any Employment Year
calendar year during the Term reflects an increase over the Price Index for the
Base Month, then the Salary shall be multiplied by the percentage difference
between the Price Index for such first month and the Price Index for the Base
Month, and the resulting sum shall be added to the Salary, effective as of such
first month. Such Salary, as adjusted, shall thereafter be payable, in equal
bi-weekly installments, until it is readjusted in the following Employment Year
pursuant to the terms hereof. In the event any cost of living adjustment is not
available as of the first month of the Employment Year, payments of Salary shall
be made on the basis of the preceding Employment Year until the cost of living
adjustment is available at which time the bi-weekly installment payment next due
shall be computed on the basis of the cost of living adjustment increased as
provided hereinabove to retroactively adjust the payments paid during such
Employment Year at the previous Salary, and all subsequent bi-weekly installment
payments of the Salary in such Employment Year shall be at the newly adjusted
Salary. In no event shall any adjustment pursuant to this Section result in a
reduction of salary rate from the prior period.
For the purpose of calculating the cost of living adjustments, the
following definitions shall apply: (i) the term "Base Month" shall mean the
calendar month immediately preceding the calendar month in which the Term
commences; and (ii) the term "Price Index" shall mean the "Revised Consumer
Price Index for Urban Consumers" published by the Bureau of Labor Statistics of
the United States Department of Labor, for the New York, Northeastern, New
Jersey, All Items, (1967 = 100) or a term "Price Index for the Base Month" shall
mean the Price Index for the Base Month.
(c) The Employee shall be entitled to an incentive compensation in respect
of each year during the term of this Agreement (pro rated for any partial year
during the term of this Agreement) equal to 5% of Net Income (as defined
-2-
hereinbelow). The term "Net Income" means, for any applicable fiscal year,
earnings of the Company before taxes, as calculated in accordance with generally
accepted accounting principles applied on a basis consistent with those utilized
in the preparation of the Company's financial statements for such year;
provided, however, that goodwill attributable to the merger of L&J Marketing,
Inc. with and into the Company shall not be greater than $150,000 per annum. The
amount of Net Income for each year shall be determined no later than 90 days
following the end of such year. Such incentive compensation shall be paid in
cash to Employee within ten (10) business days following the date of such
determination, and shall be accompanied by a copy of the determination of such
amount, certified by the Chief Financial Officer or Controller of Take-Two
Interactive Software, Inc. (the "Parent") as having been determined in
accordance with the provisions of this subparagraph 3(c).
(d) In addition to the foregoing, the Employee shall receive a bonus equal
to 0.125% of the first $20 million in combined sales of the Parent and Company
for each fiscal year during each year of the Term.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company and Parent
may from time to time institute during such period for its employees and for
which the Employee is eligible, including without limitation D&O and disability
Insurance. The Company will also purchase an insurance policy on Employee's life
consistent with that coverage offered by the Company from time to time to its
executive officers. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee will be entitled to
five (5) weeks of vacation time and that number of paid holidays, personal days
off and sick leave days in each calendar year as are determined pursuant to the
Company's Policies as in effect from time to time. Such vacation may be taken in
the Employee's discretion with the prior approval of the Employer, and at such
time or times as are not inconsistent with the reasonable business needs of the
Company.
(c) During the term of this Agreement, the Employee shall be entitled to
receive an automobile allowance of $650.00 per month payable in accordance with
Section 3(a) above. In addition, the Employer shall be responsible for providing
Employee with automobile insurance.
-3-
5. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged for
cause (as hereinafter defined), effective as of such time as the Board
shall determine. Upon discharge of the Employee pursuant to this
subparagraph 5(a), the Employer shall have no further obligation or duties
to the Employee, except for payment of Salary and such incentive
compensation, if any, having accrued to the Employee pursuant to
subparagraph 3(c) hereof through the effective date of termination, and the
Employee shall have no further obligations or duties to the Employer,
except as provided in Section 6.
(b) In the event of (i) the death of the Employee or (ii) by action of
the Board and the inability of the Employee, by reason of physical or
mental disability, to continue substantially to perform his duties
hereunder for a period of 90 days, for which 90 day period Salary and any
other benefits hereunder shall not be suspended or diminished. Upon any
termination of the Employee's employment under this subparagraph 5(b), the
Employer shall have no further obligations or duties to the Employee except
for payment of Salary and such incentive compensation, if any, having
accrued to the Employee pursuant to subparagraph 3(c) hereof through the
date of death or effective date of termination in the case of disability.
Anything contained herein to the contrary notwithstanding, in the event of
termination pursuant hereto for disability, the Employer shall pay in
addition to any accrued Salary and incentive compensation, a severance
payment equal to three (3) months Salary.
(c) In the event that Employee's employment with the Employer is
terminated by action taken by the Board without cause, then the Employer
shall have no further obligation or duties to Employee, except for payment
of Salary and such incentive compensation, if any, having accrued to the
Employee pursuant to subparagraph 3(b) hereof through the effective date of
termination and as provided in Section 7, and Employee shall have no
further obligations or duties to the Employer except as provided in Section
6 and for payment by the Company of a severance amount in the sum of
$183,500 or the Salary due and owing for the balance of the term of the
agreement, whichever is less, which severance payment shall be paid, in
full, to the Employee within two (2) weeks of the date of termination
hereunder.
(d) For purposes of this Agreement, the Company shall have "cause" to
terminate the Employee's employment under this Agreement upon (i) the
failure by the Employee to substantially perform his duties under this
Agreement, (ii) the engaging by the Employee in criminal misconduct
(including embezzlement and criminal fraud) which is materially injurious
to the Company,
-4-
monetarily or otherwise, (iii) the conviction of the Employee of a felony
or (iv) gross negligence to the Company on the part of the Employee. The
Company shall give written notice to the Employee, which notice shall
specify the grounds for the proposed termination and the Employee shall be
given thirty (30) days to cure if the grounds arise under clauses (i)
through (iv) above.
6. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company,
Inventory Management Systems, Inc. ("IMSI") and the Parent. The term
"confidential information" shall mean any and all information (verbal and
written) relating to the Company, IMSI, the Parent or any of their respective
affiliates, or any of their respective activities, other than such information
which can be shown by the Employee to be in the public domain (such information
not being deemed to be in the public domain merely because it is embraced by
more general information which is in the public domain) other than as the result
of breach of the provisions of this subparagraph 6(a). Subject to the last
sentence of this subparagraph 6(a), the Employee agrees that he will not, at any
time during his employment or for a period of one (1) year following such
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Company, IMSI or Parent and that
Employee agrees that all confidential information shall be the sole property of
the Company.
In the event that Employee is requested or becomes legally compelled (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any
confidential information or the fact that the confidential information has been
made available to you, Employee will provide the Company with prompt written
notice of such request(s) so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions hereof.
(b) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, within any county (or adjacent county) in the State of New York
or in any State within the United States or territory outside the United States
in which the Company is engaged in business during the period of the Employee's
employment or on the date of termination of the Employee's employment, engage,
have an interest in or render any services to any business (whether as
-5-
owner, manager, operator, licensor, licensee, lender, partner, stockholder,
joint venturer, employee, consultant or otherwise) competitive with the
Parent's, IMSI's or the Company's business activities.
(c) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Parent's, IMSI's or Company's business activities
including, without limitation, the solicitations of the Parent's, IMSI's or
Company's customers, or persons listed on the personnel lists of the Parent,
IMSI or Company. At no time during the term of this Agreement, or thereafter
shall the Employee directly or indirectly, disparage the commercial, business or
financial reputation of the Parent, IMSI or Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 6(b) and (c)
above shall serve as a prohibition against him, during the period referred to
therein, directly or indirectly, (i) hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor or licensee who has been
previously contacted by either a representative of the Parent, IMSI or Company,
including the Employee, to discontinue or alter his or its relationship with the
Parent, IMSI or Company or (ii) enticing, soliciting or in any other manner
persuading or attempting to persuade any customer who has been previously
contacted by either a representative of the Parent, IMSI or Company, including
the Employee, to discontinue or alter his or its relationship with the Parent,
IMSI or Company for any business which competes with the business of the
Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company,
IMSI or Parent which are in the possession of the Employee including all copies
thereof, shall be promptly returned to the Company.
(f) The Employee agrees that all processes, intellectual property rights,
technologies and inventions relating to the business of the Parent, IMSI or
Company ("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, of the Parent, IMSI or the Company, or
conceived, developed, invented or made by Employee during his employment by
Employer, shall belong to the Company and its affiliates. The Employee shall
further: (a) promptly disclose such Inventions to the Company; (b) assign to
-6-
the Company, without additional compensation, all patent, copyright, trademark
and other rights to such Inventions for the United States and foreign countries;
(c) sign all papers necessary to carry out the foregoing; and (d) give testimony
in support of his inventorship.
(g) The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and in the course of the Employee's
employment hereunder, free and clear of any claims by the Employee (or anyone
claiming under the Employee) of any kind or character whatsoever (other than the
Employee's right to receive payments hereunder). The Employee shall, at the
request of the Company, execute such assignments, certificates or other
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend its right, or
title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 6, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
(i) The parties hereto hereby acknowledge that, in addition to any other
remedies the Company may have under subparagraph 6(h) hereof, the Company shall
have the right and remedy to require the Employee to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the Employee as the
result of any transactions constituting a breach of any of the provisions of
Section 6, and the Employee hereby agrees to account for any pay over such
Benefits to the Company.
(j) Each of the rights and remedies enumerated in subparagraphs 6(h) and
(i) shall be independent of the other, and shall be severally enforceable, and
all of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
(k) If any provision contained in this Section 6 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
-7-
(l) If any provision contained in this Section 6 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
restriction shall thereafter be enforceable as contemplated hereby.
(m) It is the intent of the parties hereto that the covenants contained in
this Section 6 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Company). Accordingly, it is hereby agreed
that if any of the provisions of this Section 6 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
7. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an officer of
the Company, whether or not he continues to be such an officer at the time of
incurring such expenses, except insofar as such indemnification is prohibited by
law. Such expenses shall include, without limitation, the fees and disbursements
of attorneys of Employee's choosing (subject to the prior consent of the
Employer, which consent shall not be unreasonably withheld), amounts of
judgments and amounts of any settlements, provided that such expenses are agreed
to in advance by the Employer or a result of a settlement or judgment of a court
or other governmental agency. The foregoing indemnification obligation is in
addition to any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws.
8. General. This Agreement is further governed by the following provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, mailed by certified mail,
return receipt requested, to be delivered at such address as is indicated
below, or at such other address or to the attention of such other person as
the recipient has specified by prior written notice to the sending party.
Notice shall be effective when received.
-8-
To the Employer: Alliance Inventory Management, Inc.
14-20B 129th Street
College Point, New York
Attention: Chairman
With copies to: Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant,
Chief Executive Officer
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Barry Rutcofsky, Esq.
To the Employee: Larry Muller
61 Hearthstone Drive
Dix Hills, NY 11746
With a copy to: Law Office of Brian J. Herman
113-20 Jamaica Avenue
Richmond Hill, New York 11418
Attention: Brian J. Herman, Esq.
Telecopier: 718-847-0025
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification or termination of
this Agreement will be effective only if it is in writing signed by the
party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Employee agrees to
and hereby does submit to jurisdiction before any state or federal court of
record in New York City, New York, or in the state and county in which such
violation may occur, at Employer's election.
(e) Warranty. Employee and Employer hereby warrant and represent that
the execution of this Agreement and the discharge of its respective
obligations hereunder will not
-9-
breach or conflict with any other contract, agreement, or understanding
between himself or itself, as the case may be, and any other party or
parties.
(f) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
(g) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
ALLIANCE INVENTORY MANAGEMENT, INC.
By:
--------------------------------
Name:
Title:
-----------------------------------
Larry Muller
-10-
Terms Sheet
Borrower: Inventory Management Systems, Inc.
Alliance Inventory Management, Inc.
Purpose: Finance working capital needs
Loan Amount: $5,000,000
Loan Type: Line of Credit
Interest Rate:
Prime Rate: NationsBank's Prime Rate plus .75%, varying from time to time on the
day of each change in NationsBank's Prime Rate.
Usage Fee Borrower will pay a quarterly fee of .20% of the average daily unused
portion of the Loan during the previous quarter. The Borrower may at any time
reduce the amount of the Loan and the obligation to pay a usage fee shall
thereupon be reduced correspondingly.
Repayment:
Interest accrued on the outstanding principal balance, payable monthly.
Principal, payable in full at maturity at 5/31/98.
Prepayment Penalties:
Prepayments may be made in whole or in part at any time on any Loan for which
the Rate is based on the Prime Rate or LIBOR.
Collateral:
Personal Property: A first priority security interest in all accounts receivable
chattel paper, fixtures inventory, equipment, general intangibles owned by
Borrower or hereafter acquired and all replacements and substitutions thereof
and proceeds thereof.
Requirements Related to Collateral:
Commercial Credit Services Audit
The loan will be governed by a Borrowing Base Agreement. An audit by the
Bank's Commercial Credit Services department at the Borrower's expense,
must be performed before the proposed loan could be closed and before the
details of the Borrowing Base can be defined. Those details include
eligibility of and advance rates on receivables and inventory, the type of
reporting required, the frequency of that reporting and the frequency of
required subsequent audits.
To the extent the total of advances outstanding hereunder at any time exceeds
the Borrowing Base, Borrower shall immediately prepay this Loan to such extent.
2
SURVIVAL
This commitment letter shall constitute a Loan Document and shall survive the
execution and delivery of the definitive Loan Documents.
EXPIRATION/RENEWAL CLAUSES:
Any commitment to advance funds under the Loan shall expire on May 31, 1998 and
the Bank shall have no further obligation to extend credit. Any renewal,
extension of maturity and/or expiration date, or increase in amount of this Loan
by the Bank shall be governed by the terms of this commitment unless otherwise
agreed to by the Bank, in writing.
CONDITIONS TO FIRST ADVANCE:
Prior to the making by the Bank of the first advance to the Borrower, the
following conditions precedent shall have been satisfied.
