SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
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): August 31, 1998
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 August 31, 1998, Take-Two Interactive Software, Inc. (the "Company")
acquired all of the outstanding capital stock of Jack of All Games, Inc.
("JAG"). JAG is engaged in the wholesale distribution of interactive software
games. Pursuant to an Agreement and Plan of Merger dated August 22, 1998 (the
"Merger Agreement"), by and among the Company, JAG Acquisition Corp. (the
"Subsidiary"), JAG and Robert Alexander, David Rosenbaum and Thomas Rosenbaum
(the "Stockholders"), the Subsidiary was merged with and into JAG and all of the
outstanding shares of the capital stock of JAG were converted into an aggregate
of 2,750,000 shares of restricted Common Stock of the Company (the "Merger").
The Company intends to account for the Merger as a "pooling of interests."
Simultaneous with the closing, David P. Clark resigned as a member of the
Board of Directors of the Company, and Robert Alexander was nominated and
elected to fill the vacancy created by such resignation, to serve in accordance
with the Company's By-laws until his resignation, removal or replacement.
Effective as of the closing, JAG entered into a five-year employment
agreement with each of Nicholas Alexander, Robert Alexander, David Rosenbaum and
Thomas Rosenbaum, which agreements, as subsequently amended, provide for a base
salary of $200,000, $233,000, $233,000 and $140,000, respectively, and bonuses
based on certain performance criteria. The Company also granted options to
purchase 100,000 shares of Common Stock to Nicholas Alexander, Robert Alexander
and David Rosenbaum and 25,000 shares to Thomas Rosenbaum.
The Company and each of the Stockholders entered into a Registration Rights
Agreement providing for certain registration rights in connection with an
underwritten public offering, subject to certain exceptions, or in the event
there is no public offering, the registration of a portion of the shares
following the date the Company first publishes at least 30 days of the combined
results of operations of the Company and JAG in accordance with the accounting
rules relating to a pooling of interests.
The source of the consideration paid in the Merger was authorized but
unissued shares of Common Stock of the Company. The amount of consideration paid
by the Company in connection with the Merger was determined by arm's-length
negotiations.
The descriptions of the Merger Agreement and the other agreements discussed
above are qualified in their entirety by reference to such agreements, which are
attached as exhibits and are incorporated herein by reference.
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Item 5. Other Events.
JAG, as the surviving entity and a wholly-owned subsidiary of the Company
following the Merger, entered into Second Amended and Restated Loan and Security
Agreement with respect to its revolving line of credit with The Provident Bank
(the "Bank"). The agreement provides for aggregate borrowings by JAG of up to
$22.2 million consisting of (i) a revolving line of credit up to $20 million and
(ii) term loans aggregating $2.2 million. Advances under the line of credit are
based on a borrowing formula with respect to eligible inventory and accounts
receivable. Interest accrues on such advances at a rate of prime rate
established by the Bank from time to time plus 1.25% and is payable monthly.
Borrowings under the line of credit are secured by a lien on accounts receivable
and inventory of JAG and are guaranteed by the Company as well as Messrs. Robert
Alexander and David Rosenbaum. The loan agreement limits or prohibits JAG,
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 June 1, 1999.
In connection with the loan agreement, the Company issued to the Bank
warrants to purchase 20,000 shares of Common Stock at an exercise price of
$5.625 per share.
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 August 22, 1998 by and
among the Company, Subsidiary, JAG and the JAG Stockholders.
Exhibit 2 - Registration Rights Agreement dated August 31, 1998 among the
Company and the JAG Stockholders
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Exhibit 3 - Employment Agreement dated August 31, 1998 between JAG and
Nicholas Alexander
Exhibit 4 - Employment Agreement dated August 31, 1998 between JAG and
Robert Alexander
Exhibit 5 - Amendment to Employment Agreement dated September 10, 1998,
between JAG and Robert Alexander
Exhibit 6 - Employment Agreement dated August 31, 1998 between JAG and
David Rosenbaum
Exhibit 7 - Amendment to Employment Agreement dated September 10, 1998,
between JAG and David Rosenbaum
Exhibit 8 - Employment Agreement dated August 31, 1998 between JAG and
Thomas Rosenbaum.
Exhibit 9 - Loan Documents, dated August 31, 1998,by and among The
Provident Bank, JAG and the Company, as guarantor.
i) Form of Second Amended and Restated Loan and Security Agreement
ii) Form of $20 Million Amended and Restated Promissory Note
iii) Form of $2 Million Amended and Restated Promissory Note
iv) Form of Company Guaranty
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: September 14, 1998
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By /s/ Ryan A Brant
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Name: Ryan A. Brant
Title: Chairman of the Board
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Agreement and Plan of Merger
among
Take-Two Interactive Software Inc.,
JAG Acquisition Corp.
(its wholly-owned subsidiary)
and
Jack of All Games, Inc.
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August 22, 1998
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TABLE OF CONTENTS
Page
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1. The Merger............................................................... 1
1.1. The Merger.................................................... 1
1.2. Effective Date................................................ 1
1.3. Effect of the Merger.......................................... 2
1.4. Certificate of Incorporation; Code of
Regulations................................................... 2
1.5. Directors and Officers of Surviving Corporation............... 2
1.6. Conversion of Securities...................................... 3
2. Representations and Warranties as to JAG................................. 3
2.1. Organization, Standing and Power.............................. 3
2.2. Capitalization................................................ 4
2.3. Ownership of JAG Capital Stock................................ 4
2.4. Interests in Other Entities................................... 5
2.5. Authority..................................................... 5
2.6. Noncontravention.............................................. 6
2.7. Financial Statements.......................................... 6
2.8. Absence of Undisclosed Liabilities............................ 7
2.9. Guaranties.................................................... 7
2.10. Accounts and Notes Receivable................................. 7
2.11. Absence of Changes............................................ 8
2.12. Litigation.................................................... 8
2.13. No Violation of Law........................................... 8
2.14. Properties.................................................... 8
2.15. Intangibles/Inventions........................................ 9
2.16. Systems and Software.......................................... 9
2.17. Tax Matters................................................... 10
2.18. Insurance..................................................... 11
2.19. Banks; Powers of Attorney..................................... 11
2.20. Employee Arrangements......................................... 11
2.21. ERISA......................................................... 12
2.22. Environmental Matters......................................... 12
2.23. Business Practices and Commitments............................ 12
2.24. Certain Business Matters...................................... 13
2.25. Certain Contracts............................................. 13
2.26. Customers and Suppliers....................................... 14
2.27. Approvals/Consents............................................ 14
2.28. Information as to JAG......................................... 14
2.29. Pooling of Interests.......................................... 14
2.30 Securities Act Representation ................................ 15
3. Representations and Warranties as to TTIS and
Subsidiary............................................................... 15
3.1. Organization, Standing and Power.............................. 15
3.2. Interests in Other Entities................................... 16
3.3. Capitalization................................................ 16
3.4. Authority..................................................... 17
3.5. Noncontravention.............................................. 17
3.6. Litigation.................................................... 18
3.7. No Violation of Law........................................... 18
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Page
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3.8. Accounts and Notes Receivable................................. 18
3.9. Properties.................................................... 19
3.10. Systems and Software.......................................... 19
3.11. Intangibles/Inventions........................................ 20
3.12. Tax Matters................................................... 20
3.13. Securities and Exchange Commission Filings;
Financial Statements.......................................... 21
3.14. Stock Issuable in Merger...................................... 22
3.15. Absence of Changes............................................ 22
3.16. Environmental Matters......................................... 22
3.17. Approvals/Consents............................................ 23
3.18. Pooling of Interests.......................................... 23
3.19. Information as to TTIS and Subsidiary......................... 23
4. Indemnification.......................................................... 23
4.1. Indemnification by the Shareholders........................... 23
4.2. Indemnification by TTIS and Subsidiary........................ 24
4.3. Third Party Claims............................................ 24
4.4. Limitation.................................................... 25
4.5. Assistance.................................................... 26
5. Covenants................................................................ 26
5.1. Investigation................................................. 26
5.2. Non Compete Covenant.......................................... 26
5.3. Consummation of Transaction................................... 27
5.4. Cooperation/Further Assurances................................ 27
5.5. Accuracy of Representations................................... 27
5.6. Notification of Certain Matters............................... 27
5.7. Broker........................................................ 28
5.8. No Solicitation of Transactions............................... 28
5.9. Prohibited Conduct............................................ 28
5.10. Tax-Free Reorganization....................................... 31
5.11. Pooling of Interests.......................................... 31
5.12. Payment of Taxes Upon Merger.................................. 31
5.13. Stock Options................................................. 31
5.14. Employment Agreements......................................... 31
5.15. Registration Rights Agreement................................. 31
5.16. Business Office............................................... 32
5.17 TTIS Board of Director ....................................... 32
6. Conditions of Merger..................................................... 32
6.1. Conditions to Obligations of TTIS and Subsidiary
to Effect the Merger.......................................... 32
(a) Accuracy of Representations and Warranties............ 32
(b) Performance of Agreements............................. 32
(c) Results of Investigation.............................. 32
(d) Board Authorization................................... 32
(e) Pooling of Interests.................................. 33
(f) Affiliate Letters..................................... 33
(g) Financing Arrangements................................ 33
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Page
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(h) Tangible Net Worth.................................... 33
(i) Opinion of Counsel for JAG............................ 33
(j) Litigation............................................ 33
(k) Consents and Approvals................................ 33
(l) Date of Consummation.................................. 34
(m) Validity of Transactions.............................. 34
(n) No Material Adverse Change............................ 34
(o) Employment Agreements................................. 34
(p) Closing Certificate................................... 34
6.2. Conditions to Obligations of JAG and the
Shareholders to Effect the Merger............................ 34
(a) Accuracy of Representations and Warranties............ 34
(b) Performance of Agreements............................. 35
(c) Board Authorization................................... 35
(d) Litigation............................................ 35
(e) Consents and Approvals................................ 35
(f) Pooling of Interests.................................. 35
(g) Opinion of Counsel for TTIS and the subsidiary........ 35
(h) No Material Adverse Change............................ 36
(i) Date of Consummation.................................. 36
(j) Validity of Transactions.............................. 36
(k) Stock Options......................................... 36
(l) Employment Agreements................................. 36
(m) Registration Rights Agreement......................... 36
(n) Closing Certificate................................... 36
7. The Closing.............................................................. 36
7.1. Deliveries by TTIS and Subsidiary at the Closing............. 37
7.2. Deliveries by JAG and/or the Shareholders at the
Closing...................................................... 37
7.3. Other Deliveries............................................. 38
8. Termination, Amendment and Waiver........................................ 38
8.1. Termination.................................................. 38
8.2. Effect of Termination........................................ 39
8.3. Fees and Expenses............................................ 39
8.4. Waiver....................................................... 40
9. Survival of Representations and Warranties............................... 40
10. General Provisions...................................................... 40
10.1. Notices...................................................... 40
10.2. Severability................................................. 41
10.3. Entire Agreement............................................. 41
10.4. Amendment.................................................... 41
10.5 Schedules ................................................... 41
10.6. No Assignment................................................ 41
10.7. Governing Law................................................ 41
10.8. Counterparts................................................. 43
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 22, 1998 (the "Agreement"),
among Take-Two Interactive Software, Inc., a Delaware corporation ("TTIS"); JAG
Acquisition Corp., a Delaware corporation wholly-owned subsidiary of TTIS
("Subsidiary"); Jack of All Games, Inc., an Ohio corporation ("JAG"); David
Rosenbaum ("David"), Robert Alexander ("Robert"), and Thomas Rosenbaum
("Thomas"). David, Robert and Thomas are sometimes referred to as the
"Shareholders."
W I T N E S S E T H :
WHEREAS, JAG is in the business of distributing computer software (the
"Business"); and
WHEREAS, TTIS desires to acquire all of the outstanding capital stock of
JAG; and
WHEREAS, the Board of Directors of TTIS, the Board of Directors of
Subsidiary, TTIS as the sole shareholder of Subsidiary, and the Board of
Directors of JAG and Shareholders have: (a) determined that it is in the best
interests of their respective companies for the Subsidiary to be merged with and
into JAG upon the terms and subject to the conditions set forth herein; and (b)
approved the merger of the Subsidiary with and into JAG (the "Merger") in
accordance with the Delaware General Corporation Law of the State of Delaware
("Delaware Law") and the General Corporation Law of the State of Ohio ("Ohio
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 Date (as defined in Section 1.2),
and subject to and upon the terms and conditions of this Agreement,
Delaware Law and Ohio Law, Subsidiary shall be merged with and into JAG,
the separate corporate existence of the Subsidiary shall cease, and JAG
shall continue as the surviving corporation, operating as a wholly-owned
subsidiary of TTIS. JAG, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2. Effective Date. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in
Section 6, unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to
Section 8.1, Subsidiary and JAG shall cause the Merger to be consummated by
filing a Certificate of Merger (the "Certificate of Merger") with the
Secretaries of State of the States of Delaware and Ohio in the form of
Exhibit A and making such other filings as may be required by Delaware Law
and Ohio Law, in such form as required by and executed in accordance with
such laws (the time of the last of such filings to be made being the
"Effective Date").
1.3. Effect of the Merger. At the Effective Date, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law
and Ohio Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Date, all the rights, privileges, powers,
franchises and all property (real, personal and mixed) of the Subsidiary
and all debts due the Subsidiary as listed on Schedule 1.3.A shall vest in
JAG, and all debts, liabilities, obligations and duties of the Subsidiary
as listed on Schedule 1.3.B shall become the debts, liabilities,
obligations and duties of JAG.
1.4. Certificate of Incorporation; Code of Regulations.
(a) The Certificate of Incorporation of JAG, as in effect
immediately prior to the Effective Date (annexed hereto as Exhibit B),
shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law or such Certificate of
Incorporation.
(b) The Code of Regulations of JAG, as in effect immediately
prior to the Effective Date (annexed hereto as Exhibit C), shall be
the Code of Regulations of the Surviving Corporation until thereafter
amended as provided by law or by 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) Ryan Brant, the sole director of the Subsidiary shall, at the
Effective Date, be the duly appointed director of the Surviving
Corporation, to hold office in accordance with applicable law, the
Certificate of Incorporation and By-Laws of the Surviving Corporation
until resignation, removal or replacement.
(b) Each of Nicholas Alexander, Robert, David and Thomas, shall,
at the Effective Date, be duly nominated and appointed as Chief
Executive Officer, President, Chairman of the Board and Senior Vice
President, respectively, of the Surviving Corporation, and shall
constitute the initial officers
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of the Surviving Corporation, in each case to serve at the pleasure of
the Board of Directors of JAG until their respective resignation,
removal or placement.
1.6. Conversion of Securities. At the Effective Date, by virtue of the
Merger and without any action on the part of TTIS, Subsidiary, JAG or the
Shareholders:
(a) The outstanding shares of JAG Capital Stock (as defined in
Section 2.2 hereof) shall be converted into the right to receive an
aggregate of 2,750,000 shares of Common Stock, $.01 par value per
share, of TTIS ("TTIS Common Stock") (hereafter referred to as the
"Share Consideration"), to be distributed to the Shareholders, pro
rata, as set forth in Schedule 1.6(a). All such shares of JAG Capital
Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and become Treasury Stock subject to
issuance pursuant to Section 1.6(e).
(b) Any warrant or option convertible or exchangeable into JAG
Capital Stock shall be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) From and after the Effective Date, the holders of
certificates evidencing ownership of shares of JAG Capital Stock shall
cease to have any rights with respect to the shares of JAG Capital
Stock.
(d) No fractional shares of TTIS Common Stock shall be issued in
connection with the Merger and the Shareholders will be issued a whole
share of TTIS Common Stock in lieu of any fractional shares.
(e) Each share of the common stock, par value $.01 per share, of
the Subsidiary issued and outstanding at the Effective Date shall be
converted into the right to receive one fully paid and nonassessable
share of common stock of the Surviving Corporation.
2. Representations and Warranties as to JAG. Each of the Shareholders and
JAG, jointly and severally, represents and warrants to TTIS and Subsidiary as
follows:
2.1. Organization, Standing and Power. JAG is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio, with full corporate power and corporate authority to (i)
own, lease and operate its properties, (ii) carry on the Business as
currently conducted by it and (iii) execute and deliver, and perform under
this Agreement and each other agreement and instrument to be executed and
delivered by it pursuant hereto. Except as set forth on Schedule 2.1, there
are no states or jurisdictions in which the
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character and location of any of the properties owned or leased by JAG, or
the conduct of the Business makes it necessary for JAG to qualify to do
business as a foreign corporation. True and complete copies of the
Certificate of Incorporation of JAG and all amendments thereof, and of the
Code of Regulations of JAG, as amended to date, have heretofore been
furnished to TTIS. JAG's minute books contain complete and accurate records
of all meetings and other corporate actions of JAG's stockholders and Board
of Directors (including committees of its Board of Directors).