The Bank shall have received, duly executed, all Loan Documents and any other
documents and instruments necessary or advisable in connection with the Loan,
all of which shall be in form and substance satisfactory to the Bank and its
counsel.
The financing statements, notices and other documents and instruments deemed by
the Bank and its counsel to be necessary or advisable in connection with the
collateral described herein shall have been recorded or filed in all necessary
places by closing.
CONDITIONS TO EACH ADVANCE:
Prior to the disbursement by the Bank of any advances to Borrower under this
Loan, the Bank shall have determined that there shall exist no event of default
except those that Bank has agreed in writing to forbear; the representations and
warranties contained in the Loan documents shall be true and accurate as of the
date of such advance; there shall have occurred no material adverse change in
the financial condition of the Borrower or any other person liable for repayment
of the Loan; and the Bank shall have determined that the prospect of payment or
performance of the Loan has not been materially impaired.
Guarantors:
Take-two Interactive Software, Inc.
Reporting Requirements: The Borrower will submit to the Bank the following:
1. QUARTERLY within 60 days of the end of each QUARTER, internally prepared
financial statements of the Borrower, including a balance sheet and income
statements; and
2. Annually, within one hundred fifty (150) days following the end of the
Borrower's fiscal year, a balance sheet and income statement prepared in
accordance with generally
3
accepted accounting principles on an audited basis by an independent certified
public accountant acceptable to the Bank, including statements of financial
condition, income, cash flows and changes in shareholders' equity.
3. Reports showing a detailed aging of accounts receivable, an inventory
accounting and a borrowing base certificate as defined in the borrowing base
agreement.
4. An audit by the Bank's Commercial Credit Services department. Said audit
would determine the frequency of such reporting and the need for subsequent
audits.
5. In addition, the Borrower shall submit a projected balance sheet prior to
closing, reflecting the acquisition of L&J Marketing d/b/a Alliance
Distributors.
The Guarantor will submit to the Bank the following:
1. Annually, within one hundred fifty (150) days following the end of the
Guarantor's fiscal year, a balance sheet and income statement prepared in
accordance with generally accepted accounting principles on an audited basis by
an independent certified public accountant acceptable to the Bank, including
statements of financial condition, income, cash flows and changes in
shareholders' equity.
2. Quarterly 1OQ's
Financial Covenants:
Tangible Capital Funds:
Upon receipt of the projected balance sheet, a minimum Tangible Capital Funds
covenant will be established.
Tangible Capital Funds shall be as defined by Generally Accepted Accounting
Principles.
REPRESENTATIONS AND WARRANTIES:
Good Standing. Borrower is a corporation, duly organized, validly existing and
in good standing and has the power and authority to own its property and to
carry on its business in each jurisdiction in which Borrower does business.
Authority and Compliance. Borrower has full power and authority to execute and
deliver the Loan Documents and to incur and perform the obligations provided for
therein, all of which have been duly authorized by all proper and necessary
action of the appropriate governing body of Borrower. Borrower is in compliance
with all laws and regulatory requirements to which it is subject.
Binding Agreement. This Agreement and the other Loan Documents executed by
Borrower constitute valid and legally binding obligations of Borrower,
enforceable in accordance with their terms.
4
Litigation. There is no proceeding involving Borrower pending or, to the
knowledge of Borrower, threatened before any court or governmental authority,
agency or arbitration authority, except as disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement.
No Conflicting Agreements. There is no charter, bylaw, stock provision,
partnership agreement or other document pertaining to the organization, power or
authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting its property, which would
conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the other Loan Documents.
Ownership of Assets. Borrower has good title to its assets, and its assets are
free and clear of liens, except those granted to Bank and as disclosed to Bank
in writing prior to the date of this Agreement.
Taxes. All taxes and assessments due and payable by Borrower have been paid or
are being contested in good faith by appropriate proceedings and the Borrower
has filed all tax returns which it is required to file.
Financial Statements. The financial statements of Borrower heretofore delivered
to Bank have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved and fairly present Borrower's financial
condition as of the date or dates thereof, and there has been no material
adverse change in Borrower's financial condition or operations since October 31,
1997.
Environmental Compliance. The conduct of Borrower's business operations and the
condition of Borrower's property does not and will not violate any federal laws,
rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials.
Continuation of Representation and Warranties. All representations and
warranties made under this Letter of Commitment shall be deemed to be made at
and as of the date hereof and at and as of the date of any advance under any
Loan.
AFFIRMATIVE COVENANTS:
Until full payment and performance of all obligations of Borrower under the Loan
Documents, Borrower will, without limiting any requirement of any other Loan
Documents:
Comply with all statutes and government regulations in all material respects
Pay all taxes when due.
Maintain its corporate existence.
Maintain insurance in amounts and with coverage's acceptable to the Bank.
Maintain its property in good condition.
5
From time to time provide the Bank with such other information as the Bank may
reasonably request and allow the Bank to inspect all records and property as it
may reasonably request.
Continue to operate its business.
Inform Bank of potential or contingent liabilities in excess of $100,000 not
incurred in ordinary course of business.
Investments limited to United States government obligations or subsidiary stock.
NEGATIVE COVENANTS:
Until full payment and performance of all obligations of Borrower under the Loan
Documents, Borrower will not, without the prior written consent of Bank (and
without limiting any requirement of any other Loan Documents):
Make any material change in the management or ownership.
Sell, lease, assign or otherwise dispose of or transfer any assets, except in
the normal course of its business, or enter into any merger or consolidation, or
transfer control or ownership of the Borrower or from or acquire any subsidiary.
Grant, suffer or permit any contractual or noncontractual lien on or security
interest in its assets, except in favor of Bank, or fail to promptly pay when
due all lawful claims, whether for labor, materials or otherwise.
Make any loan or advance to any individual, partnership, corporation or other
entity in the aggregate of $30,000.00 in each fiscal year and not already
disclosed to the Bank.
Create, incur, assume or become liable in any manner for any indebtedness (for
borrowed money, deferred payment for the purchase of assets, lease payments, as
surety or guarantor for the debt for another, or otherwise) other than to Bank,
except for normal trade debts incurred in the ordinary course of Borrower's
business and except for existing indebtedness disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement.
Make any distribution (other than dividends payable in capital stock of
Borrower) on any shares of any class of its common stock or apply any of its
property or assets to the purchase, redemption or other retirement of any shares
of any class of common stock of or any partnership interest in Borrower if such
distribution shall cause the Borrower to be in default of its financial
covenants.
EVENTS OF DEFAULT:
The Borrower shall be in default under this Commitment and under any and all
promissory notes executed by Borrower in favor of Bank and any and all other
documents, instruments, deeds of trust, mortgages, security agreements,
guarantees executed and or delivered by Borrower in connection with the Loan if
it shall default in the payment of any amounts due and owing under the Loan and
such payment default is not cured within ten (10) days or should it fail to
timely and properly perform, keep and observe any other item, covenant,
agreement or condition in any Commitment made to Borrower or any of the Loan
Documents and such failure is not
6
cured within thirty (30) days, or the failure to pay or perform any obligations,
liability or indebtedness of Borrower or any endorser hereof to any affiliate of
Bank which failure is not cured within any applicable cure period under any
other agreement, note or instrument now or hereafter existing whether upon
demand, at maturity or by acceleration.
REMEDIES UPON DEFAULT
If an event of default shall occur Bank shall have all rights, powers and
remedies available under each of the loan Documents as well as all rights and
remedies available at law or in equity.
CLOSING COSTS AND EXPENSES:
The Borrower shall pay all costs and expenses incurred by the Bank in connection
with the Bank's review, due diligence and closing of the Loans, including
attorney's fees (to include outside counsel fees and all allocated costs of
Bank's in-house Counsel if permitted by applicable law) incurred by the Bank in
connection with the negotiation and preparation of the Loan Documents, the costs
of any environmental investigation and audit, appraisal, title insurance
premiums, survey and inspection fees, field exam of collateral, whether or not
the Loans actually close.
MATERIAL ADVERSE CHANGE:
This commitment may be terminated, in the sole discretion of the Bank, upon the
occurrence of a material adverse change in the financial condition of the
Borrower or any other person liable to the Bank for the repayment of this loan.
GOVERNING LAW:
This commitment and the Loan shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia (without regard to choice of law
principles).
NON-ASSIGNABLE:
This commitment and the right of Borrower to receive loans hereunder may not be
assigned by Borrower.
ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE AND
ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL
7
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR
DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR
(II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC.
91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR
(C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES..
EXPIRATION:
This commitment is to be closed within fifteen (15) days of the acceptance data.
Should this commitment not be accepted by the expiration date or such later date
agreed to in writing, and not closed within fifteen (15) days of the acceptance
date, then the Bank shall have no further obligation to extend credit hereunder.
8
The terms and conditions set forth above are accepted this _____ day of
____________, 19__.
Inventory Management Systems, Inc.
By: David P. Clark
------------------------------
Title: President
--------------------------
Alliance Inventory Management, Inc.
By: Ryan A. Brant
------------------------------
Title: Director/CEO
--------------------------
Guarantor:
Take-Two Interactive Software, Inc.
By: Ryan A. Brant
------------------------------
Title: CEO
--------------------------
9
NationsBank, N.A.
Promissory Note
Date December 23, 1997 Maturity Date May 31, 1998
[ ] New [x] Renewal Amount $ 5,000,000.00
================================================================================
Bank: Borrower:
NationsBank, N.A.
Banking Center: INVENTORY MANAGEMENT SYSTEMS, INC.
AND ALLIANCE INVENTORY MANAGEMENT,
Mid-Atlantic Commercial Banking INC.
1111 East Main Street 2900 Polo Parkway
Richmond, VA 23219-3500 Midlothian, VA 23113
County: Independent City of Richmond
County: Chesterfield
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of ----FIVE MILLION AND NO/100-----Dollars ($5,000,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
[This Note contains some provisions preceded by boxes. If a box is marked, the
provision applies to this transaction; if it is not marked, the provision does
not apply, to this transaction.]
1. Rate
Prime Rate. The Rate shall be the Prime Rate, plus 0.75 percent, per annum. The
"Prime Rate" is the fluctuating rate of interest established by Bank from time
to time, at its discretion, whether or not such rate shall be otherwise
published. The Prime Rate is established by Bank as an index and may or may not
at any time be the best or lowest rate charged by Bank on any loan.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the Commonwealth of
Virginia; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Bank.
2. Accrual Method. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of interest
is computed for a hypothetical year of 360 days; that amount is multiplied by
the actual number of days for which any principal is outstanding hereunder). If
interest is not to be computed using this method, the method shall be: N/A.
3. Rate Change Date. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. If the Rate is to change on any other date or at any other
interval, the change shall be: N/A.
In the event any index is discontinued, Bank shall substitute an index
determined by Bank to be comparable, in its sole discretion.
4. Payment Schedule. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due end
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
Single Principal Payment. Principal shall be paid in full in a single payment on
May 31, 1998. Interest thereon shall be paid monthly commencing on January 31,
1998, and continuing on the same day of each successive month thereafter, with a
final payment of all unpaid interest at the stated maturity of this Note.
5. Revolving Feature.
[X] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided, that Borrower is not in default under any
provision of this Note, any other documents executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bunk, and provided that the
borrowings hereunder do not exceed any borrowing base or other limitation on
borrowings by Borrower. Bank shall incur no liability for its refusal to advance
funds based upon its determination that any conditions of such further advances
have not been met. Bank records of the amounts borrowed from time to time shall
be conclusive proof thereof.
[_] Uncommitted Facility. Borrower acknowledges and agrees that,
notwithstanding any provisions of this Note or any other documents executed
in connection with this Note, Bank has no obligation to make any advance,
and that all advances are at the sole discretion of Bank.
[_] Out-Of-Debt Period. For a period of at least __ consecutive days during
[_] each fiscal year, [_] any consecutive 12-month period, Borrower shall
fully pay down the balance of this Note, so that no amount of principal or
interest and no other obligation under this Note remains outstanding.
6. Automatic Payment.
[X] Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number 4113623802. This
authorization shall not effect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on
VA041 1 Approved: 09-21-95
Revised: 06-26-96
the due date thereof, or if Bank fails to debit the account.
7. Waivers, Consents and Covenants. Borrower, any indorser, or guarantor hereof
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way effect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any indorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any suit, mediation or arbitration proceeding,
out of court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding as may be determined reasonable by any arbitrator or court.
8. Prepayments. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate. All prepayments of principal
shall be applied in the inverse order of maturity, or an such other order as
Bank shall determine in its sole discretion. No prepayment of any other loan
shall be permitted without the prior written consent of Bank. Notwithstanding
such prohibition, if there is a prepayment of any such loan, whether by consent
of Bank, or because of acceleration or otherwise, Borrower shall, within 15 days
of any request by Bank, pay to Bank any loss or expense which Bank may incur or
sustain as a result of such prepayment. For the purposes of calculating the
amounts owed only, it shall be assumed that Bank actually funded or committed to
fund the loan through the purchase of an underlying deposit in an amount and for
a term comparable to the loan, and such determination by Bank shall be
conclusive, absent a manifest error in computation.
9. Delinquency Charge. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of any payment that is
more than fifteen days late.
10. Events of Default. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party,
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/Guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a proceeding
against any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obliger with or into another entity; (f) the insolvency of, the business failure
of, the appointment of a custodian, trustee, liquidator or receiver for or for
any of the property of, the assignment for the benefit of creditors by, or the
filing of a petition under bankruptcy, insolvency or debtor's relief law or the
filing of a petition for any adjustment of indebtedness, composition or
extension by or against any Obligor; (g) the determination by Bank that any
representation or warranty made to Bank by any Obligor in any Loan Documents or
otherwise is or was, when it was made, untrue or materially misleading; (h) the
failure of any Obligor to timely deliver such financial statements, including
tax returns, other statements of condition or other information, as Bank shall
request from time to time; (i) the entry of a judgment against any Obliger which
Bank deems to be of a material nature, in Bank's sole discretion; (j) the
seizure or forfeiture of, or the issuance of any writ of possession,
garnishment, or attachment, or any turnover order for any property of any
Obliger; (k) the determination by Bank that it is insecure for any reason; (l)
the determination by Bank that a material adverse change has occurred in the
financial condition of any Obliger; or (m) the failure of Borrower's business to
comply with any law or regulation controlling its operation.