2.2. Capitalization. (a) The authorized capital stock of JAG consists
of: 750 shares of common stock, no par value (the "JAG Common Stock"), of
which 100 shares of JAG Common Stock are outstanding. The shares of JAG
Common Stock and JAG Preferred Stock are sometimes hereinafter collectively
referred to as "JAG Capital Stock". All of the JAG Capital Stock is duly
authorized, validly issued, fully paid and nonassessable. Schedule 2.2 sets
forth a true and complete list of the holders of all outstanding shares of
JAG Capital Stock, and the holders of all outstanding options and warrants
issued by JAG, which shares, options and warrants are held by them in the
amounts set forth on Schedule 2.2. Except as contemplated by the Merger and
except as set forth on Schedule 2.2, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of JAG or obligating JAG
to issue or sell any shares of capital stock of or other equity interests
in JAG. There is no personal liability, and there are no preemptive rights
with regard to the capital stock of JAG, and no right-of-first refusal or
similar catch-up rights with regard to such capital stock. Except as set
forth on Schedule 2.2 and except for the transactions contemplated by this
Agreement, there are no outstanding contractual obligations or other
commitments or arrangements of JAG to (A) repurchase, redeem or otherwise
acquire any shares of JAG Capital Stock (or any interest therein) or (B) to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity, or (C) issue or distribute
to any person any capital stock of JAG, or (D) issue or distribute to
holders of any of the capital stock of JAG any evidences of indebtedness or
assets of JAG. All of the outstanding securities of JAG have been issued
and sold by JAG in full compliance with applicable federal and state
securities laws.
2.3. Ownership of JAG Capital Stock. Except as listed on Schedule 2.3,
the Shareholders have good and marketable title to all of the issued and
outstanding shares of JAG Capital Stock, free and clear of any and all
liens, adverse claims, security interests, pledges, mortgages, charges and
encumbrances of any nature whatsoever ("Liens"), and on the Closing Date
(as defined in Section 7 hereof) will own all of the JAG Capital Stock,
free and clear of any and all Liens, including, but not
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limited to, any claims by any present or former stockholders of JAG.
2.4. Interests in Other Entities.
(a) JAG does not have any direct or indirect subsidiaries or own,
directly or indirectly, of record or beneficially, shares of voting
stock or other equity securities in any other corporation.
(b) None of the Shareholders (individually or jointly): (i) own,
directly or indirectly, of record or beneficially, any shares of
voting stock or other equity securities of any other corporation
engaged in the same or similar business to that business engaged in by
JAG at the Effective Date (other than not more than one percent (1%)
of the publicly-traded capital stock of corporations engaged in such
business held solely for investment purposes); (ii) have any ownership
interest, direct or indirect, of record or beneficially, in any
unincorporated entity engaged in the same or similar business to that
business engaged in by JAG at the Effective Date; or (iii) have any
obligation, direct or indirect, present or contingent, (A) to purchase
or subscribe for any interest in, advance or loan monies to, or in any
way make investments in, any other person or entity engaged in the
same or similar business to that business engaged in by JAG at the
Effective Date, or (B) to share any profits or capital investments or
both from a entity engaged in the same or similar business to that
business engaged in by JAG at the Effective Date.
2.5. Authority. The execution and delivery by JAG of this Agreement
and of all of the agreements to be executed and delivered by JAG pursuant
hereto (collectively, the "JAG Documents"), the performance by JAG of its
obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of JAG (including,
but not limited to, the unanimous consents of the Board of Directors of JAG
and of the Shareholders) and JAG has all necessary corporate power and
corporate authority with respect thereto. The Shareholders are individuals
having all necessary capacity, power and authority to execute and deliver
this Agreement and such other agreements to be executed and delivered by
either of them pursuant hereto (collectively, the "Shareholder Documents")
and to consummate the transactions contemplated hereby and thereby. This
Agreement is, and when executed and delivered by JAG and the Shareholders,
each of the other agreements to be delivered by either or both of them
pursuant hereto will be, the valid and binding obligations of JAG and the
Shareholders, to the extent they are parties thereto, in accordance with
their respective terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or
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other laws affecting the rights of creditors generally and subject to the
rules of law governing (and all limitations on) specific performance,
injunctive relief, and other equitable remedies.
2.6. Noncontravention. Except as set forth on Schedule 2.6, neither
the execution and delivery by JAG or the Shareholders of this Agreement or
of any other JAG Documents or Shareholder Documents to be executed and
delivered by either or both of them, nor the consummation of any of the
transactions contemplated hereby or thereby, nor the performance by either
or both of them of any of their respective obligations 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, By-Laws or other constituent documents of
JAG, each as amended to date, 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 any of them, under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which
either or both of them is a party or by which either or both of them or any
of their respective assets may be bound, 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
either or both of them, or (d) result in the creation or imposition of any
lien, adverse claim, restriction, charge or encumbrance upon any of the
assets of JAG (the "Assets") or the JAG Capital Stock, or (e) interfere
with or otherwise adversely affect the ability of JAG to carry on the
Business after the Effective Date on substantially the same basis as is now
conducted by JAG.
2.7. Financial Statements. JAG has heretofore delivered to each of
TTIS and Subsidiary (a) its financial statements consisting of the audited
balance sheets at December 31, 1996 and 1997, and the related statements of
income, stockholders' equity and cash flows for the two (2) years then
ended, which have been audited by Aronowitz, Chaiken & Hardesty, L.L.P.,
independent certified public accountants, and (b) its unaudited balance
sheet at June 30, 1998 (the "Balance Sheet") statements of income and
stockholders' equity and cash flows for the six months ended June 30, 1998
(collectively, the "JAG Financial Statements"). The JAG Financial
Statements were prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, and present fairly the financial
position of JAG as at the dates thereof and the results of operations for
the periods and the cash flow indicated. The books and records of JAG are
complete and correct, have been maintained in accordance with good business
practices, and accurately reflect the basis for the financial condition,
results
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of operations and cash flow of JAG as set forth in the JAG Financial
Statements.
2.8. Absence of Undisclosed Liabilities. JAG has no liabilities or
obligations of any nature whatsoever, whether accrued, matured, unmatured,
absolute, contingent, direct or indirect or otherwise, which have not been
(a) in the case of liabilities and obligations of a type customarily
reflected on a corporate balance sheet, prepared in accordance with GAAP,
set forth on the Balance Sheet, or (b) incurred in the ordinary course of
business since June 30, 1998, or (c) in the case of other types of
liabilities and obligations, described in Schedule 2.8, or (d) incurred,
consistent with past practice, in the ordinary course of business of JAG
(in the case of liabilities and obligations of the type referred to in
clause (a) above).
2.9. Guaranties. Schedule 2.9 hereto is a complete and accurate list
and summary description of all written guaranties currently in effect
heretofore issued by the Shareholders to any bank or other lender in
connection with any credit facilities extended by such creditors to JAG or
issued by the Shareholders in connection with any other contracts or
agreements for the benefit of JAG (collectively, the "Guaranties"),
including the name of such creditor and the amount of the indebtedness,
together with any interest and fees currently owing and expected to be
outstanding as of the Effective Date.
2.10. Accounts and Notes Receivable/Inventories.
(a) The accounts and notes receivable which are reflected on the
Balance Sheet are good and collectible in the ordinary course of
business at the aggregate recorded amounts thereof, less the
respective amount of the allowances for doubtful accounts and notes
receivable, if any, reflected thereon, and are not subject to offsets
other than in the ordinary course of business. The accounts and notes
receivable of JAG which were added after June 30, 1998, are good and
collectible in the ordinary course of business, less the respective
amount of the allowances for doubtful accounts and notes receivable,
if any, reflected on the books and records of JAG (which allowances
were established on a basis consistent with prior practice), and are
not subject to offsets.
(b) The inventories reflected on the Balance Sheet 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,
all of which have been (i) written down to net realizable value or
(ii) adequately reserved against on the books and records of JAG. All
inventories are stated at the lower of cost or market.
-7-
2.11. Absence of Changes. Since June 30, 1998, there have not been (a)
any adverse change (other than as is normal in the ordinary course of
business) in the condition (financial or otherwise), assets, liabilities,
business, prospects, results of operations or cash flows of JAG (including,
without limitation, any such adverse change resulting from damage,
destruction or other casualty loss, whether or not covered by insurance),
(b) any waivers by JAG of any right, or cancellation of any debt or claim,
of substantial value, (c) any declarations, set asides or payments of any
dividend or other distributions or payments in respect of the JAG Capital
Stock, or (d) any changes in the accounting principles or methods which are
utilized by JAG.
2.12. Litigation. Except as set forth in Schedule 2.12, there are no
claims, suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending or, to the best
knowledge of JAG and the Shareholders, threatened, against or relating to
JAG or the Shareholders, the transactions contemplated hereby or any of the
Assets. There are no judgments, orders, stipulations, injunctions, decrees
or awards in effect which relate to JAG, this Agreement, the transactions
contemplated, the Business or any of the Assets, the effect of which is (a)
to limit, restrict, regulate, enjoin or prohibit any business practice of
JAG in any area, or the acquisition by JAG of any properties, assets or
businesses, or (b) otherwise materially adverse to the Business, any of the
Assets or JAG Capital Stock.
2.13. No Violation of Law. To the best knowledge of the Shareholders
and JAG, JAG is not engaging in any activity or omitting to take any action
as a result of which it is 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 JAG, the Business or any of the Assets, including,
but not limited to, those relating to: occupational safety and health
matters; issues of 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); business practices and operations; labor practices; employee
benefits; and zoning and other land use laws and regulations.
2.14. Properties. Except as set forth on Schedule 14A, all plants,
structures and equipment which are utilized in the Business, or are
material to the condition (financial or otherwise) of JAG are owned or
leased by JAG, are free and clear of all Liens, are in good operating
condition and repair (ordinary wear and tear excepted), and are adequate
and suitable for the purposes for which they are used. Schedule 2.14B sets
forth all (a) real property which is owned, leased (whether as lessor or
lessee) or subject to contract or
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commitment of purchase or sale or lease (whether as lessor or lessee) by
JAG, or which is subject to a title retention or conditional sales
agreement or other security device, and (b) tangible personal property
which is owned, leased (whether as lessor or lessee) or subject to contract
or commitment of purchase or sale or lease (whether as lessor or lessee) by
JAG.
2.15. Intangibles/Inventions. Schedule 2.15 identifies (by a summary
description) the Intangibles (as defined below), the ownership thereof and,
if applicable, JAG's authority for use of the same, which Schedule is
complete and correct and encompasses: (A) all United States and foreign
patents, trademark and trade name registrations, trademarks and trade
names, brandmarks and brand name registrations, servicemarks and
servicemark registrations, assumed names and copyrights and copyright
registrations, (collectively, the "Marks") owned in whole or in part or
used by JAG, and all applications therefor, (B) all inventions,
discoveries, improvements, processes, formulae, technology, know-how,
processes and other intellectual property, proprietary rights and trade
secrets relating to the Business (collectively, the "Inventions") and (C)
all licenses and other agreements to which JAG is a party or otherwise
bound which relate to any of the Intangibles or the Inventions or JAG's use
thereof in connection with the Business (collectively, the "Licenses, and
together with the Marks and the Inventions, the "Intangibles"). No
violations of the terms of any of the aforesaid licenses and/or agreements
have occurred. Except as disclosed on Schedule 2.15, (A) JAG owns or is
authorized to use in connection with the Business all of the Intangibles;
(B) no proceedings have been instituted, are pending, or to the best
knowledge of JAG and the Shareholders, are threatened which challenge the
rights of JAG with respect to the Intangibles or its use thereof in
connection with the Business and/or the Assets or the validity thereof and,
there is no valid basis for any such proceedings; (C) neither JAG's
ownership of the Intangibles nor their use thereof in connection with the
Business and/or the Assets violates any laws, statutes, ordinances or
regulations, or has at any time infringed upon or violated any rights of
others, or is being infringed by others; (D) none of the Intangibles, or
JAG's use thereof in connection with the Business and/or the Assets is
subject to any outstanding order, decree, judgment, stipulation or any
lien, security interest or other encumbrance; and (E) JAG has not granted
any license to third parties with regard to its Intangibles.
2.16. Systems and Software. JAG owns or has the right to use pursuant
to lease, license, sublicense, agreement, or permission all computer
hardware, software and information systems listed on Schedule 2.16 and
necessary for the operation of the businesses of JAG as presently conducted
(collectively, "Systems"). Each System owned or used by JAG immediately
prior to the Effective Date will be owned or available for use by JAG on
identical terms and conditions immediately subsequent to the
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Effective Date. With respect to each System owned by a third party and used
by JAG pursuant to lease, license, sublicense, agreement or permission: (a)
the lease, license, sublicense, agreement or permission covering the System
is legal, valid, binding, enforceable, and in full force and effect; (b)
the lease, license, sublicense, agreement or permission will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Effective Date; (c) no party to any such
lease, license, sublicense, agreement or permission is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, and permit termination, modification or
acceleration thereunder; (d) no party to any such lease, license,
sublicense, agreement or permission has repudiated any provision thereof;
(e) JAG has not granted any sublicense, sublease or similar right with
respect to any such lease, license, sublicense, agreement or permission;
(f) JAG's use and continued use of such Systems does not and will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any intellectual property rights of third parties as a
result of the continued operation of the Business.
2.17. Tax Matters.
(a) Except as listed on Schedule 2.17, JAG 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
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 are set forth on the Balance Sheet are
adequate for all accrued and unpaid taxes of JAG as of June 30, 1998,
whether (i) incurred in respect of or measured by income of JAG for
any periods prior to the close of business on that date, or (ii)
arising out of transactions entered into, or any state of facts
existing, on or prior to such date. JAG 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. JAG 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 JAG and the Shareholders, 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 JAG have not been examined by the
Internal Revenue Service ("the IRS"), nor has any states taxing
authority examined any merchandize, personal property, sales or use
tax returns of JAG.
(b) JAG (i) has not agreed to or been required to make any
adjustment pursuant to Section 481(a) of the
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Internal Revenue Code of 1986, as amended (the "Code"), (ii) has no
knowledge that the IRS or any other taxing authority has proposed any
such adjustment or change in accounting method, and (iii) has no
application pending with any governmental authority requesting
permission for any change in accounting method.
(c) As used herein, the term "Taxes" 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.
2.18. Insurance. Schedule 2.18 is a complete and correct list and
summary description of all contracts and policies of insurance relating to
any of the Assets, the Business or the Shareholders in which JAG is an
insured party, beneficiary or loss payable payee. Such policies are in full
force and effect, all premiums due and payable with respect thereto have
been paid, and no notice of cancellation or termination has been received
by JAG with respect to any such policy.
2.19. Banks; Powers of Attorney. Schedule 2.19 is a complete and
correct list showing (a) the names of each bank in which JAG 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 JAG.
2.20. Employee Arrangements. Schedule 2.20 is a complete and correct
list and summary description of all (a) union, collective bargaining,
employment, management, termination and consulting agreements to which JAG
is a party or otherwise bound, and (b) compensation plans and arrangements;
bonus and incentive plans and arrangements; deferred compensation plans and
arrangements; pension and retirement plans and arrangements; profit-sharing
and thrift plans and arrangements; stock purchase and stock option plans
and arrangements; hospitalization and other life, health or disability
insurance or reimbursement programs; holiday, sick leave, severance,
vacation, tuition reimbursement, personal loan and product purchase
discount policies and arrangements; and other plans or arrangements
providing for benefits for employees of JAG. Said Schedule also lists the
names and compensation of all employees of JAG whose earnings during the
last fiscal year were $25,000 or more (including bonuses and other
incentive compensation), and all employees who are expected to receive at
least said amount in respect of the current fiscal year.
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2.21. ERISA. JAG neither maintains nor is obligated to contribute to
an "employee pension benefit plan" as such term is defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and JAG "welfare benefit plan", as such term is defined in
Section 3(1) of ERISA.
2.22. Environmental Matters. JAG and each of its subsidiaries has
obtained and is in compliance with the terms and conditions of all required
permits, licenses, registrations and other authorizations required under
Environmental Laws (as hereinafter defined). To the best knowledge of the
Shareholders and JAG, no asbestos in a friable condition, equipment
containing polychlorinated biphenyls, leaking underground or above-ground
storage tanks are contained in or located at any facility currently, or was
contained or located at any facility previously owned, leased or controlled
by JAG or any subsidiary of JAG heretofore in existence. JAG has not
released, discharged or disposed of on, under or about any facility
currently or previously owned, leased or controlled by JAG, any Hazardous
Substance (as hereinafter defined), and to the best knowledge of JAG and
the Shareholders, no third party has released, discharged or disposed of
on, under or about any facility currently or previously owned, leased or
controlled by JAG, and Hazardous Substances. JAG is in compliance with all
applicable Environmental Laws. JAG has fully disclosed to TTIS all past and
present noncompliance with, or liability under, Environmental Laws, and all
past discharges, emissions, leaks, releases or disposals by it of any
substance or waste regulated under or defined by Environmental Laws that
have formed or could reasonably be expected to form the basis of any claim,
action, suit, proceeding, hearing or investigation under any applicable
Environmental Laws. JAG has not received notice of any past or present
events, conditions, circumstances, activities, practices, incidents,
actions or plans of JAG or its subsidiaries that have resulted in or
threaten to result in any common law or legal liability, or otherwise form
the basis of any claim, action, suit, proceeding, hearing or investigation
under, any applicable Environmental Laws. For purposes of this Section
2.22, (a) "Environmental Laws: mean applicable federal, state, local and
foreign laws, regulations and codes relating in any respect to pollution or
protection of the environment and (b) "Hazardous Substances" means any
toxic, caustic or otherwise dangerous substance (whether or not regulated
under federal, state or local environmental statutes, rules, ordinances, or
orders), including (i) "hazardous substance" as defined in 42 U.S.C.
Section 9601, and (ii) petroleum products, derivatives, byproducts and
other hydrocarbons.
2.23. Business Practices and Commitments. Set forth on Schedule 2.23
is a description of and a list and the amount of all of JAG's outstanding
obligations with respect to (i) JAG's rebate and volume discount practice
and obligations,
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(ii) JAG's allowance and customer return practice and obligations, (iii)
JAG's co-op advertising and other promotional practices, and (iv) JAG's
warranty practice and obligations as each of the foregoing relate to the
customers and suppliers of JAG.