11. Remedies upon Default. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate shall not be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving Obligors a right to cure any default. At
Bank's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the principal
balance, and interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of principal and interest is paid in full. Bank is hereby authorized at any time
to set off and charge against any deposit accounts of any Obligor, as well as
any money, instruments, securities, documents, chattel paper, credits, claims,
demands, income and any other property, rights and interests of any Obligor
which at any time shall come into the possession or custody or under the control
of Bank or any of its agents, affiliates or correspondents, without notice or
demand, any and all obligations due hereunder. Additionally, Bank shall have all
rights and remedies available under each of the Loan Documents, as well as all
rights and remedies available at law or in equity.
12. Non-waiver. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligor to Bank
in any other respect at any other time.
13. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the Commonwealth of Virginia. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the Commonwealth of Virginia
or the United States located within the Commonwealth of Virginia and expressly
waive any objections as to venue in any such courts. Nothing contained herein
shall, however, prevent Bank from bringing any action or
VA041 2 Approved: 09-21-95
Revised: 06-26-96
exercising any rights within any other state or jurisdiction or from obtaining
personal jurisdiction by any other means available under applicable law.
14. Partial Invalidity. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
15. Binding Effect. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
16. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other Loan Document concerning this obligation,
the Note shall control over any other document, and if the Note does not address
an issue, then each other document shall control to the extent that it deals
most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THIS FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS.
Corporate or Partnership Borrower
INVENTORY MANAGEMENT SYSTEMS, INC.
By: /s/ David P. Clark (Seal)
--------------------------------
Name: DAVID P. CLARK
Title: PRESIDENT
/s/ Barbara A. Ras
-----------------------------------------
Attest (If Applicable)
(Corporate Seal)
ALLIANCE INVENTORY MANAGEMENT, INC.
By: /s/ David P. Clark (Seal)
--------------------------------
Name:
Title:
Pres.
-----------------------------------------
Attest (If Applicable)
[Corporate Seal]
VAO41 3 Approved: 09-21-95
Revised: 06-26-96
NationsBank, N.A.
Customer # 533966
Date December 23, 1997
Security Agreement
================================================================================
Bank/Secured Party: Debtor(s)/Pledgor(s):
NationsBank, N.A.
Banking Center: INVENTORY MANAGEMENT SYSTEMS, INC.
2900 Polo Parkway
Mid-Atlantic Commercial Banking Midlothian, VA 23113
1111 East Main Street
Richmond, VA 23219-3500
County: Independent City of Richmond County: Chesterfield
================================================================================
Debtor/Pledgor is: Corporation
Address is Debtor's: Place of Business
Collateral (hereinafter defined) is located at: Virginia
________________________________________________________________________________
________________________________________________________________________________
================================================================================
1. Security Interest. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor (hereinafter referred
to as "Debtor") assigns and grants to Bank (also known as Secured Party), a
security interest and lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter defined).
2. Collateral. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral"):
A. Types of Collateral
Accounts: Any and all accounts and other rights of Debtor to the
payment for goods sold or leased or for services rendered whether or not
earned by performance, including, without limitation, contract rights, book
debts, checks, notes, drafts, instruments, chattel paper, acceptances, and
any and all amounts due to Debtor from a factor or other forms of
obligations and receivables, now existing or hereafter arising.
Inventory:
Blanket Lien: Any and all of Debtor's goods held as inventory, whether
now owned or hereafter acquired, including without limitation, any and all
such goods held for sale or lease or being processed for sale or lease in
Debtor's business, as now or hereafter conducted, including all materials,
goods and work in process, finished goods and other tangible property held
for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in Debtor's business, along with all documents
(including documents of title) covering such inventory including the
following (attach schedule if necessary): n/a
B. Substitutions, Proceeds and Related Items. Any and all substitutes and
replacements for, accessions, attachments and other additions to, tools, parts
and equipment now or hereafter added to or used in connection with, and all cash
or non-cash proceeds and products of, the Collateral (including, without
limitation, all income, benefits and property receivable, received or
distributed which results from any of the Collateral, such as dividends payable
or distributable in cash, property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation, returned premiums,
interest, premium and principal payments, redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any securities
in the Collateral); any and all choses in action and causes of action of Debtor,
whether now existing or hereafter arising, relating directly or indirectly to
the Collateral (whether arising in contract, tort or otherwise and whether or
not currently in litigation); all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper, whether now
existing or hereafter arising directly or indirectly from or related to the
Collateral; all warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to the Collateral;
all of Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer systems, computer disks, computer programs, source
codes and object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data and other
information pertaining directly or indirectly to the Collateral from third
parties, whether now existing or hereafter arising; and all returned, refused,
stopped in transit, or repossessed Collateral, any of which, if received by
Debtor, upon request shall be delivered immediately to Bank.
C. Balances and Other Property. The balance of every deposit account of
Debtor maintained with Bank and any other claim of Debtor against Bank, now or
hereafter existing, liquidated or unliquidated, and all money, instruments,
securities, documents, chattel paper, credits, claims, demands, income, and any
other property, rights and interests of Debtor which at any time shall come into
the possession or custody or under the control of Bank or any of its agents or
affiliates for any purpose, and the proceeds of any thereof. Bank shall be
deemed to have possession of any of the Collateral in transit to or set apart
for it or any of its agents or affiliates.
3. Description of Obligation(s). The following obligations ("Obligation" or
"Obligations") are secured by this Agreement: (a) All debts, obligations,
liabilities and agreements of Debtor to Bank, now or hereafter existing, arising
directly or indirectly between Debtor and Bank whether absolute or contingent,
joint or several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) All costs
incurred by Bank to obtain, preserve, perfect and enforce this Agreement and
maintain, preserve, collect and realize upon the Collateral; (c) All debt,
obligations and liabilities of Alliance Inventory Management, Inc. to Bank of
the kinds described in this Item 3, now existing or hereafter arising; (d) All
other costs and attorney's fees incurred by Bank, for which Debtor is obligated
to reimburse Bank in accordance with the terms of the Loan Documents
(hereinafter defined), together with interest at the maximum rate allowed by
law, or if none, 25% per annum; and (e) All amounts which may be owed to Bank
pursuant to all other Loan Documents executed between Bank and any other Debtor.
If Debtor is not the obligor of the Obligation, and in the
VAO7I Approved: 7/01/95
1 Revised: 6/28/96
event any amount paid to Bank on any Obligation is subsequently recovered from
Bank in or as a result of any bankruptcy, insolvency or fraudulent conveyance
proceeding, Debtor shall be liable to Bank for the amounts so recovered up to
the fair market value of the Collateral whether or not the Collateral has been
released or the security interest terminated. In the event the Collateral has
been released or the security interest terminated, the fair market value of the
Collateral shall be determined, at Bank's option, as of the date the Collateral
was released, the security interest terminated, or said amounts were recovered.
4. Debtor's Warranties. Debtor hereby represents and warrants to Bank as
follows:
A. Financing Statements. Except as may be noted by schedule attached hereto
and incorporated herein by reference, no financing statement covering the
Collateral is or will be on file in any public office, except the financing
statements relating to this security interest, and no security interest, other
than the one herein created, has attached or been perfected in the Collateral or
any part thereof.
B. Ownership. Debtor owns, or will use the proceeds of any loans by Bank to
become the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
C. Fixtures and Accessions. None of the Collateral is affixed to real
estate or is an accession to any goods, or will become a fixture or accession,
except as expressly set out herein.
D. Claims of Debtors on the Collateral. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
E. Environmental Compliance. The conduct of Debtor's business operations
and the condition of Debtor's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or any material defined as hazardous
materials or substances under any local, state or federal environmental laws,
rules or regulations, and petroleum, petroleum products, oil and asbestos
("Hazardous Materials").
F. Power and Authority. Debtor has full power and authority to make this
Agreement, and all necessary consents and approvals of any persons, entities,
governmental or regulatory authorities and securities exchanges have been
obtained to effectuate the validity of this Agreement.
5. Debtor's Covenants. Until full payment and performance of all of the
Obligation and termination or expiration of any obligation or commitment of Bank
to make advances or loans to Debtor, unless Bank otherwise consents in writing:
A. Obligation and This Agreement. Debtor shall perform all of its
agreements herein and in any other agreements between it and Bank.
B. Ownership and Maintenance of the Collateral. Debtor shall keep all
tangible Collateral in good condition. Debtor shall defend the Collateral
against all claims and demands of all persons at any time claiming any interest
therein adverse to Bank. Debtor shall keep the Collateral free from all liens
and security interests except those for taxes not yet due and the security
interest hereby created.
C. Insurance. Debtor shall insure the Collateral with companies acceptable
to Bank. Such insurance shall be in an amount not less than the fair market
value of the Collateral and shall be against such casualties, with such
deductible amounts as Bank shall approve. All insurance policies shall be
written for the benefit of Debtor and Bank as their interests may appear,
payable to Bank as loss payee, or in other form satisfactory to Bank, and such
policies or certificates evidencing the same shall be furnished to Bank. All
policies of insurance shall provide for written notice to Bank at least thirty
(30) days prior to cancellation. Risk of loss or damage is Debtor's to the
extent of any deficiency in any effective insurance coverage.
D. Bank's Costs. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce the security interest created by this Agreement,
collect the Obligation, and preserve, defend, enforce and collect the
Collateral, including but not limited to taxes, assessments, insurance premiums,
repairs, rent, storage costs and expenses of sales, legal expenses, reasonable
attorney's fees and other fees or expenses for which Debtor is obligated to
reimburse Bank in accordance with the terms of the Loan Documents. Whether the
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on the Collateral, and pay for insurance of the Collateral, and such payments
shall be a part of the Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. Information and Inspection. Debtor shall (i) promptly furnish Bank any
information with respect to the Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever located,
and to inspect and copy, or furnish Bank or its representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) promptly
furnish Bank or its representatives such information as Bank may request to
identify the Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
the Collateral.
F. Additional Documents. Debtor shall sign and deliver any papers deemed
necessary or desirable in the judgment of Bank to obtain, maintain, and perfect
the security interest hereunder and to enable Bank to comply with any federal or
state law in order to obtain or perfect Bank's interest in the Collateral or to
obtain proceeds of the Collateral.
G. Parties Liable on the Collateral. Debtor shall preserve the liability of
all obligors on any Collateral, shall preserve the priority of all security
therefor, and shall deliver to Bank the original certificate's of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
H. Records of the Collateral. Debtor at all times shall maintain accurate
books and records covering the Collateral. Debtor immediately will mark all
books and records with an entry showing the absolute assignment of all
Collateral to Bank, and Bank is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
I. Disposition of the Collateral. If disposition of any Collateral gives
rise to an account, chattel paper or instrument, Debtor immediately shall notify
Bank, and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed of
by Debtor in any manner without the prior written consent of Bank, except the
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
VA071 2 Approved: 7/01/95
Revised: 6/28/96
J. Accounts. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties and shall not be evidenced by
any instrument or chattel paper.
K. Notice/Location of the Collateral. Debtor shall give Bank written notice
of each office of Debtor in which records of Debtor pertaining to accounts held
as Collateral are kept, and each location at which the Collateral is or will be
kept, and of any change of any such location. If no such notice is given, all
records of debtor pertaining to the Collateral and all Collateral of Debtor are
and shall be kept at the address marked by Debtor above.
1. Change of Name/Status and Notice of Changes. Without the written consent
of Bank, Debtor shall not change its name, change its corporate status, use any
trade name or engage in any business not reasonably related to its business as
presently conducted. Debtor shall notify Bank immediately of (i) any material
change in the Collateral, (ii) a change in Debtor's residence or location, (iii)
a change in any matter warranted or represented by Debtor in this Agreement, or
in any of the Loan Documents or furnished to Bank pursuant to this Agreement,
and (iv) the occurrence of an Event of Default (hereinafter defined).
M. Use and Removal of the Collateral. Debtor shall not use the Collateral
illegally. Debtor shall not, unless previously indicated as a fixture, permit
the Collateral to be affixed to real or personal property without the prior
written consent of Bank. Debtor shall not permit any of the Collateral to be
removed from the locations specified herein without the prior written consent of
Bank, except for the sale of inventory in the ordinary course of business.
N. Possession of the Collateral. Debtor shall deliver all investment
securities and other instruments, documents and chattel paper which are part of
the Collateral and in Debtor's possession to Bank immediately, or if hereafter
acquired, immediately following acquisition, appropriately indorsed to Bank's
order, or with appropriate, duly executed powers. Debtor waives presentment,
notice of acceleration, demand, notice to dishonor, protest, and all other
notices with respect thereto.
0. Consumer Credit. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this covenant.
P. Power of Attorney. Debtor appoints Bank and any officer thereof as
Debtor's attorney-in-fact with full power in Debtor's name and behalf to do
every act which Debtor is obligated to do or may be required to do hereunder;
however, nothing in this paragraph shall be construed to obligate Bank to take
any action hereunder nor shall Bank be liable to Debtor for failure to take any
action hereunder. This appointment shall be deemed a power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor.
Q. Waivers by Debtor. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligation; waives presentment, demand, notice of dishonor, and protest;
waives notice of the amount of the Obligation outstanding at any time, notice of
any change in financial condition of any person liable for the Obligation or any
part thereof, notice of any Event of Default, and all other notices respecting
the Obligation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, extended or renewed one or more times by Bank in its
discretion, without notice to Debtor. Debtor waives any right to require that
any action be brought against any other person or to require that resort be had
to any other security or to any balance of any deposit account. Debtor further
waives any right of subrogation or to enforce any right of action against any
other Debtor until the Obligation is paid in full.