2.24. Certain Business Matters. Except as is set forth in Schedule
2.24, (a) JAG is not a party to or bound by any publishing,
distributorship, dealership, sales agency, franchise or similar agreement
which relates to the sale or distribution of any of the products and
services of the Business, (b) JAG has no sole-source supplier of
significant goods or services (other than utilities) with respect to which
practical alternative sources are not available on comparable terms and
conditions, (c) there are no pending or, to the best knowledge of JAG and
the Shareholders, threatened labor negotiations, work stoppages or work
slowdowns involving or affecting the Business, and no union representation
questions exist, and there are no organizing activities, in respect of any
of the employees of JAG, (d) the product and service warranties given by
JAG or by which it is bound (complete and correct copies or descriptions of
which have heretofore been delivered by JAG to TTIS) entail no greater
obligations than are customary in the Business, (e) neither JAG nor the
Shareholders is a party to or bound by any agreement which limits its or
his, as the case may be, freedom to compete in any line of business or with
any person, or which is otherwise materially burdensome to JAG or the
Shareholders, and (f) JAG is not a party to or bound by any agreement in
which any officer, director or stockholder of JAG (or any affiliate of any
such person) has, or had when made, a direct or indirect material interest.
2.25. Certain Contracts. Schedule 2.25 is a complete and correct list
of all material contracts, commitments, obligations and understandings
which are not set forth in any other Schedule delivered hereunder and to
which JAG is a party or otherwise bound, except for (a) purchase orders
from vendors or customers and (b) each of those which (i) were made in the
ordinary course of business and (ii) either (A) are terminable by JAG (and
will be terminable by JAG) without liability, expense or other obligation
on 30 days' notice or less, or (B) may be anticipated to involve aggregate
payments to or by JAG of $50,000 (or the equivalent) or less calculated
over the full term thereof, and (C) are not otherwise material to the
Business. Complete and correct copies of all contracts, commitments,
obligations and undertakings set forth on any of the Schedules delivered
pursuant to this Agreement have been furnished by JAG to TTIS. Except as
expressly stated on any of such Schedules, (1) each of agreements listed on
Schedule 2.25 is in full force and effect, no other person or entity which
is a party thereto or otherwise bound thereby is in material default
thereunder, and no event, occurrence, condition or act exists which does
(or which with the giving of notice or the lapse of time or both would)
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give rise to a material default or right of cancellation, acceleration or
loss of contractual benefits thereunder; (2) there has been no threatened
cancellations thereof, and there are no outstanding disputes thereunder;
and (3) each of them is fully assignable without the consent, approval,
order or any waiver by, or any other action of or with any individual or
individuals, without the payment of any penalty, the incurrence of any
additional debt, liability or obligation of any nature whatsoever or the
change of any term.
2.26. Customers and Suppliers. Schedule 2.26 sets forth a complete and
correct list, as of June 30, 1998, of (a) the 20 largest customers of the
Business and the amount for which each such customer was invoiced, and (b)
the 20 largest suppliers of the Business and the amount of goods and
services purchased from each such supplier. There are no (i) threatened
cancellations by the aforesaid customers or suppliers with respect to the
Business, (ii) outstanding disputes by such customers or suppliers with JAG
and the Business, or (iii) any adverse changes in the business relationship
between the Business and any such customer or supplier. To the best
knowledge of the Shareholders and JAG, the aforesaid suppliers and
customers will continue their respective relationships with the Business
after the Closing Date on substantially the same basis as now exists.
2.27. Approvals/Consents. Except as set forth on Schedule 2.27, JAG
currently holds all governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises which are
necessary for the operation of the Business, all of which are in full force
and effect and are transferable pursuant to the transaction contemplated
hereby without the payment of any penalty, the incurrence of any additional
debt, liability or obligation of any nature whatsoever or the change of any
term. Schedule 2.27 is a complete and correct list of all such governmental
and administrative consents, permits, appointments, approvals, licenses,
certificates and franchises. No material violations of the terms thereof
have heretofore occurred or are known by the Shareholders to exist as of
the date of this Agreement.
2.28. Information as to JAG. None of the representations or warranties
made by the Shareholders in this Agreement is, or contained in any of the
JAG Documents to be executed and delivered hereto will be, false or
misleading with respect to any material fact, or omits to state any
material fact necessary in order to make the statements therein contained
not misleading.
2.29. Pooling of Interests. Each of the parties hereto intends that
the Merger be accounted for under the pooling of interests methods under
the requirements of APB No. 16 of the AICPA, as amended by the SFAS Board
and the related interpretations of the AICPA, the SFAS Board and the rules
and
-14-
regulations of the SEC. Neither JAG nor the Shareholders has, through the
date of this Agreement, taken or agreed to take any action which would
impair the ability of JAG to account for the business combination to be
effected by the Merger as a pooling of interests. Except as set forth on
Schedule 2.29:
(a) Neither JAG nor the Shareholders own or will have, since the
date two years prior to the Effective Date, owned any shares of TTIS
Common Stock, nor shall JAG have been a subsidiary or a division of
another entity since the date two years prior to the Effective Date.
(b) JAG has no equity investments or rights to purchase equity
investments of any kind in TTIS other than as pursuant to this
Agreement and the other agreements referenced herein; and
(c) JAG has not disposed of a significant amount of assets other
than in the ordinary course of business since the date two years prior
to the Effective Date.
The equity transactions and the capital stock transactions for JAG and
for each Shareholder since the date two years prior to the date hereof are
set forth on Schedule 2.29.
2.30. Securities Act Representation. Except in accordance with the
Registration Rights Agreement (as defined in Section 5.16), each
Shareholder is acquiring the TTIS Common Stock solely for investment
purposes, with no intention of distributing or reselling any such stock or
any interest therein. Each Shareholder is aware that the TTIS Common Stock
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and that neither the TTIS Common Stock nor any interest
therein may be sold, pledged, or otherwise transferred unless the TTIS
Common Stock is registered under the Securities Act or qualifies for an
exemption under the Securities Act.
3. Representations and Warranties as to TTIS and Subsidiary. TTIS and
Subsidiary, jointly and severally, represent and warrant to JAG and the
Shareholders as follows:
3.1. Organization, Standing and Power. Each of TTIS and Subsidiary is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, the laws of the jurisdiction of their
respective incorporation, with full corporate power and corporate authority
to (i) own, lease and operate its properties, (ii) carry on its business as
currently conducted by it and (iii) execute and deliver, and perform under
this Agreement and each other agreement and instrument to be executed and
delivered by it pursuant hereto. Except as set forth on Schedule 3.1, there
are no states or jurisdictions in which the character and location of any
of the properties owned or leased by TTIS or the Subsidiary,
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or the conduct of their respective business operations makes it necessary
for TTIS or the Subsidiary to qualify to do business as a foreign
corporation. True and complete copies of the Certificate of Incorporation
of TTIS and all amendments thereof, and of the By-laws of TTIS, as amended
to date, have heretofore been furnished to JAG.
3.2. Interests in Other Entities. Schedule 3.2 sets forth a true and
complete list of all direct or indirect subsidiaries of TTIS (other than
the Subsidiary) that are material to the financial condition of TTIS and it
subsidiaries, together with the jurisdiction of incorporation of each such
subsidiary and the percentage of each such subsidiary's outstanding capital
stock owned by TTIS or another of TTIS's subsidiaries. Each of such
subsidiaries are duly organized corporations, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation
(as well as all applicable foreign jurisdictions necessary to its business
operations) and have the requisite corporate power and authority and
governmental authority to own, operate or lease the properties that each
purports to own, operate or lease and to carry on its business as it is now
being conducted.
3.3. Capitalization.
(a) The authorized capital stock of TTIS consists of 50,000,000
shares of TTIS Common Stock and 5,317,000 shares of Preferred Stock,
par value $.01 per share (of which 1,850,000 shares of Series A
Preferred Stock, $.01 par value per share, are outstanding). As of the
date hereof, (i) 12,103,863 shares of TTIS Common Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable, (ii) 1,186,784 (both plan and non-plan) shares
of TTIS Common Stock are issuable upon exercise of options and (iii)
913,164 shares of TTIS Common Stock are reserved for future issuance
upon exercise of outstanding common stock purchase warrants.
(b) The outstanding shares of capital stock of each of the
subsidiaries of TTIS, including the Subsidiary, are duly authorized,
validly issued, fully paid and nonassessable, and, except as set forth
on Schedule 3.3, such shares are owned by TTIS, directly or
indirectly, free and clear of all Liens and limitations on TTIS's
voting rights. Except as noted on Schedule 3.3, there are no options,
warrants or similar right outstanding with respect to shares of
capital stock of any subsidiary.