R. Other Parties and Other Collateral. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security thereof or
guaranty thereof or under this Agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim (or
personal judgment against any person for any part of the Obligation or seek to
realize upon any other security for :he Obligation, before foreclosing or
otherwise realizing upon the Collateral. Debtor waives any right to the benefit
of or to require or control application of any other security or proceeds
thereof, and agrees that Bank shall have no duty or obligation to Debtor to
apply to the Obligation any such other security or proceeds thereof.
S. Collection and Segregation of Accounts and Right to Notify. Bank hereby
authorizes Debtor to collect the Collateral, subject to the direction and
control of Bank, but Bank may, without cause or notice, curtail or terminate
said authority at any time. Upon notice by Bank, whether oral or in writing, to
Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and
other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon an
express trust for Bank until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are secured
hereby as Bank may in its sole discretion elect. At the sole election of Bank,
any portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to Debtor. At
any time, whether Debtor is or is not in default hereunder, Bank may notify
persons obligated on any Collateral to make payments directly to Bank and Bank
may take control of all proceeds of any Collateral. Until Bank elects to
exercise such rights, Debtor, as agent of Bank, shall collect and enforce all
payments owed on the Collateral.
T. Compliance with Commonwealth and Federal Laws. Debtor will maintain its
existence, good standing and qualification to do business, where required, and
comply with all laws, regulations and governmental requirements, including
without limitation, environmental laws applicable to it or any of its property,
business operations and transactions.
U. Environmental Covenants. Debtor shall immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Debtor's business operations; and
(ii) all claims made or threatened by any third party against Debtor relating to
damages, contribution, cost, recovery, compensation, loss or injury resulting
from any Hazardous Materials. Debtor shall immediately notify Bank of any
remedial action taken by Debtor with respect to Debtor's business operations.
Debtor will not use or permit any other party to use any Hazardous Materials at
any of Debtor's places of business or at any other property owned by Debtor
except such materials as are incidental to Debtor's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Debtor agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Debtor's places of business or any other
property of Debtor at any reasonable times upon three (3) days prior notice for
the purposes of conducting
VA071 3 Approved: 7/01/95
Revised: 6/28/96
an environmental investigation and audit (including taking physical samples) to
insure that Debtor is complying with this covenant and Debtor shall reimburse
Bank on demand for the costs of any such environmental investigation and audit.
Debtor shall provide Bank, its agents, contractors, employees and
representatives with access to and copies of any and all data and documents
relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by Debtor's business operations within five
(5) days of the request therefor.
6. Rights and Powers of Bank.
A. General. Bank, before or after default, without liability to Debtor may:
obtain from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
require Debtor to give possession or control of any Collateral to Bank; indorse
as Debtor's agent any instruments, documents or chattel paper in the Collateral
or representing proceeds of the Collateral; contact account debtors directly to
verify information furnished by Debtor; take control of proceeds, including
stock received as dividends or by reason of stock splits; release the Collateral
in its possession to any Debtor, temporarily or otherwise; require additional
Collateral; reject as unsatisfactory any property hereafter offered by Debtor as
Collateral; set standards from time to time to govern what may be used as after
acquired Collateral; designate, from time to time, a certain percent of the
Collateral as the loan value and require Debtor to maintain the Obligation at or
below such figure; take control of funds generated by the Collateral, such as
cash dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligation and exercise all other rights which an owner
of such Collateral may exercise, except the right to vote or dispose of the
Collateral before an Event of Default; at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; and
demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Bank may determine. Bank shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of Bank, its
officers, agents or employees, except for its or their own willful misconduct or
gross negligence. The foregoing rights and powers of Bank will be in addition
to, and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Bank's option (i) protect only Bank and not provide any
remuneration or protection for Debtor directly and (ii) provide coverage only
after the Obligation has been declared due as herein provided. The premiums for
any such insurance purchased by Bank shall be a part of the Obligation and shall
bear interest as provided in 3(d) hereof.
B. Convertible Collateral. Bank may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
7. Default.
A. Event of Default. An event of default ("Event of Default") shall occur
if: (i) there is a loss, theft, damage or destruction of any material portion of
the Collateral for which there is no insurance coverage or for which, in the
opinion of Bank, there is insufficient insurance coverage; (ii) Debtor or any
other obligor on all or part of the Obligation shall fail to timely and properly
pay or observe, keep or perform any term, covenant, agreement or condition in
this Agreement or in any other agreement between Debtor and Bank or between Bank
and any other obligor on the Obligation, including, but not limited to, any
other note or instrument, loan agreement, security agreement, deed of trust,
mortgage, promissory note, guaranty, certificate, assignment, instrument,
document or other agreement concerning or related to the Obligation
(collectively, the "Loan Documents"); (iii) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any agreement between such party and any affiliate or
subsidiary of NationsBank Corporation; (iv) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any lease agreement between such party and any lessor
pertaining to premises at which any Collateral is located or stored, or (v)
Debtor or such other obligor abandons any leased premises at which any
Collateral is located or stored and the Collateral is either moved without the
prior written consent of Bank or the Collateral remains at the abandoned
premises.
B. Rights and Remedies. If any Event of Default shall occur, than, in each
and every such case, Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment, or protest; notice of intent to
accelerate all or any part of the Obligation; notice of acceleration of all or
any part of that Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required under this Agreement,
any other Loan Document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies at Bank's option:
i. Acceleration. The Obligation shall, at Bank's option, become immediately
due and payable, and the obligation, if any, of Bank to permit further
borrowings under the Obligation shall at Bank's option immediately cease and
terminate.
ii. Possession and Collection of the Collateral. At its option: (a) take
possession or control of, store, lease, operate, manage, sell, or instruct any
Agent or Broker to sell or otherwise dispose of, all or any part of the
Collateral; (b) notify all parties under any account or contract right forming
all or any part of the Collateral to make any payments otherwise due to Debtor
directly to Bank; (c) in Bank's own name, or in the names of Debtor, demand,
collect, receive, sue for, and give receipts and releases for, any and all
amounts due under such accounts and contract rights: (d) indorse as the agent of
Debtor any check, note, chattel paper, documents, or instruments forming all or
any part of the Collateral; (e) make formal application for transfer to Bank (or
to any assignee of Bark or to any purchaser of any of the Collateral) of all of
Debtor's permits, licenses, approvals, agreements, and the like relating to the
Collateral or to Debtor's business; (f) take any other action which Bank deems
necessary or desirable to protect end realize upon its security interest in the
Collateral; and (g) in addition to the foregoing, and not in substitution
therefor, exercise any one or more of the rights and remedies exercisable by
Bank under any other provision of this Agreement. Under any of the other Loan
Documents, or as provided by applicable law (including, without limitation, the
Uniform Commercial Code as in effect in Virginia (hereinafter referred to as the
"UCC")). In taking possession of the Collateral Bank may enter Debtor's premises
and otherwise proceed without legal process, if this can be done without breach
of the peace. Debtor shall, upon Bank's demand, promptly make the Collateral or
other security available to Bank at a place designated by Bank, which place
shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Bank's willful and malicious
act. Bank shall have no duty to take any action to preserve or collect the
Collateral.
iii. Receiver. Obtain the appointment of a receiver for all or any of the
Collateral, Debtor hereby consenting to the appointment of such a receiver and
agreeing not to oppose any such appointment.
iv. Right of Set Off. Without notice or demand to Debtor, set off and apply
against any and all of the Obligation any and all deposits (general or special,
time or demand, provisional or final) and any other indebtedness, at any time
held or owing by Bank or any of Bank's agents or affiliates to or for the credit
of the account of Debtor or any guarantor or indorser of Debtor's Obligation.
VA071 4 Approved: 7/01/95
Revised: 6/28/96
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Bank for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligation shall be applied to the Obligation in such order and in such manner
as Bank in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any end all
obligations and liabilities arising out of or related to the timing or manner of
any such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities law,
Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. General.
A. Parties Bound. Bank's rights hereunder shall inure to the benefit of its
successors and assigns. In the event of any assignment or transfer by Bank of
any of the Obligation or the Collateral, Bank thereafter shall be fully
discharged from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. Waiver. No delay of Bank in exercising any power or right shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise of any other
power or right. No waiver by Bank of any right hereunder or of any default by
Debtor shall be binding upon Bank unless in writing, and no failure by Bank to
exercise any power or right hereunder or waiver of any default by Debtor shall
operate as a waiver of any other or further exercise of such right or power or
of any further default. Each right, power and remedy of Bank as provided for
herein or in any of the Loan Documents, or which shall now or hereafter exist at
law or in equity or by statute or otherwise, shall be cumulative and concurrent
end shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by Bank of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by Bank
of any or all other such rights, powers or remedies.
C. Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this Agreement.
D. Definitions. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Agreement; if UCC definitions conflict,
Article 9 definitions apply.
E. Notices. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action (or if the UCC elsewhere specifies
a longer period, such longer period) to this address of Debtor given above, or
to such other address as any party may designate by written notice to the other
party. Each notice, request and demand shall be deemed given or made, if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. Mail, first class postage prepaid, or if sent by any other means, upon
delivery.
F. Modifications. No provision hereof shall be modified or limited except
by a written agreement expressly referring hereto and to the provisions so
modified or limited and signed by Debtor end Bank. The provisions of the
Agreement shall not be modified or limited by course of conduct or usage of
trade.
G. Applicable Law and Partial Invalidity. This Agreement has been delivered
in tie Commonwealth of Virginia and shall be construed in accordance with the
laws of that Commonwealth. Wherever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement. The invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
H. Financing Statement. To the extent permitted by applicable law, a
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S/ENDISPUTE OR ANY
SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY
OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO
WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
i. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
VA071 5 Approved: 7/01/95
Revised: 6/28/96
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT To SUCH REMEDIES.
J. Controlling Document. To the extent that this Security Agreement
conflicts with or is in any way incompatible with any other Loan Document
concerning the Obligation, any promissory note shall control over any other
document, and if such note does not address an issue, then each other document
shall control to the extent that it deals most specifically with an issue.
K. Execution Under Seal. This Agreement is being executed under seal by
Debtor(s).
L. Additional Provisions. See Schedule "__" attached hereto and
incorporated hereunder for all purposes.
M. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
Bank/Secured Party: Corporate or Partnership Debtor Pledgor
NationsBank, N.A. INVENTORY MANAGEMENT SYSTEMS, INC.
By: By: /s/ David P. Clark
---------------------------- -------------------------------
Name: AUSTIN B. WELDER Name: DAVID P. CLARK
Title: ASSISTANT VICE PRESIDENT Title: PRESIDENT
/s/ Barbara A. Ras
-----------------------------------
Attest (If Applicable)
[Corporate Seal]
VA071 6 Approved: 7/01/95
Revised: 6/28/96
NationsBank, N.A.
Customer # 533966
Date: December 23, 1997
Security Agreement
================================================================================
Bank/Secured Party: Debtor(s)/Pledgor(s):
NationsBank, N.A. ALLIANCE INVENTORY MANAGEMENT, INC.
Banking Center: Take-Two Interactive Software, Inc.
Mid-Atlantic Commercial Banking 575 Broadway
1111 East Main Street New York, New York 10012
Richmond, VA 23219-3500
County: Independent City of Richmond County: New York
================================================================================
Debtor/Pledgor is: Corporation
Address is Debtor's: Place of Business
Collateral (hereinafter defined) is located at: New Jersey (Hudson County)
______________________________________________________________________________
_____________________________________________________
================================================================================
1. Security Interest. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor (hereinafter referred
to as "Debtor") assigns and grants to Bank (also known as "Secured Party"), a
security interest and lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter defined).
2. Collateral. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral"):
A. Types of Collateral
Accounts: Any and all accounts and other rights of Debtor to the
payment for goods sold or leased or for services rendered whether or not
earned by performance, including, without limitation, contract rights, book
debts, checks, notes, drafts, instruments, chattel paper, acceptances, and
any and all amounts due to Debtor from a factor or other forms of
obligations and receivables, now existing or hereafter arising.
Inventory:
Blanket Lien: Any and all of Debtor's goods held as inventory, whether
now owned or hereafter acquired, including without limitation, any and all
such goods held for sale or lease or being processed for sale or lease in
Debtor's business, as now or hereafter conducted, including all materials,
goods and work in process, finished goods and other tangible property held
for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in Debtor's business, along with all documents
(including documents of title) covering such inventory including the
following (attach schedule if necessary): n/a
B. Substitutions, Proceeds and Related Items. Any and all substitutes and
replacements for, accessions, attachments and other additions to, tools, parts
and equipment now or hereafter added to or used in connection with, and all cash
or non-cash proceeds and products of, the Collateral (including, without
limitation, all income, benefits and property receivable, received or
distributed which results from any of the Collateral, such as dividends payable
or distributable in cash, property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation, returned premiums,
interest, premium and principal payments: redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any securities
in the Collateral); any and all choses in action and causes of action of Debtor,
whether now existing or hereafter arising, relating directly or indirectly to
the Collateral (whether arising in contract, tort or otherwise and whether or
not currently in litigation); all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper, whether now
existing or hereafter arising directly or indirectly from or related to the
Collateral; all warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to the Collateral;
all of Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer systems, computer disks, computer programs, source
codes and object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data and other
information pertaining directly or indirectly to the Collateral from third
parties, whether now existing or hereafter arising; and all returned, refused,
stopped in transit, or repossessed Collateral, any of which, if received by
Debtor, upon request shall be delivered immediately to Bank.
C. Balances and Other Property. The balance of every deposit account of
Debtor maintained with Bank and any other claim of Debtor against Bank, now or
hereafter existing, liquidated or unliquidated, and all money, instruments,
securities, documents, chattel paper, credits, claims, demands, income, and any
other property, rights and interests of Debtor which at any time shall come into
the possession or custody or under the control of Bank or any of its agents or
affiliates for any purpose, and the proceeds of any thereof. Bank shall be
deemed to have possession of any of the Collateral in transit to or set apart
for it or any of its agents or affiliates.
3. Description of Obligation(s). The following obligations ("Obligation" or
"Obligations") are secured by this Agreement: (a) All debts, obligations,
liabilities and agreements of Debtor to Bank, now or hereafter existing, arising
directly or indirectly between Debtor and Bank whether absolute or contingent,
joint or several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) All costs
incurred by Bank to obtain, preserve, perfect and enforce this Agreement and
maintain, preserve, collect and realize upon the Collateral; (c) All debt,
obligations and liabilities of Inventory Management Systems, Inc. to Bank of the
kinds described in this Item 3., now existing or hereafter arising; (d) All
other costs and attorney's fees incurred by Bank, for which Debtor is obligated
to reimburse Bank in accordance with the terms of the Loan Documents
(hereinafter defined), together with interest at the maximum rate allowed by
law, or if none, 25% per annum; and (e) All amounts which may be owed to Bank
pursuant to all other Loan Documents executed between Bank end any other Debtor.
If Debtor is not the obligor of the Obligation, and in the event any amount paid
to Bank on any Obligation is subsequently recovered from Bank in or as a result
of any bankruptcy, insolvency or fraudulent conveyance proceeding, Debtor shall
be liable to Bank for the amounts so recovered up to the fair market value of
the Collateral whether or not the Collateral has been released or the security
interest terminated. In the event the Collateral has been released or the
security interest terminated the fair market value of the Collateral shall be
determined, at Bank's option, as of the date the Collateral was released, the
security interest terminated, or said amounts were recovered.
4. Debtor's Warranties. Debtor hereby represents and warrants to Bank as
follows:
A. Financing Statements. Except as may be noted by schedule attached hereto
and incorporated herein by reference, no financing statement covering the
Collateral is or will be on file in any public office, except the financing
statements relating to this security interest, and no security interest, other
than the one herein created, has attached or been perfected in the Collateral or
any part thereof.
B. Ownership. Debtor owns, or will use the proceeds of any loans by Bank to
became the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
C. Fixtures and Accessions. None of the Collateral is affixed to real
estate or is an accession to any goods, or will become a fixture or accession,
except as expressly set out herein.
D. Claims of Debtors on the Collateral. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
E. Environmental Compliance. The conduct of Debtor's business operations
and the condition of Debtor's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or any materials defined as hazardous
materials or substances under any local, state or federal environmental laws,
rules or regulations, and petroleum, petroleum products, oil and asbestos
("Hazardous Materials").
F. Power and Authority. Debtor has full power and authority to make this
Agreement, and all necessary consents and approvals of any persons, entities,
governmental or regulatory authorities and securities exchanges have been
obtained to effectuate the validity of this Agreement.
5. Debtor's Covenants. Until full payment and performance of all of the
Obligation and termination or expiration of any obligation or commitment of Bank
to make advances or loans to Debtor, unless Bank otherwise consents in writing:
A. Obligation and This Agreement. Debtor shall perform all of its
agreements herein and in any other agreements between it and Bank.
B. Ownership and Maintenance of the Collateral. Debtor shall keep all
tangible Collateral in good condition. Debtor shall defend the Collateral
against all claims and demands of all persons at any time claiming any interest
therein adverse to Bank. Debtor shall keep the Collateral free from all liens
and security interests except those for taxes not yet due and the security
interest hereby created.
C. Insurance. Debtor shall insure the Collateral with companies acceptable
to Bank. Such insurance shall be in an amount not less than the fair market
value of the Collateral and shall be against such casualties, with such
deductible amounts as Bank shall approve. All insurance policies shall be
written for the benefit of Debtor and Bank as their interests may appear,
payable to Bank as loss payee, or in other form satisfactory to Bank, and such
policies or certificates evidencing the same shall be furnished to Bank. All
policies of insurance shall provide for written notice to Bank at least thirty
(30) days prior to cancellation. Risk of loss or damage is Debtor's to the
extent of any deficiency in any effective insurance coverage.
D. Bank's Costs. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce the security interest created by this Agreement,
collect the Obligation, and preserve, defend, enforce and collect the
Collateral, including but not limited to taxes, assessments, insurance premiums,
repairs, rent, storage costs and expenses of sales, legal expenses, reasonable
attorney's fees and other fees or expenses for which Debtor is obligated to
reimburse Bank in accordance with the terms of the Loan Documents. Whether the
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on the Collateral, and pay for insurance of the Collateral, and such payments
shall be a part of the Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. Information and Inspection. Debtor shall (i) promptly furnish Bank any
information with respect to the Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever located,
and to inspect and copy, or furnish Bank or its representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) promptly
furnish Bank or its representatives such information as Bank may request to
identify the Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
the Collateral.
F. Additional Documents. Debtor shall sign and deliver any papers deemed
necessary or desirable in the judgment of Bank to obtain, maintain, and perfect
the security interest hereunder and to enable Bank to comply with any federal or
state law in order to obtain or perfect Bank's interest in the Collateral or to
obtain proceeds of the Collateral.
G. Parties Liable on the Collateral. Debtor shall preserve the liability of
all obligors on any Collateral, shall preserve the priority of all security
therefor, and shall deliver to Bank the original certificates of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
H. Records of the Collateral. Debtor at all times shall maintain accurate
books and records covering the Collateral. Debtor immediately will mark all
books and records with an entry showing the absolute assignment of all
Collateral to Bank, and Bank is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
I. Disposition of the Collateral. If disposition of any Collateral gives
rise to an account, chattel paper or instrument, Debtor immediately shall notify
Bank, and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed of
by Debtor in any manner without the prior written consent of Bank, except the
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
J. Accounts. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties and shall not be evidenced by
any instrument or chattel paper.
K. Notice/Location of the Collateral. Debtor shall give Bank written notice
of each office of Debtor in which records of Debtor pertaining to accounts held
as Collateral are kept, and each location at which the Collateral is or will be
kept, and of any change of any such location. If no such notice is given, all
records of Debtor pertaining to the Collateral and all Collateral of Debtor are
and shall be kept at the address marked by Debtor above.
L. Change of Name/Status and Notice of Changes. Without the written consent
of Bank, Debtor shall not
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change its name, change its corporate status, use any trade name or engage in
any business not reasonably related to its business as presently conducted.
Debtor shall notify Bank immediately of (i) any material change in the
Collateral, (ii) a change in Debtor's residence or location, (iii) a change in
any matter warranted or represented by Debtor in this Agreement, or in any of
the Loan Documents or furnished to Bank pursuant to this Agreement, and (iv) the
occurrence of an Event of Default (hereinafter defined).
M. Use and Removal of the Collateral. Debtor shall not use the Collateral
illegally. Debtor shall not, unless previously indicated as a fixture, permit
the Collateral to be affixed to real or personal property without the prior
written consent of Bank. Debtor shall not permit any of the Collateral to be
removed from the locations specified herein without the prior written consent of
Bank, except for the sale of inventory in the ordinary course of business.
N. Possession of the Collateral. Debtor shall deliver all investment
securities and other instruments, documents and chattel paper which are part of
the Collateral and in Debtor's possession to Bank immediately, or if hereafter
acquired, immediately following acquisition, appropriately endorsed to Bank's
order, or with appropriate, duly executed powers. Debtor waives presentment,
notice of acceleration, demand, notice of dishonor, protest, and all other
notices with respect thereto.
O. Consumer Credit. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this covenant.
P. Power of Attorney. Debtor appoints Bank and any officer thereof as
Debtor's attorney-in-fact with full power in Debtor's name and behalf to do
every act which Debtor is obligated to do or may be required to do hereunder;
however, nothing in this paragraph shall be construed to obligate Bank to take
any action hereunder nor shall Bank be liable to Debtor for failure to take any
action hereunder. This appointment shill be deemed a power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor.
Q. Waivers by Debtor. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligation; waives presentment, demand, notice of dishonor, and protest;
waives notice of the amount of the Obligation outstanding at any time, notice of
any change in financial condition of any person liable for the Obligation or any
part thereof, notice of any Event of Default, and all other notices respecting
the Obligation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, extended or renewed one or more times by Bank in its
discretion, without notice to Debtor. Debtor waives any right to require that
any action be brought against any other person or to require that resort be had
to any other security or to any balance of any deposit account. Debtor further
waives any right of subrogation or to enforce any right of action against any
other Debtor until the Obligation is paid in full.
R. Other Parties and Other Collateral. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this Agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim for
personal judgment against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing or
otherwise realizing upon the Collateral. Debtor waives any right to the benefit
of or to require or control application of any other security or proceeds
thereof, and agrees that Bank shall have no duty or obligation to Debtor to
apply to the Obligation any such other security or proceeds thereof.
S. Collection and Segregation of Accounts and Right to Notify. Bank hereby
authorizes Debtor to collect the Collateral, subject to the direction and
control of Bank, but Bank may, without cause or notice, curtail or terminate
said authority at any time. Upon notice by Bank, whether oral or in writing, to
Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and
other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon an
express trust for Bank, until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are secured
hereby as Bank may in its sole discretion elect. At the sole election of Bank,
any portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to Debtor. At
any time, whether Debtor is or is not in default hereunder, Bank may notify
persons obligated on any Collateral to make payments directly to Bank and Bank
may take control of all proceeds of any Collateral. Until Bank elects to
exercise such rights, Debtor, as agent of Bank, shall collect and enforce all
payments owed on the Collateral.
T. Compliance with Commonwealth and Federal Laws. Debtor will maintain its
existence, good standing and qualification to do business, where required, and
comply with all laws, regulations and governmental requirements, including
without limitation, environmental laws applicable to it or any of its property,
business operations and transactions.
U. Environmental Covenants. Debtor shall immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Debtor's business operations; and
(ii) all claims made or threatened by any third party against Debtor relating to
damages, contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials. Debtor shall immediately notify Bank of any
remedial action taken by Debtor with respect to Debtor's business operations.
Debtor will not use or permit any other party to use any Hazardous Materials at
any of Debtor's places of business or at any other property owned by Debtor
except such materials as are incidental to Debtor's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Debtor agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Debtor's places of business or any other
property of Debtor at any reasonable times upon three (3) days prior notice for
the purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that Debtor is complying with this covenant
and Debtor shall reimburse Bank on demand for the costs of any such
environmental investigation and audit. Debtor shall provide Bank, its agents,
contractors, employees and representatives with access to and copies of any and
all data and documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by Debtor's business operations
within five (5) days of the request therefor.
6. Rights and Powers of Bank.
A. General. Bank, before or after default, without liability to Debtor may:
obtain from any person information
3
regarding Debtor or Debtor's business, which information any such person also
may furnish without liability to Debtor; require Debtor to give possession or
control of any Collateral to Bank; indorse as Debtor's agent any instruments,
documents or chattel paper in the Collateral or representing proceeds of the
Collateral; contact account debtors directly to verify information furnished by
Debtor; take control of proceeds, including stock received as dividends or by
reason of stock splits; release the Collateral in its possession to any Debtor,
temporarily or otherwise; require additional Collateral; reject as
unsatisfactory any property hereafter offered by Debtor as Collateral; set
standards from time to time to govern what may be used as after acquired
Collateral; designate, from time to time, a certain percent of the Collateral as
the loan value and require Debtor to maintain the Obligation at or below such
figure; take control of funds generated by the Collateral, such as cash
dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligation and exercise all other rights which an owner
of such Collateral may exercise, except the right to vote or dispose of the
Collateral before an Event of Default; at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; and
demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Bank may determine. Bank shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of Bank, its
officers, agents or employees, except for its or their own willful misconduct or
gross negligence. The foregoing rights and powers of Bank will be in addition
to, and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Bank's option (i) protect only Bank and not provide any
remuneration or protection for Debtor directly and (ii) provide coverage only
after the Obligation has been declared due as herein provided. The premiums for
any such insurance purchased by Bank shall be a part of the Obligation and shall
bear interest as provided in 3(d) hereof.
B. Convertible Collateral. Bank may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
7. Default.
A. Event of Default. An event of default ("Event of Default") shall occur
if: (i) there is a loss, theft, damage or destruction of any material portion of
the Collateral for which there is no insurance coverage or for which, in the
opinion of Bank, there is insufficient insurance coverage; (ii) Debtor or any
other obligor on all or part of the Obligation shall fail to timely and properly
pay or observe, keep or perform any term, covenant, agreement or condition in
this Agreement or in any other agreement between Debtor and Bank or between Bank
and any other obligor on the Obligation, including, but not limited to, any
other note or instrument, loan agreement, security agreement, deed of trust,
mortgage, promissory note, guaranty, certificate, assignment, instrument,
document or other agreement concerning or related to the Obligation
(collectively, the "Loan Documents"); (iii) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any agreement between such party and any affiliate or
subsidiary of NationsBank Corporation; (iv) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any lease agreement between such party and any lessor
pertaining to premises at which any Collateral is located or stored; or (v)
Debtor or such other obligor abandons any leased premises at which any
Collateral is located or stored and the Collateral is either moved without the
prior written consent of Bank or the Collateral remains at the abandoned
premises.
B. Rights and Remedies. If any Event of Default shall occur, then, in each
and every such case, Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment or protest; notice of intent to
accelerate all or any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required under this Agreement,
any other Loan Document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies at Bank's option:
i. Acceleration. The Obligation shall, at Bank's option, become
immediately due and payable, and the obligation, if any, of Bank to permit
further borrowings under the Obligation shall at Bank's option immediately
cease and terminate.
ii. Possession and Collection of the Collateral. At its option: (a)
take possession or control of, store, lease, operate, manage, sell, or
instruct any Agent or Broker to sell or otherwise dispose of, all or any
part of the Collateral; (b) notify all parties under any account or
contract right forming all or any part of the Collateral to make any
payments otherwise due to Debtor directly to Bank; (c) in Bank's own name,
or in the name of Debtor, demand, collect, receive, sue for, and give
receipts and releases for, any and all amounts due under such accounts and
contract rights; (d) indorse as the agent of Debtor any check, note,
chattel paper, documents, or instruments forming all or any part of the
Collateral; (e) make formal application for transfer to Bank (or to any
assignee of Bank or to any purchaser of any of the Collateral) of all of
Debtor's permits, licenses, approvals, agreements, and the like relating to
the Collateral or to Debtor's business; (f) take any other action which
Bank deems necessary or desirable to protect and realize upon its security
interest in the Collateral; and (g) in addition to the foregoing, and not
in substitution therefor, exercise any one or more of the rights and
remedies exercisable by Bank under any other provision of this Agreement,
under any of the other Loan Documents, or as provided by applicable law
(including, without limitation, the Uniform Commercial Code as in effect in
Virginia (hereinafter referred to as the "UCC")). In taking possession of
the Collateral Bank may enter Debtor's premises and otherwise proceed
without legal process, if this can be done without breach of the peace.