(c) Except as set forth in the SEC Reports (as defined in Section
3.13 hereof) and on Schedule 3.3, and except for the transactions
contemplated by this Agreement, there are no outstanding contractual
obligations or other commitments or arrangements of TTIS to (A)
repurchase, redeem or otherwise
-16-
acquire any shares of the capital stock of TTIS (or any interest
therein) or (B) to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any other
entity, or (C) issue or distribute to any person any capital stock of
TTIS, or (D) issue or distribute to holders of any of the capital
stock of TTIS any evidences of indebtedness or assets of TTIS. All of
the outstanding securities of TTIS have been issued and sold by TTIS
in full compliance with applicable federal and state securities laws.
3.4. Authority. The execution and delivery by TTIS and Subsidiary of
this Agreement and of each agreement to be executed and delivered by either
of them pursuant hereto (collectively, the "TTIS Documents"), the
performance by each of them of its obligations hereunder and thereunder,
and the consummation of the transactions contemplated hereby and thereby,
have been duly and validly authorized by all necessary corporate action on
the part of TTIS and Subsidiary, and TTIS and Subsidiary have all necessary
corporate power and corporate authority with respect thereto. This
Agreement is, and when executed and delivered by TTIS and Subsidiary each
other TTIS Document will be, the valid and binding obligation of TTIS or
Subsidiary, as the case may be to the extent it is a party thereto, in
accordance with the respective terms, thereof, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights of creditors generally and subject to the rules of law
governing (and all limitations on) specific performance, injunctive relief,
and other equitable remedies.
3.5. Noncontravention. Except as set forth on Schedule 3.5, neither
the execution and delivery by TTIS or the Subsidiary of this Agreement or
of any other document, agreement or instrument to be executed and delivered
by either or both of them, nor the consummation of any of the transactions
contemplated hereby or thereby, nor the performance by either or both of
them of any of their respective obligations 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, By-Laws or other constituent documents of TTIS or the
Subsidiary, each as amended to date, 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 either or both
of them, under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which either or both of them is a party or by which either or
both of them or any of their respective assets may be bound, 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 either or both of them, or (d)
-17-
result in the creation or imposition of any lien, adverse claim,
restriction, charge or encumbrance upon any of the assets of TTIS or the
capital stock of TTIS, or (e) interfere with or otherwise adversely affect
the ability of TTIS to carry on its business operations after the Effective
Date in substantially the same basis as are now conducted by TTIS.
3.6. Litigation. Except as set forth in the SEC Reports or on Schedule
3.4, there are no claims, suits or actions, or administrative, arbitration
or other proceedings or governmental investigations, pending or, to the
best knowledge of TTIS and the Subsidiary, threatened, against or relating
to TTIS or the Subsidiary or the transactions contemplated hereby. There
are no judgments, orders, stipulations, injunctions, decrees or awards in
effect which relate to TTIS, the Subsidiary, this Agreement or the
transactions contemplated hereby, the effect of which is (a) to limit,
restrict, regulate, enjoin or prohibit any business practice of TTIS in any
area, or the acquisition by TTIS of any properties, assets or businesses,
or (b) otherwise materially adverse to the TTIS Common Stock.
3.7. No Violation of Law. To the best knowledge of TTIS and the
Subsidiary, neither TTIS nor the Subsidiary is engaging in any activity or
omitting to take any action as a result of which it is 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 TTIS, the Subsidiary or the
businesses of either or both of them, including, but not limited to, those
relating to: occupational safety and health matters; issues of
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); business
practices and operations; labor practices; employee benefits; and zoning
and other land use laws and regulations.
3.8. Accounts and Notes Receivable/Inventories.
(a) The accounts and notes receivable of TTIS which are reflected
on the financial statements set forth in the SEC Reports are good and
collectible in the ordinary course of business at the aggregate
recorded amounts thereof, less the respective amount of the allowances
for doubtful accounts and notes receivable, if any, reflected thereon,
and are not subject to offsets other than in the ordinary course of
business. The accounts and notes receivable of TTIS which were added
after April 30, 1998, are good and collectible in the ordinary course
of business, less the respective amount of the allowances for doubtful
accounts and notes receivable, if any, reflected on the books and
records of TTIS (which allowances were established on a basis
consistent with prior practice), and are not subject to offsets.
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(b) The inventories reflected on the latest balance sheet
contained in the SEC Reports 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, all of which have been (i)
written down to net realizable value or (ii) adequately reserved
against on the books and records of TTIS. All inventories are stated
at the lower of cost or market.
3.9. Properties. All plants, structures and equipment which are
material to the condition (financial or otherwise) of TTIS or the
Subsidiary are owned or leased by TTIS operations or the Subsidiary, as
applicable, are free and clear of all Liens except as otherwise disclosed
in the SEC Reports, are in good operating condition and repair (ordinary
wear and tear excepted), and are adequate and suitable for the purposes for
which they are used. The SEC Reports and Schedule 3.9 sets forth all (a)
real property which is owned, leased (whether as lessor or lessee) or
subject to contract or commitment of purchase or sale or lease (whether as
lessor or lessee) by TTIS or the Subsidiary, or which is subject to a title
retention or conditional sales agreement or other security device, and (b)
except for furniture, personal computers and personal property having a
value less than $500.00 located at its various facilities, tangible
personal property which is owned, leased (whether as lessor or lessee) or
subject to contract or commitment of purchase or sale or lease (whether as
lessor or lessee) by TTIS or the Subsidiary.
3.10. Systems and Software. TTIS owns or has the right to use pursuant
to lease, license, sublicense, agreement, or permission all Systems
necessary for the operation of the businesses of TTIS as presently
conducted. Each System owned or used by TTIS immediately prior to the
Effective Date will be owned or available for use by TTIS on identical
terms and conditions immediately subsequent to the Effective Date. With
respect to each System owned by a third party and used by TTIS pursuant to
lease, license, sublicense, agreement or permission: (a) the lease,
license, sublicense, agreement or permission covering the System is legal,
valid, binding, enforceable, and in full force and effect; (b) the lease,
license, sublicense, agreement or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical
terms following the Effective Date; (c) no party to any such lease,
license, sublicense, agreement or permission is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, and permit termination, modification or acceleration
thereunder; (d) no party to any such lease, license, sublicense, agreement
or permission has repudiated any provision thereof; (e) TTIS has not
granted any sublicense, sublease or similar right with respect to any such
lease, license, sublicense, agreement or permission; (f)
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TTIS's use and continued use of such Systems does not and will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any intellectual property rights of third parties as a
result of the continued operation of the Business.
3.11. Intangibles/Inventions. Schedule 3.11 identifies (by a summary
description) the Intangibles, the ownership thereof and, if applicable,
TTIS's authority for use of the same, which Schedule is complete and
correct and encompasses: (A) all Marks owned in whole or in part or used by
TTIS, and all applications therefor, (B) all inventions, discoveries,
improvements, processes, formulae, technology, know-how, processes and
other intellectual property, proprietary rights and trade secrets relating
to the business of TTIS (collectively, the "Inventions") and (C) all
licenses and other agreements to which TTIS is a party or otherwise bound
which relate to any of the TTIS Intangibles or the TTIS Inventions or
TTIS's use thereof in connection with the Business (collectively, the "TTIS
Licenses, and together with the Marks and the TTIS Inventions, the "TTIS
Intangibles"). No violations of the terms of any of the aforesaid licenses
and/or agreements have occurred. Except as disclosed on Schedule 3.11, (A)
TTIS owns or is authorized to use in connection with its business all of
the TTIS Intangibles; (B) no proceedings have been instituted, are pending,
or to the best knowledge of TTIS, are threatened which challenge the rights
of TTIS with respect to the TTIS Intangibles or its use thereof in
connection with the business operations of TTIS or the validity thereof
and, there is no valid basis for any such proceedings; (C) neither TTIS's
ownership of the TTIS Intangibles nor its use thereof in connection with
its business operations violates any laws, statutes, ordinances or
regulations, or has at any time infringed upon or violated any rights of
others, or is being infringed by others; (D) none of the TTIS Intangibles,
or TTIS's use thereof in connection with its business operations is subject
to any outstanding order, decree, judgment, stipulation or any lien,
security interest or other encumbrance; and (E) TTIS has not granted any
license to third parties with regard to it the TTIS Intangibles.
3.12. Tax Matters.
(a) Except as listed on Schedule 3.12, TTIS 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
made adequate provision for the payment of, Taxes shown to be due or
claimed to be due on such tax returns and reports. The provisions for
Taxes which are set forth on TTIS' balance sheet set forth in its
latest Form 10- QSB for the three months ended April 30, 1998 are
adequate for all accrued and unpaid taxes of TTIS as of April 30,
1998, whether (i) incurred in respect of or measured by income of TTIS
for any periods prior to the close of business on that date, or
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(ii) arising out of transactions entered into, or any state of facts
existing, on or prior to such date. TTIS 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. TTIS 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 TTIS, 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 TTIS have not been examined by the IRS, nor has any states
taxing authority examined any merchandize, personal property, sales or
use tax returns of TTIS.