Debtor shall, upon Bank's demand, promptly make the Collateral or other
security' available to Bank at a place designated by Bank, which place
shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation
or other damages to the Collateral, unless caused by Bank's willful and
malicious act. Bank shall have no duty to take any action to preserve or
collect the Collateral.
iii. Receiver. Obtain the appointment of a receiver for all or any of
the Collateral, Debtor hereby consenting to the appointment of such a
receiver and agreeing not to oppose any such appointment.
iv. Right of Set Off. Without notice or demand to Debtor, set off and
apply against any and all of the Obligation any and all deposits (general
or special, time or demand, provisional or final) and any other
indebtedness, at any time held or owing by Bank or any of Bank's agents or
affiliates to or for the credit of the account of Debtor or any guarantor
or indorser of Debtor's Obligation.
4
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Bank for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligation shall be applied to the Obligation in such order and in such manner
as Bank in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any and all
obligations and liabilities arising out of or related to the timing or manner of
any such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities law,
Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. General.
A. Parties Bound. Bank's rights hereunder shall inure to the benefit of its
successors and assigns. In the event of any assignment or transfer by Bank of
any of the Obligation or the Collateral, Bank thereafter shall be fully
discharged from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. Waiver. No delay of Bank in exercising any power or right shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise of any other
power or right. No waiver by Bank of any right hereunder or of any default by
Debtor shall be binding upon Bank unless in writing, and no failure by Bank to
exercise any power or right hereunder or waiver of any default by Debtor shall
operate as a waiver of any other or further exercise of such right or power or
of any further default. Each right, power and remedy of Bank as provided for
herein or in any of the Loan Documents, or which shall now or hereafter exist at
law or in equity or by statute or otherwise, shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by Bank of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by Bank
of any or all other such rights, powers or remedies.
C. Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this Agreement.
D. Definitions. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Agreement; if UCC definitions conflict,
Article 9 definitions apply.
E. Notices. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action (or if the UCC elsewhere specifies
a longer period, such longer period) to the address of Debtor given above, or to
such other address as any party may designate by written notice to the other
party. Each notice, request and demand shall be deemed given or made, if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. Mail, first class postage prepaid, or if sent by any other means, upon
delivery.
F. Modifications. No provision hereof shall be modified or limited except
by a written agreement expressly referring hereto and to the provisions so
modified or limited and signed by Debtor and Bank. The provisions of the
Agreement shall not be modified or limited by course of conduct or usage of
trade.
G. Applicable Law and Partial Invalidity. This Agreement has been delivered
in the Commonwealth of Virginia and shall be construed in accordance with the
laws of that Commonwealth. Wherever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement. The invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
H. Financing Statement. To the extent permitted by applicable law, a
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
i. SPECIAL RULES. THE ARBITRATION SMALL BE CONDUCTED IN THE COUNTY OF
ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING
THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN
ADDITIONAL 60 DAYS.
ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL
BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
5
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING
BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
J. Controlling Document. To the extent that this Security Agreement
conflicts with or is in any way incompatible with any other Loan Document
concerning the Obligation, any promissory note shall control over any other
document, and if such note does not address an issue, then each other document
shall control to the extent that it deals most specifically with an issue.
K. Execution Under Seal. This Agreement is being executed under seal by
Debtor(s).
L. Additional Provisions. See Schedule "_" attached hereto and incorporated
hereunder for all purposes.
M. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
Bank/Secured Party: Corporate or Partnership Debtor/Pledgor
NationsBank, N.A. ALLIANCE INVENTORY MANAGEMENT, INC.
By: By: /s/ David P. Clark (Seal)
----------------------------- --------------------------------
Name: AUSTIN B. WELDER Name:
Title: ASSISTANT VICE PRESIDENT Title:
/s/ Barbara A. Ras
------------------------------------
Attest (if Applicable)
[Corporate Seal]
6
NationsBank, N.A.
Customer #533966
Date: December 23, 1997
Continuing and Unconditional Guaranty
================================================================================
Bank: Guarantor:
NationsBank, N.A.
Banking Center: TAKE-TWO INTERACTIVE SOFTWARE, INC.
575 Broadway
Mid-Atlantic Commercial Banking New York, NY 10012
1111 East Main Street
Richmond, VA 23219-3500
County: Richmond Independent City County: New York
================================================================================
"Borrower": ALLIANCE INVENTORY MANAGEMENT. INC.
1. Guaranty. FOR VALUE RECEIVED, and to induce NationsBank, N.A. (Attn:
Commercial Banking) ("Bank") to make loans or advances or to extend credit or
other financial accommodations or benefits, with or without security, to or for
the account of Borrower, the undersigned "Guarantor", if more than one, then
each of them jointly and severally, hereby irrevocably and unconditionally
guarantees to Bank the full and prompt payment when due, whether by acceleration
or otherwise, of any and all Liabilities (as hereinafter defined) of Borrower to
Bank. This Guaranty is continuing and unlimited as to the amount, and is
cumulative to and does not supersede any other guaranties.
Guarantor further unconditionally guarantees the faithful, prompt and complete
compliance by Borrower with all Obligations (as hereinafter defined). The
undertakings of Guarantor hereunder are independent of the Liabilities and
Obligations of Borrower and a separate action or actions for payment, damages or
performance may be brought or prosecuted against Guarantor, whether or not an
action is brought against Borrower or to realize upon the security for the
Liabilities and/or Obligations and whether or not Borrower is joined in any such
action or actions, and whether or not notice is given or demand is made upon
Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person, or entity, whether primarily or secondarily liable, or against any
collateral held by it, before resorting to Guarantor for payment, and Guarantor
shall not be entitled to assert as a defense to the enforceability of the
Guaranty any defense of Borrower with respect to any Liabilities or Obligations.
2. Paragraph Headings, Governing Law and Binding Effect. Guarantor agrees that
the paragraph headings in this Guaranty are for convenience only and that they
will not limit any of the provisions of this Guaranty. Guarantor further agrees
that this Guaranty shall be governed by and construed in accordance with the
laws of :he Commonwealth of Virginia and applicable United States federal law.
Guarantor further agrees that this Guaranty shall be deemed to have been made in
the Commonwealth of Virginia at Bank's address indicated above, and shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Virginia, or the United States courts located within the Commonwealth of
Virginia, and is performable in the Commonwealth of Virginia. This Guaranty is
binding upon Guarantor, his, their or its executors, administrators, successors
or assigns, and shall inure to the benefit of Bank, its successors, indorsees or
assigns. Anyone executing this Guaranty shall be bound by the terms hereof
without regard to execution by anyone else.
3. Definitions.
A. "Guarantor" shall mean Guarantor or any one or more of them.
B. "Liability" or "Liabilities" shall mean without limitation, all
liabilities, overdrafts, indebtedness, and obligations of Borrower and/or
Guarantor to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including reasonable attorney's fees and cost of collection) incurred in the
collection thereof or the enforcement of rights thereunder (including without
limitation, any liability arising from failure to comply with state or federal
laws, rules and regulations concerning the control of hazardous waste or
substances at or with respect to any real estate securing any loan guaranteed
hereby), whether arising in the ordinary course of business or otherwise. If
Borrower is a partnership, corporation or other entity the term "Liability" or
"Liabilities" as used herein shall include all liabilities to Bank of any
successor entity or entities.
C. "Loan Documents" shall mean all deeds to secure debt, deeds of trust,
mortgages, security agreements and other documents securing payment of the
Liabilities and all notes and other agreements, documents and instruments
evidencing or relating to the Liabilities and Obligations.
D. "Obligation" or "Obligations" shall mean all terms, conditions,
covenants, agreements and undertakings of Borrower and/or Guarantor under all
notes and other documents evidencing the Liabilities, and under all deeds to
secure debt, deeds of trust, mortgages, security agreements and other
agreements, documents and instruments executed in connection with the
Liabilities or related thereto.
4. Waivers by Guarantor. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liabilities or Obligations to which it may apply,
presentment, demand for payment, protest, notice of dishonor or nonpayment of
any Liabilities, notice of intent to accelerate, notice of acceleration, and
notice of any suit or the taking of other action by Bank against Borrower,
Guarantor or any other person, any applicable statute of limitations and any
other notice to any party liable on any Loan Document (including Guarantor).
VA061 -1- Approved: 07/01/95
Revised: 05/30/96
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any other Guarantor hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Bank against Borrower or against any security
which Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise.
Guarantor also waives the benefits of any provision of law requiring that Bank
exhaust any right or remedy, or take any action, against Borrower, any
Guarantor, any other person and/or property including but not limited to the
provisions of the Virginia Code ss.49-25 and the Virginia Code ss.49-26, as
amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing or otherwise affecting the Obligations of Guarantor, in whole or in
part, and without the indorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment,
or change or extend the time of or renew, or change any interest rate or alter
any Liability or Obligation or installment thereof, or any security therefor;
(b) loan additional monies or extend additional credit to Borrower, with or
without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall apply to the Liabilities and Obligations as so changed, extended,
surrendered, realized upon or otherwise altered; (c) sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner and in any order
any property at any time pledged or mortgaged to secure the Liabilities or
Obligations and any offset there against; (d) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner; (e) settle or compromise any Liability
or Obligation or any security therefor and subordinate the payment of all or any
part thereof to the payment of any Liability or Obligation of any other parties
primarily or secondarily liable on any of the Liabilities or Obligations; (f)
release or compromise any Liability of Guarantor hereunder or any Liability or
Obligation of any other parties primarily or secondarily liable on any of the
Liabilities or Obligations; or (g) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
5. Subordination, Upon demand of Bank, Guarantor agrees that it will not demand,
take or receive from Borrower, by set-off or in any other manner, payment of any
debt, now and at any time or times hereafter owing by Borrower to Guarantor
unless and until all the Liabilities and Obligations shall have been fully paid
and performed, and any security interest, liens or encumbrances which Guarantor
now has and from time to time hereafter may have upon any of the assets of
Borrower shall be made subordinate, junior and inferior and postponed in
priority, operation and effect to any security interest of Bank in such assets.
6. Waivers by Bank. No delay on the part of Bank in exercising any of its
options, powers or rights, and no partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. Termination. This Guaranty shall be binding on each Guarantor until written
notice of revocation signed by such Guarantor or written notice of the death of
such Guarantor shall have been received by Bank, notwithstanding change in name,
location, composition or structure of, or the dissolution, termination or
increase, decrease or change in personnel, owners or partners of Borrower, or
any one or more of Guarantors. No notice of revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
Liabilities or Obligations that shall have been committed, created, contracted,
assumed or incurred prior to receipt of such written notice pursuant to any
agreement entered into by Bank prior to receipt of such notice. The sole effect
of such notice of revocation or termination hereof shall be to exclude from this
Guaranty, Liabilities or Obligations thereafter arising that are unconnected
with Liabilities or Obligations theretofore arising or transactions entered into
theretofore.
In the event of the death of a Guarantor, the liability of the estate of the
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower after
the date of death of the deceased Guarantor pursuant to a commitment made by
Bank to Borrower prior to the date of such death. As to all surviving
Guarantors, this Guaranty shall continue in full force and effect after the
death of a Guarantor, not only as to the Liabilities existing at that time, but
also as to liabilities thereafter incurred by Borrower to Bank.
8. Partial Invalidity and/or Enforceability of Guaranty. The unenforceability or
invalidity of any provision of this Guaranty shall not affect the enforceability
or validity of any other provision herein and the invalidity or unenforceability
of any provision of any Loan Document as it may apply to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
collateral or the proceeds thereof, in whole or in part, which had been
previously applied to or retained for application against any Liability, by
reason of a proceeding arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release effected by Bank.
9. Change of Status. Guarantor will not become a party to a merger or
consolidation with any other company, except where Guarantor is the surviving
corporation or entity, and all covenants under this Guaranty are assumed by the
surviving entity. Further, Guarantor may not change its legal structure, without
the written consent of Bank and all covenants under this Guaranty are assumed by
the new or surviving entity. Guarantor further agrees that this Guaranty shall
be binding, legal and enforceable against Guarantor in the event Borrower
changes its name, status or type of entity.
10. Financial and Other Information. Guarantor agrees to furnish to Bank any and
all financial information and any other information regarding Guarantor and/or
collateral requested in writing by Bank within ten (10) days of the date of the
request. Guarantor has made an independent investigation of the financial
condition and affairs of Borrower prior to entering into this Guaranty, and
Guarantor will continue to make such investigation; and in entering into this
Guaranty Guarantor has not relied upon any representation of Bank as to the
financial condition, operation or creditworthiness of Borrower. Guarantor
further agrees that Bank shall have no duty or responsibility now or hereafter
to make any investigation or appraisal of Borrower on behalf of Guarantor or to
provide Guarantor with any credit or other information which may come to its
attention now or hereafter.
VA061 -2- Approved: 07/01/95
Revised: 05/30/96
11. Notices. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action to the address of Guarantor or
Bank, at their respective addresses indicated at the beginning of this Guaranty,
or to such other address as any party may designate by written notice to the
other party. Each notice, request and demand shall be deemed given or made, if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, or if sent by any other
means, upon delivery.
12. Guarantor Duties. Guarantor shall upon notice or demand by Bank promptly and
with due diligence pay all Liabilities and perform and satisfy all Obligations
for the benefit of Bank in the event of (a) the occurrence of any default under
any Loan Documents; (b) the failure of any Borrower or Guarantor to perform any
obligation or pay any liability or indebtedness of any Borrower or Guarantor to
Bank, or to any affiliate of Bank, whether under any Note, Guaranty, or any
other agreement, now or hereafter existing, as and when due (whether upon
demand, at maturity or by acceleration); (c) the failure of any Borrower or
Guarantor to pay or perform any other liability, obligation or indebtedness of
any Borrower or Guarantor to any other party; (d) the death of any Borrower or
Guarantor (if an individual); (e) the resignation or withdrawal of any partner
or a material owner/Guarantor of Borrower, as determined by Bank in its sole
discretion; (f) the commencement of a proceeding against any Borrower or
Guarantor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Borrower or Guarantor or the merger or
consolidation of any Borrower or Guarantor with or into another entity; (g) the
insolvency, or the business failure of, or the appointment of a custodian,
trustee, liquidator or receiver for or of any of the property of, or the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
any adjustment of indebtedness, composition or extension by or against any
Borrower or Guarantor; (h) the sole determination by Bank that any
representation or warranty to Bank in any Loan Document or otherwise to Bank was
untrue or materially misleading when made; (i) the failure of Guarantor or
Borrower to timely deliver such financial statements including tax returns and
all schedules, or other statements of condition or other information, as Bank
shall request from time to time; (j) the entry of a judgment against Borrower or
Guarantor which Bank deems to be of a material nature in the sole discretion of
Bank; (k) the seizure or forfeiture of any of Borrower or Guarantor's property,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order; (l) the sole determination by Bank that Guarantor or Borrower
jointly or severally, has suffered a material adverse change in its financial
condition; (m) the determination by Bank that for any reason it is insecure; (n)
any lien or additional security interest being placed upon any collateral which
is security for any Loan Document; or (o) the failure of Borrower's business to
comply with any law or regulation controlling the operation of Borrower's
business.
13. Remedies. Upon the failure of Guarantor to fulfill its duty to pay all
Liabilities and perform and satisfy all Obligations as required hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice or demand: (a) declare
any Liability due and payable at once; (b) take possession of any collateral
pledged by Borrower or Guarantor wherever located, and sell, resell, assign,
transfer and deliver all or any part of said collateral of Borrower or Guarantor
at any public or private sale or otherwise dispose of any or all of the
collateral in its then condition, for cash or on credit or for future delivery,
and in connection therewith Bank may impose reasonable conditions upon any such
sale, and Bank, unless prohibited by law the provisions of which cannot be
waived, may purchase all or any part of said collateral to be sold, free from
and discharged of all trusts, claims, rights or redemption and equities of
Borrower or Guarantor whatsoever; Guarantor acknowledges and agrees that the
sale of any collateral through any nationally recognized broker-dealer,
investment banker or any other method common in the securities industry shall be
deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof
except as provided herein; and (c) set-off against any or all liabilities of
Guarantor all money owed by Bank or any of its agents or affiliates in any
capacity to Guarantor whether or not due, and also set-off against all other
Liabilities of Guarantor to Bank all money owed by Bank in any capacity to
Guarantor, and if exercised by Bank, Bank shall be deemed to have exercised such
right of set-off and to have made a charge against any such money immediately
upon the occurrence of such default although made or entered on the books
subsequent thereto.
Bank shall have a properly perfected security interest in all of Guarantor's
funds on deposit with Bank to secure the balance of any Liabilities and/or
Obligations that Guarantor may now or in the future owe Bank. Bank is granted a
contractual right of set-off and will not be liable for dishonoring checks or
withdrawals where the exercise of Bank's contractual right of set-off or
security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in the possession of Bank, including but not limited to any joint account,
special account, account by the entireties, tenancy in common, and all dividends
and distributions now or hereafter in the possession or control of Bank.
14. Attorney Fees, Cost and Expenses. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of Court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or defending this
agreement.
15. Collateral. Bank at all times and from time to time shall have the right to
require Guarantor to deliver to Bank collateral satisfactory to Bank to secure
Guarantor's undertakings hereunder and/or the Liabilities of Guarantor
hereunder.
16. Preservation of Property. Bank shall not be bound to take any steps
necessary to reserve any rights in any property pledged as collateral to Bank to
secure Borrower and/or Guarantor's Liabilities and obligations as against prior
parties who may be liable in connection therewith, and Borrower and Guarantor
hereby agree to take any such steps. Bank, nevertheless, at any time, may (a)
take any action it deems appropriate for the care or preservation of such
property or of any rights of Borrower and/or Guarantor or Bank therein; (b)
demand, sue for, collect or receive any money or property at any time due,
payable or receivable on account of or in exchange for any property pledged as
collateral, to Bank to secure Borrower and/or Guarantor's Liabilities to Bank;
(c) compromise and settle with any person liable on such property; or (d) extend
the time of payment or otherwise change the terms of the Loan Documents as to
any party liable on the Loan Documents, all without notice to, without incurring
responsibility to, and without affecting any of the Obligations or Liabilities
of Guarantor.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY
VA061 -3- Approved: 07/01/95
Revised: 05/30/96
INCONSISTENCY. THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH
THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION. THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE. DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
18. Controlling Document. To the extent that this Continuing and Unconditional
Guaranty conflicts with or is in any way incompatible with any other Loan
Document concerning this Obligation, any promissory note shall control over any
other document, and if such promissory note does not address an issue, then each
other document shall control to the extent that it deals most specifically with
an issue.
19. Execution Under Seal. This Guaranty is being executed under seal by
Guarantor.
20. NOTICE OF FINAL AGREEMENT. THIS WRITTEN CONTINUING AND UNCONDITIONAL
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on the 23rd day of December, 1997.
Witnessed By: Corporate or Partnership Guarantor:
TAKE-TWO INTERACTIVE SOFTWARE. INC.
By: /s/ Ryan A. Brant [Seal]
- ----------------------------------- ---------------------------
Name: Name: RYAN A. BRANT
Title: Title: C.E.O.
/s/ Barbara A. Ras
-------------------------------
Attest (If Applicable)
(Corporate Seal)
State of New York )
County of New York)
This instrument was acknowledged before me on December 23, 1997, by RYAN A.
BRANT, Chief Executive Officer of Take-Two Interactive Software. Inc., a
____________________ corporation, on behalf of said corporation.
/s/ Gloria H. Cohan
------------------------------------------
Notary Public in and for the State of
New York
(Seal) Gloria H. Cohan
------------------------------------------
Print Name of Notary
5/18/98
- ---------------------
My Commission Expires
VA061 -4- Approved: 07/01/95
Revised: 05/30/96
NationsBank, N.A.
Customer #533966
Date: December 23, 1997
Continuing and Unconditional Guaranty
================================================================================
Bank: Guarantor:
NationsBank, N.A.
Banking Center: TAKE-TWO INTERACTIVE SOFTWARE, INC.
575 Broadway
Mid-Atlantic Commercial Banking New York, NY 10012
1111 East Main Street
Richmond, VA 23219-3500
County: Richmond Independent City County: New York
================================================================================
"Borrower": INVENTORY MANAGEMENT SYSTEMS, INC.
1. Guaranty. FOR VALUE RECEIVED, and to induce NationsBank. N.A. (Attn:
Commercial Banking) ("Bank") to make loans or advances or to extend credit or
other financial accommodations or benefits, with or without security, to or for
the account of Borrower, the undersigned "Guarantor", if more than one, then
each of them jointly and severally, hereby irrevocably and unconditionally
guarantees to Bank the full and prompt payment when due, whether by acceleration
or otherwise, of any and all Liabilities (as hereinafter defined) of Borrower to
Bank. This Guaranty is continuing and unlimited as to the amount, and is
cumulative to and does not supersede any other guaranties.
Guarantor further unconditionally guarantees the faithful, prompt and complete
compliance by Borrower with all Obligations (as hereinafter defined). The
undertakings of Guarantor hereunder are independent of the Liabilities and
Obligations of Borrower and a separate action or actions for payment, damages or
performance may be brought or prosecuted against Guarantor, whether or not an
action is brought against Borrower or to realize upon the security for the
Liabilities and/or Obligations and whether or not Borrower is joined in any such
action or actions, and whether or not notice is given or demand is made upon
Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person, or entity, whether primarily or secondarily liable, or against any
collateral held by it, before resorting to Guarantor for payment, and Guarantor
shall not be entitled to assert as a defense to the enforceability of the
Guaranty any defense of Borrower with respect to any Liabilities or Obligations.
2. Paragraph Headings, Governing Law and Binding Effect. Guarantor agrees that
the paragraph headings in this Guaranty are for convenience only and that they
will not limit any of the provisions of this Guaranty. Guarantor further agrees
that this Guaranty shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia and applicable United States federal law.
Guarantor further agrees that this Guaranty shall be deemed to have been made in
the Commonwealth of Virginia at Bank's address indicated above, and shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Virginia, or the United States courts located within the Commonwealth of
Virginia, and is performable in the Commonwealth of Virginia. This Guaranty is
binding upon Guarantor, his, their or its executors, administrators, successors
or assigns, and shall inure to the benefit of Bank, its successors, indorsees or
assigns. Anyone executing this Guaranty shall be bound by the terms hereof
without regard to execution by anyone else.
3. Definitions.
A. "Guarantor" shall mean Guarantor or any one or more of them.
B. "Liability" or "Liabilities" shall mean without limitation, all
liabilities, overdrafts, indebtedness, and obligations of Borrower and/or
Guarantor to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including reasonable attorney's fees and cost of collection) incurred in the
collection thereof or the enforcement of rights thereunder (including without
limitation, any liability arising from failure to comply with state or federal
laws, rules and regulations concerning the control of hazardous waste or
substances at or with respect to any real estate securing any loan guaranteed
hereby), whether arising in the ordinary course of business or otherwise. If
Borrower is a partnership, corporation or other entity tie term "Liability" or
"Liabilities" as used herein shall include all Liabilities to Bank of any
successor entity or entities.
C. "Loan Documents" shall mean all deeds to secure debt, deeds of trust,
mortgages, security agreements and other documents securing payment of the
Liabilities and all notes and other agreements, documents, and instruments
evidencing or relating to the Liabilities and Obligations.
D. "Obligation" or "Obligations" shall mean all terms, conditions,
covenants, agreements and undertakings of Borrower and/or Guarantor under all
notes and other documents evidencing the Liabilities, and under all deeds to
secure debt, deeds of trust, mortgages, security agreements and other
agreements, documents and instruments executed in connection with the
Liabilities or related thereto.
4. Waivers by Guarantor. Guarantor waives notice of acceptance of this Guaranty,
notice of any Liabilities or Obligations to which it may apply, presentment,
demand for payment, protest, notice of dishonor or nonpayment of any
Liabilities, notice of intent to accelerate, notice of acceleration, and notice
of any suit or the taking of other action by Bank against Borrower, Guarantor or
any other person, any applicable statute of limitations and any other notice to
any party liable on any Loan Document (including Guarantor).
VA061 -1- Approved: 07/01/95
Revised: 05/30/96
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any other Guarantor hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Bank against Borrower or against any security
which Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise.
Guarantor also waives the benefits of any provision of law requiring that Bank
exhaust any right or remedy, or take any action, against Borrower, any
Guarantor, any other person and/or property including but not limited to the
provisions of the Virginia Code ss.49-25 and the Virginia Code ss.49-26, as
amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing or otherwise affecting the Obligations of Guarantor, in whole or in
part, and without the indorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) charge the manner, place or terms of payment,
or change or extend the time of or renew, or change any interest rare or alter
any Liability or Obligation or installment thereof, or any security therefor:
(b) loan additional monies or extend additional credit to Borrower, with or
without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall apply to the Liabilities and Obligations as so changed, extended,
surrendered, realized upon or otherwise altered; (c) sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner and in any order
any property at any time pledged or mortgaged to secure the Liabilities or
Obligations and any offset there against, (d) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner; (e) settle or compromise any Liability
or Obligation or any security therefor and subordinate the payment of all or any
part thereof to the payment of any Liability or Obligation of any other parties
primarily or secondarily liable on arty of the Liabilities or Obligations; (f)
release or compromise any Liability of Guarantor hereunder or any Liability or
Obligation of any other parties primarily or secondarily liable on any of the
Liabilities or Obligations; or (g) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
5. Subordination. Upon demand of Bank, Guarantor agrees that it will not demand,
take or receive from Borrower, by set-off or in any other manner, payment of any
debt, now and at any time or times hereafter owing by Borrower to Guarantor
unless and until all the Liabilities and Obligations shall have been fully paid
and performed, and any security interest, liens or encumbrances which Guarantor
now has and from time to time hereafter may have upon any of the assets of
Borrower shall be made subordinate, junior and inferior and postponed in
priority, operation and effect to any security interest of Bank in such assets.
6. Waivers by Bank. No delay on the part of Bank in exercising any of its
options, powers or rights, and no partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. Termination. This Guaranty shall be binding on each Guarantor until written
notice of revocation signed by such Guarantor or written notice of the death of
such Guarantor shall have been received by Bank, notwithstanding change in name,
location, composition or structure of, or the dissolution, termination or
increase, decrease or change in personnel, owners or partners of Borrower, or
any one or more of Guarantor. No notice of revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
Liabilities or Obligations that shall have been committed, created, contracted,
assumed or incurred prior to receipt of such written notice pursuant to any
agreement entered into by Bank prior to receipt of such notice. The sole effect
of such notice of revocation or termination hereof shall be to exclude from this
Guaranty, Liabilities or Obligations thereafter arising that are unconnected
with Liabilities or Obligations theretofore arising or transactions entered into
theretofore.
In the event of the death of a Guarantor, the liability of the estate of the
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower after
the date of death of the deceased Guarantor pursuant to a commitment made by
Bank to Borrower prior to the date of such death. As to all surviving
Guarantors, this Guaranty shall continue in full force and effect after the
death of a Guarantor, not only as to the Liabilities existing at that time, but
also as to Liabilities thereafter incurred by Borrower to Bank.