(b) TTIS (i) has not agreed to or been required to make any
adjustment pursuant to Section 481(a) of the Code, (ii) has no
knowledge that the IRS or any other taxing authority has proposed any
such adjustment or change in accounting method, and (iii) has no
application pending with any governmental authority requesting
permission for any change in accounting method.
3.13. Securities and Exchange Commission Filings; Financial
Statements.
(a) TTIS has filed on EDGAR all forms, reports, statements and
documents required to be filed with the Securities and Exchange
Commission ("SEC") (collectively, the "SEC Reports"), as set forth in
Schedule 3.13, each of which has complied in form in all material
respects with the applicable requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, each as in effect on the date so filed. None of such
reports (including but not limited to any financial statements or
schedules included or incorporated by reference therein) filed by
TTIS, when filed (except to the extent revised or superseded by a
subsequent filing with the SEC) contained any untrue statement of a
material fact.
(b) Each of the consolidated financial statements contained in
the SEC Reports has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may otherwise be indicated
in the notes thereto) and each presents fairly, in all material
respects, the consolidated financial position of TTIS and its
subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flow position for the periods
indicated.
(c) Except as and to the extent set forth on the balance sheet of
TTIS and its subsidiaries as at April 30, 1998, including the notes
thereto, TTIS and its subsidiaries
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taken as a whole, do not have any liabilities or obligations, whether
or not accrued, contingent or otherwise, that would be required to be
included on a balance sheet prepared in accordance with GAAP, except
for liabilities or obligations incurred in the ordinary course of
business since April 30, 1998, none of which would, individually or in
the aggregate, have a material adverse effect on the financial
condition, or results of the operations or cash flows of TTIS and its
subsidiaries, on a consolidated basis.
3.14. Stock Issuable in Merger. The Share Consideration, when issued,
will be duly authorized and validly issued, fully paid and non-assessable,
will be delivered hereunder free and clear of any liens, adverse claims,
security interests, pledges, mortgages, charges and encumbrances of any
nature whatsoever, except that the shares of TTIS Common Stock constituting
the Share Consideration are not registered and will be subject to
restrictions on transfers under the Securities Act.
3.15. Absence of Changes. Since April 30, 1998, there have not been
(a) any material adverse change (other than as is normal in the ordinary
course of business, in the condition (financial or otherwise), assets,
liabilities, business, prospects, results of operations or cash flows of
TTIS and Subsidiary (including, without limitation, any such adverse change
resulting from damage, destruction or other casualty loss, whether or not
covered by insurance), (b) any waivers by TTIS or Subsidiary of any right,
or cancellation of any debt or claim, of substantial value, (c) any
declarations, set asides or payments of any dividend or other distributions
or payments in respect of the TTIS Common Stock, or (d) any changes in the
accounting principles or methods which are utilized by TTIS or Subsidiary.
3.16. Environmental Matters. TTIS and the Subsidiary have obtained and
are in compliance with the terms and conditions of all required permits,
licenses, registrations and other authorizations required under
Environmental Laws. To the best knowledge of TTIS and the Subsidiary, no
asbestos in a friable condition, equipment containing polychlorinated
biphenyls, leaking underground or above-ground storage tanks are contained
in or located at any facility currently, or was contained or located at any
facility previously owned, leased or controlled by TTIS or the Subsidiary.
Neither TTIS nor the Subsidiary has released, discharged or disposed of on,
under or about any facility currently or previously owned, leased or
controlled by TTIS, any Hazardous Substance, and to the best knowledge of
TTIS and the Subsidiary, no third party has released, discharged or
disposed of on, under or about any facility currently or previously owned,
leased or controlled by TTIS, Hazardous Substances. TTIS is in compliance
with all applicable Environmental Laws. TTIS has fully disclosed to JAG all
past and present noncompliance with, or liability under, Environmental
Laws, and all past discharges, emissions, leaks,
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releases or disposals by it of any substance or waste regulated under or
defined by Environmental Laws that have formed or could reasonably be
expected to form the basis of any claim, action, suit, proceeding, hearing
or investigation under any applicable Environmental Laws. TTIS has not
received notice of any past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans of TTIS or the
Subsidiary that have resulted in or threaten to result in any common law or
legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation under, any applicable Environmental
Laws.
3.17. Approvals/Consents. Except as set forth on Schedule 3.17, TTIS
and the Subsidiary currently hold all governmental and administrative
consents, permits, appointments, approvals, licenses, certificates and
franchises which are necessary for the operation of its Business
operations, all of which are in full force and effect and are transferable
pursuant to the transaction contemplated hereby without the payment of any
penalty, the incurrence of any additional debt, liability or obligation of
any nature whatsoever or the change of any term. Schedule 3.17 is a
complete and correct list of all such governmental and administrative
consents, permits, appointments, approvals, licenses, certificates and
franchises. No material violations of the terms thereof have heretofore
occurred or are known by TTIS or the Subsidiary to exist as of the date of
this Agreement.
3.18. Pooling of Interests. Each of the parties hereto intends that
the Merger be accounted for under the pooling of interests methods under
the requirements of APB No. 16 of the AICPA, as amended by the SFAS Board
and the related interpretations of the AICPA, the SFAS Board and the rules
and regulations of the SEC. Neither TTIS nor the Subsidiary has, through
the date of this Agreement, taken or agreed to take any action which would
impair the ability of TTIS to account for the business combination to be
effected by the Merger as a pooling of interests.
3.19. Information as to TTIS and Subsidiary. None of the
representations or warranties made by TTIS or Subsidiary in this Agreement,
or contained in any of the TTIS Documents, to be executed and delivered
hereto, is or will be, false or misleading with respect to any material
fact, or omits to state any material fact necessary in order to make the
statements therein contained not misleading.
4. Indemnification.
4.1. Indemnification by the Shareholders. Each of JAG (before the
Effective Date) and the Shareholders, jointly and severally, hereby
indemnifies and agrees to defend and hold harmless each of TTIS and
Subsidiary from and against any and all
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losses, obligations, deficiencies, liabilities, claims, 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 misrepresentation of a fact
contained in any representation of JAG and/or the Shareholders contained
in, or the breach by JAG, or the Shareholders of any warranty or covenant
made by any one or all of them in, any JAG Document and/or any Shareholder
Document. The foregoing indemnification shall also apply to direct claims
by TTIS and/or Subsidiary against the Shareholders.
4.2. Indemnification by TTIS and Subsidiary. Each of TTIS and
Subsidiary, jointly and severally, indemnifies and agrees to defend and
hold harmless each of JAG (before the Effective Date) and the Shareholders
from and against any and all losses, obligations, deficiencies,
liabilities, claims, 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 misrepresentation of a fact contained in any representation of TTIS
and/or Subsidiary contained in, or the breach by TTIS or Subsidiary of any
warranty or covenant made by either or both of them in, any TTIS Document.
The foregoing indemnification shall also apply to direct claims by JAG or
the Shareholders against TTIS and/or Subsidiary.
4.3. Third Party Claims. 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, the party or parties seeking such indemnification
shall promptly notify the indemnifying party or parties, in writing, of
such claim; 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
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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 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 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.
4.4. Limitation. Notwithstanding the provisions of this Section 4, the
indemnification obligations shall not be applicable except to the extent
that the aggregate of all indemnifiable amounts sought against the
indemnifying parties exceeds $250,000; provided, however, in no event shall
the maximum liability of each Shareholder exceed the amounts, determined by
the following formulas:
==========================================================================================
Number of TTIS
Percentage of Common Stock Multiplied Maximum
Name JAG Ownership Received By Liability
- ------------------------------------------------------------------------------------------
David 45% 1,237,500 ("X") $_______
- ------------------------------------------------------------------------------------------
Robert 50% 1,375,000 ("X") $_______
- ------------------------------------------------------------------------------------------
Thomas 5% 137,500 ("X") $_______
- ------------------------------------------------------------------------------------------
Total: 100% 2,750,000 ("X") $_______
==========================================================================================
"X" = the average of the closing bid price per share of the TTIS Common Stock on
the five trading days immediately proceeding the Closing Date.
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4.5. 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.
5. Covenants
5.1. Investigation.
(a) Between the date hereof and the Closing Date, TTIS and/or
Subsidiary, on the one hand, and JAG and the Shareholders, on the
other hand, may, directly and through their representatives, make such
investigation of each other corporate party and their respective
businesses and assets of the other corporate party or parties as each
deems necessary or advisable (the entity and/or its representatives
making such investigation being the "Investigating Party"), but such
investigation shall not affect any of the representations and
warranties contained herein or in any instrument or document delivered
pursuant hereto. In furtherance of the foregoing, the Investigating
Party shall have reasonable access, during normal business hours after
the date hereof, to all properties, books, contracts, commitments and
records of each other, and shall furnish to the other and their
representatives such financial and operating data and other
information as may from time to time be reasonably requested relating
to the transactions contemplated by this Agreement. Each of TTIS and
Subsidiary, on the one hand, and JAG and the Shareholders, on the
other, and the respective management, employees, accountants and
attorneys of the corporate parties shall cooperate fully with the
Investigating Party in connection with such investigation.