8. Partial Invalidity and/or Enforceability of Guaranty. The unenforceability or
invalidity of any provision of this Guaranty shall not affect the enforceability
or validity of any other provision herein and the invalid by or unenforceability
of any provision of any Loan Document as it may apply to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
collateral or the proceeds thereof, in whole or in part, which had been
previously applied to or retained for reapplication against any Liability, by
reason of a proceeding to arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release affected by Bank.
9. Change of Status. Guarantor will not become a party to a merger or
consolidation with any other company, except where Guarantor is the surviving
corporation or entity, and all covenants under this Guaranty are assumed by the
surviving entity. Further, Guarantor may not change its legal structure, without
the written consent of Bank and all covenants under this Guaranty are assumed by
the new or surviving entity. Guarantor further agrees that this Guaranty shall
be binding, legal and enforceable against Guarantor in the event Borrower
changes its name, status or type of entity.
10. Financial and Other Information. Guarantor agrees to furnish to Bank any and
all financial information and any other information regarding Guarantor and/or
collateral requested in writing by Bank within ten (10) days of the date of the
request. Guarantor has made an independent investigation of the financial
condition and affairs of Borrower prior to entering into this Guaranty, and
Guarantor will continue to make such investigation; and in entering into this
Guaranty Guarantor has not relied upon any representation of Bank as to the
financial condition, operation or creditworthiness of Borrower. Guarantor
further agrees that Bank shall have no duty or responsibility now or hereafter
to make any investigation or appraisal of Borrower on behalf of Guarantor or to
provide Guarantor with any credit or other information which may come to its
attention now or hereafter.
VA061 -2- Approved: 07/01/95
Revised: 05/30/96
11. Notices. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action to the address of Guarantor or
Bank, at their respective addresses indicated at the beginning of this Guaranty,
or to such other address as any party may designate by written notice to the
other party. Each notice, request and demand shall be deemed given or made, if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, or if sent by any other
means, upon delivery.
12. Guarantor Duties. Guarantor shall upon notice or demand by Bank promptly and
with due diligence pay all Liabilities and perform and satisfy all Obligations
for the benefit of Bank in the event of (a) the occurrence of any default under
any Loan Documents; (b) the failure or any Borrower or Guarantor to perform any
obligation or pay any liability or indebtedness of any Borrower or Guarantor to
Bank, or to any affiliate of Bank, whether under any Note, Guaranty, or any
other agreement, now or hereafter existing, as and when due (whether upon
demand, at maturity or by acceleration); (c) the failure of any Borrower or
Guarantor to pay or perform any other liability, obligation or indebtedness of
any Borrower or Guarantor to any other party; (d) the death of any Borrower or
Guarantor (if an individual); (a) the resignation or withdrawal of any partner
or a material Owner/Guarantor of Borrower, as determined by Bank in its sole
discretion; (f) the commencement of a proceeding against any Borrower or
Guarantor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Borrower or Guarantor or the merger or
consolidation of any Borrower or Guarantor with or into another entity; (g) the
insolvency, or the business failure of, or the appointment of a custodian,
trustee, liquidator or receiver for or of any of the property of, or the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
any adjustment of indebtedness, composition or extension by or against any
Borrower or Guarantor; (h) the sole determination by Bank that any
representation or warranty to Bank in any Loan Document or otherwise to Bank was
untrue or materially misleading when made; (i) the failure of Guarantor or
Borrower to timely deliver such financial statements including tax returns and
all schedules, or other statements of condition or other information, as Bank
shall request from time to time; (j) the entry of a judgment against Borrower or
Guarantor which Bank deems to be of a material nature in the sole discretion of
Bank; (k) the seizure or forfeiture of any of Borrower or Guarantor's property,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order; (l) the sole determination by Bank that Guarantor or Borrower
jointly or severally, has suffered a material adverse change in its financial
condition; (m) the determination by Bank that for any reason it is insecure; (n)
any lien or additional security interest being placed upon any collateral which
is security for any Loan Document; or for the failure of Borrower's business to
comply with any law or regulation controlling the operation of Borrower's
business.
13. Remedies. Upon the failure of Guarantor to fulfill "its duty to pay all
Liabilities and perform and satisfy all Obligations as required hereunder. Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice or demand: (a) declare
any Liability due and payable at once; (b) take possession of any collateral
pledged by Borrower or Guarantor wherever located, and sell, resell, assign,
transfer and deliver all or any part of said collateral of Borrower or Guarantor
at any public or private sale or otherwise dispose of any or all of the
collateral in its then condition, for cash or on credit or for future delivery,
and in connection therewith Bank may impose reasonable conditions upon any such
sale, and Bank, unless prohibited by law the provisions of which cannot be
waived, may purchase all or any part of said collateral to be sold, free from
and discharged of all trusts, claims, rights or redemption and equities of
Borrower or Guarantor whatsoever; Guarantor acknowledges and agrees that the
sale of any collateral through any nationally recognized broker-dealer,
investment banker or any other method common in the securities industry shall be
deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof
except as provided herein; and (c) set-off against any or all liabilities of
Guarantor all money owed by Bank or any of its agents or affiliates in any
capacity to Guarantor whether or not due, and also set-off against all other
Liabilities of Guarantor to Bank all money owed by Bank in any capacity to
Guarantor, and if exercised by Bank. Bank shall be deemed to have exercised such
right of set-off and to have made a charge against any such money immediately
upon the occurrence of such default although made or entered on the books
subsequent thereto.
Bank shall have a properly perfected security interest in all of Guarantor's
funds on deposit with Bank to secure the balance of any Liabilities and/or
Obligations that Guarantor may now or in the future owe Bank. Bank is granted a
contractual right of set-off and will not be liable for dishonoring checks or
withdrawals where the exercise of Bank's contractual right of set-off or
security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in the possession of Bank, including but not limited to any joint account,
special account, account by the entireties, tenancy in common, and all dividends
and distributions now or hereafter in the possession or control of Bank.
14. Attorney Fees, Cost and Expenses. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of Court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or defending this
agreement.
15. Collateral. Bank at all times and from time to time shall have the right to
require Guarantor to deliver to Bank collateral satisfactory to Bank to secure
Guarantor's undertakings hereunder and/or the Liabilities of Guarantor
hereunder.
16. Preservation of Property. Bank shall not be bound to take any steps
necessary to preserve any rights in any property pledged as collateral to Bank
to secure Borrower and/or Guarantor's Liabilities and Obligations as against
prior parties who may be liable in connection therewith, and Borrower and
Guarantor hereby agree to take any such steps. Bank, nevertheless, at any time,
may (a) take any action it deems appropriate for the care or preservation of
such property or of any rights of Borrower and/or Guarantor or Bank therein; (b)
demand, sue for, collect or receive any money or property at any time due,
payable or receivable on account of or in exchange for any property pledged as
collateral, to Bank to secure Borrower and/or Guarantor's Liabilities to Bank;
(c) compromise and settle with any person liable on such property; or (d) extend
the time of payment or otherwise change the terms of the Loan Documents as to
any party liable on the Loan Documents, all without notice to, without incurring
responsibility to, and without affecting any of the Obligations or Liabilities
of Guarantor.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."). AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY
VA061 -3- Approved: 07/01/95
Revised: 05/30/96
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING. TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH
THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT. AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
18. Controlling Document. To the extent that this Continuing and Unconditional
Guaranty conflicts with or is in any way incompatible with any other Loan
Document concerning this Obligation, any promissory note shall control over any
other document, and if such promissory note does not address an issue, then each
other document shall control to the extent that it deals most specifically with
an issue.
19. Execution Under Seal. This Guaranty is being executed under seal by
Guarantor.
20. NOTICE OF FINAL AGREEMENT. THIS WRITTEN CONTINUING AND UNCONDITIONAL
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on the 23rd day of December, 1997.
Witnessed By: Corporate or Partnership Guarantor:
TAKE-TWO INTERACTIVE SOFTWARE. INC.
By: /s/ Ryan A. Brant [Seal]
- ----------------------------------- ---------------------------
Name: Name: RYAN A. BRANT
Title: Title: C.E.O.
/s/ Barbara A. Ras
-------------------------------
Attest (If Applicable)
(Corporate Seal)
State of New York )
County of New York)
This instrument was acknowledged before me on December 23, 1997, by RYAN A.
BRANT, Chief Executive Officer of Take-Two Interactive Software. Inc., a
____________________ corporation, on behalf of said corporation.
/s/ Gloria H. Cohan
------------------------------------------
Notary Public in and for the State of
New York
(Seal) Gloria H. Cohan
------------------------------------------
Print Name of Notary
5/18/98
- ---------------------
My Commission Expires
VA061 -4- Approved: 07/01/95
Revised: 05/30/96
NationsBank Borrowing Base Agreement
================================================================================
1. Borrowing Base The aggregate principal amount of all amounts from time
to time advanced pursuant to the terms of that promissory note dated December
19, 1997 in the principal amount of $5,000,000 (the "Note") shall not exceed the
Maximum Amount.
"Maximum Amount" shall mean the lesser of $5,000,000 or the Borrowing Base.
The "Borrowing Base" at any time, shall be equal to 80% of Eligible Accounts
Receivable:
plus 50% of the value of Eligible Inventory, provided, however, that
the outstanding principal balance of all advances against Borrower's
Eligible Inventory shall not at any time exceed in the aggregate $5,000,000
As used herein, "Eligible Accounts Receivable" shall mean all accounts
receivable of Borrower which have been created in the ordinary course of
Borrower's business and upon which Borrower's right to receive payment is
absolute and not contingent upon the fulfillment of any condition whatsoever,
and shall not include:
any account which is more than 90 days past due;
any account for which there exists a right of set off, defense or
discount, except regular discounts allowed in the ordinary course of
business to promote prompt payment and (for which no defense or
counterclaim has been asserted);
any account which arises out of a contract or order which, by its
terms, forbids or makes void or unenforceable any assignment by Borrower to
Bank of the account receivable arising with respect thereto;
Any account arising from a "sale on approval," "sale or return,"
"consignment," or subject to any other repurchase or return agreement;
that portion of any account from a Customer or Borrower which
represents the amount by which Borrower's total accounts from such Customer
exceeds 20% of Borrower's total accounts, excepting any account from
Blockbuster Music, provided that such account is no more than 30 days past
due.
and any account on which the Bank is not or does not continue to be, in the
Bank's sole discretion, satisfied with the credit standing of the Customer of
Borrower in relation to the amount of credit extended.
"Eligible Inventory" shall mean all of Borrower's inventory other than (a)
work in process and supplies; (b) in the event that the Bank has taken a
security interest in the inventory, all inventory in which the Bank does not
have a first priority perfected security interest; (c) inventory on consignment;
(d) repossessed inventory; (e) obsolete inventory; (f) inventory that is not in
good condition or that fails to meet government standards; and (g) inventory
that the Bank in its sole discretion determines to be ineligible. Inventory will
be valued based on book value. As used herein, the term "book value" shall mean.
"Customers" shall mean the account debtors obligated on the Accounts
Receivables.
"Accounts Receivables" shall mean all of the Borrower's accounts,
instruments, contract rights, chattel paper, document, and general intangibles
arising from the sale of goods and/or the rendition of services by the Borrower
in the ordinary course of business, and the proceeds thereof and all security
and guaranties therefore, whether now existing or hereafter created, and all
returned, reclaimed or repossessed goods, and all books and records pertaining
to the foregoing.
"Inventory" shall mean all of the Borrower's inventory, including: all raw
materials, work-in-process and finished goods of every kind and character,
whether presently in existence or hereafter acquired and wherever located.
2. Advances. The amounts of advances under the Note shall be determined in
the sole discretion of the Bank consistent with the value of the Eligible
Accounts Receivable and the Eligible Inventory, taking into account all
fluctuations of the value thereof in light of the Bank's experience and sound
business principles. The Bank shall be under no obligation to make any advance
to Borrower in excess of the limitations stated above.
3. Reporting. In addition to any reporting requirements required under the
Loan Agreement to which this Borrowing Base Addendum is attached, the Borrower
will submit the following in form and substance satisfactory to Bank:
Accounts Receivable Aging. Not later than 15 days after and as of the
end of each month, a listing of accounts receivable aged from date of
invoice.
Borrowing Base Certificate. Not later than 15 days after and as of the
end of each month, a borrowing base certificate.
Inventory Listing: Not later than 15 days after and as of the end of
each quarter, a listing of accounts receivable aged from date of invoice
4. Mandatory Payment In the event the aggregate principal outstanding
balance of advances under the Note exceed the Maximum Amount, Borrower shall
immediately and without notice or demand of any kind, make such payments as
shall be necessary to reduce the principal balance of the Note below the Maximum
Amount.
Borrower: Inventory Management Systems, Inc.
By: /s/ David P. Clark (Seal)
---------------------------
Name: David P. Clark
Title: President
Borrower: Alliance Inventory Management, Inc.
By: /s/ David P. Clark (Seal)
---------------------------
Name: David P. Clark
Title: President
Attest:
By: /s/ Barbara A. Ras (Seal)
---------------------------
Name: Barbara A. Ras
Title: Secretary
Bank:
NationsBank, N.A.
By: __________________________________
NationsBank Borrowing Base Certificate
================================================================================
Status as of, 19
In accordance with the terms of the Borrowing Base Agreement attached as Exhibit
A to that Loan Agreement dated December 16, 1997, by and between Inventory
Management Systems, Inc. and Alliance Inventory Management, Inc. and
NationsBank, N.A., we hereby represent and warrant as follows:
1. Total Accounts Receivable $
-----------------------
2. Less ineligible accounts receivable
(as set forth in the Borrowing Base
Agreement) $
-----------------------
3. Net Accounts Receivable $
-----------------------
4. a. __% of Eligible Accounts Receivable $
-----------------------
b. __% of Eligible Inventory (not to exceed
$_______________) $
-----------------------
c. __%of___________ $
-----------------------
d. Less _____________ $
-----------------------
e. Total Available $
-----------------------
5. Maximum loan amount $
-----------------------
6. Outstanding balance as of report date $
-----------------------
7. Available for further advances
(lessor of
line 4e or line 5 minus line 6) $
-----------------------
Borrower:
Inventory Management Systems, Inc.
By:
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