(b) The parties hereto hereby agree that all confidential
information of a party to which an Investigating Party obtains access
shall be deemed "Confidential Information." As used in this Section,
the term "Confidential Information" shall mean any and all information
(verbal and written) relating to the Business, including, but not
limited to, information relating to: identity and description of goods
and services used; purchasing; costs; pricing; sources; machinery and
equipment; technology; research, test procedures and results;
customers and prospects; marketing; and selling and servicing;
(c) After the Effective Date each of the Shareholders agrees not
to, at any time, directly or indirectly, use, communicate, disclose or
disseminate any Confidential Information in any manner whatsoever
except such disclosures which are necessary to comply with their
duties as officers of the Surviving Corporation.
5.2. Non-Compete Covenant. Each of the Shareholders hereby
acknowledges and confirms that, in connection with the Merger, such
Shareholder has agreed to certain non-
-26-
compete and other restrictive covenants which are set forth in such
Shareholder's respective Employment Agreements (as hereinafter defined)
entered into pursuant to this Agreement.
5.3. Consummation of Transaction. Each of the parties hereto hereby
agrees to use its best 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 any of the parties hereto under this
Agreement or any agreement executed and delivered pursuant hereto.
5.4. 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.
(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 TTIS and/or Subsidiary, on the one hand, and/or JAG
and/or the Shareholders, on the other, or their respective legal
counsel may reasonably require in order to document and carry out the
transactions contemplated by this Agreement.
5.5. Accuracy of Representations. Each party hereto agrees that prior
to the Effective Date he or it will enter into no transaction and take no
action, and will use his or its best efforts to prevent the occurrence of
any event (but excluding events which occur in the ordinary course of
business and events over which such party has no control), which would
result in any of his or its representations, warranties or covenants
contained in this Agreement or in any agreement, document or instrument
executed and delivered by him or it pursuant hereto not to be true and
correct, or not to be performed as contemplated, at and as of the time
immediately after the occurrence of such transaction or event.
5.6. Notification of Certain Matters. JAG and the Shareholders shall
give prompt notice to TTIS and Subsidiary, and
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TTIS or Subsidiary shall give prompt notice to JAG and the Shareholders, as
the case may be, of (a) the occurrence, or nonoccurrence, or any event the
occurrence, or nonoccurrence, of which would be likely to cause any
representation contained in this Agreement to be untrue or inaccurate in
any material respect at or prior to the Effective Date and (b) any material
failure of JAG and/or the Shareholders, on the one hand, and of TTIS and/or
Subsidiary, on the other, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by him or it hereunder;
provided, however, that the delivery of any notice pursuant to this
Subsection 5.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.7. Broker. Each of TTIS, Subsidiary, JAG, and the Shareholders
represents and warrants to the other parties that no broker or finder was
engaged or dealt with in connection with any of the transactions
contemplated by this Agreement, 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.
5.8. No Solicitation of Transactions. Prior to the earlier of the
Effective Date or the termination of this Agreement, neither JAG nor any of
the Shareholders will, directly or indirectly, through any director,
officer, employee, investment banker, financial advisor, attorney,
accountant or other agent or representative of JAG otherwise, solicit,
initiate or encourage the submission of proposals or offers from any person
relating to any acquisition or purchase of all or (other than in the
ordinary course of business) any portion of the JAG Capital Stock, Assets
or Business of, or any equity interest in, JAG, or any business combination
with JAG (other than the Merger contemplated hereby) and other than with
TTIS and/or Subsidiary, participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of
the foregoing. JAG and the Shareholders shall immediately cease and cause
to be terminated any existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing (other than in
respect of the transaction contemplated hereby). JAG and the Shareholders
shall promptly notify TTIS if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made and shall, in any
such notice to TTIS, indicate in reasonable detail the identity of the
offeror and the terms and conditions of any proposal or offer.
5.9. Prohibited Conduct. Each of JAG and the Shareholders, jointly and
severally, covenants and agrees that, during the period from the date
hereof to the Effective Date,
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except pursuant to the terms hereof or unless TTIS shall otherwise agree in
writing, the Business shall be conducted only, and JAG shall not take any
action except, in the ordinary course of business and in a manner
consistent with past practice and in compliance with applicable laws; and
JAG shall use its best efforts to preserve intact its Assets, the Business
and the business organization of JAG, to keep available the services of the
present officers, employees and consultants of JAG, and to preserve the
present relationships of JAG with customers, suppliers and other persons
with whom JAG has business relations. By way of illustration, and not
limitation, neither JAG nor the Shareholders shall, between the date of
this Agreement and the Effective Date, directly or indirectly, do or
propose or commit to do, any of the following without the prior written
consent of TTIS:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of the JAG Capital Stock, or
(ii) split, combine or reclassify any of the JAG Capital Stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of the JAG Capital Stock, or
otherwise;
(b) authorize for issuance, issue, deliver, sell or agree to
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber, any shares of
JAG Capital Stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities convertible securities or any other
securities or equity equivalents;
(c) (i) increase the compensation payable or to become payable to
any officer, director, employees or consultant of JAG, except pursuant
to the terms of contracts, policies or benefit arrangements in effect
on the date hereof, or (ii) grant any severance or termination pay to,
or enter into any employment or severance agreement with, any
director, officer, other employee or consultant of JAG or any of its
subsidiaries, except pursuant to the terms of contracts, policies and
benefit arrangements in effect on the date hereof, or (iii) establish,
adopt, enter into or amend any collective bargaining (other than in
accordance with past practice), bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers, employees or consultants of JAG;
(d) amend the Certificate of Incorporation, By-Laws or other
comparable charter or organizational documents of JAG or alter through
merger, liquidation, reorganization,
-29-
restructuring, or in any other fashion, the corporate structure or
ownership of JAG;
(e) acquire, or agree to acquire, (i) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets
of, or by any other manner, any business or corporation, partnership,
joint venture, association or other business organization or division
thereof, or (ii) any assets that are material, individually or in the
aggregate, to JAG, except purchases consistent with past practice;
(f) sell, lease, license, mortgage or otherwise encumber or
subject to any lien, security interest, pledge or encumbrance or
otherwise dispose of any of the Assets, except sales in the ordinary
course of business consistent with past practice;
(g) permit JAG to incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of JAG, guarantee any debt securities of another person, or
enter into any arrangement having the economic effect of any of the
foregoing, except for (i) short-term borrowings incurred in the
ordinary course of business consistent with past practice, and (ii)
the existing Provident Bank Facility disclosed in Schedule 5.9(g).
(h) except in the ordinary course of business, enter into any
agreement, contract, commitment, involving a commitment on the part of
JAG to purchase, sell, lease or otherwise dispose of assets or require
payment by JAG in excess of $50,000;
(i) make any capital expenditures;
(j) adopt a plan of complete or partial liquidation of JAG or
resolutions providing for or authorizing such a liquidation or the
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization of JAG;
(k) cause JAG to recognize any labor union (unless legally
required to do so) or enter into or amend any collective bargaining
agreement;
(l) change any accounting principles used by JAG, unless required
by the Financial Accounting Standards Board;
(m) make any tax election of, or settle, compromise any income
tax liability of, or file any federal income tax return prior to the
last day (including extensions) prescribed by law, in the case of any
of the foregoing, material to the business, financial condition or
results of the operations of JAG and its subsidiaries, if any, taken
as a whole;
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(n) settle or compromise any litigation in which JAG is a
defendant (whether or not commenced prior to the date of this
Agreement) or settle, pay or compromise any claims not required to be
paid, which payments are individually in an amount in excess of $5,000
and in the aggregate in an amount in excess of $25,000; and
(o) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.10. Tax-Free Reorganization. Each of the parties hereto agree to use
all reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code, and to
obtain the opinion of its respective counsel. Each party shall make, and
shall use all reasonable efforts to cause those of its respective
shareholders that counsel to the parties shall reasonably request to make,
such representations and provide certificates as counsel to the parties
shall reasonably request to enable them to render such opinions.
5.11. Pooling of Interests. Neither JAG nor the Shareholders shall
take any action which would adversely affect the likelihood of treating,
for financial reporting purposes, the Merger as a "pooling of interests."
5.12. Payment of Taxes Upon Merger. The Shareholders shall be
responsible for, and shall pay, any and all sales, use, purchase, transfer
and similar taxes (real estate or otherwise), and any and all filing,
recording, registration and similar fees, arising out of the transfer of
JAG Capital Stock pursuant to the Merger.
5.13. Stock Options. At the Effective Date, TTIS shall reserve an
additional 250,000 shares of TTIS Common Stock under its 1997 Stock Option
Plan (the "1997 Plan") for the granting of incentive stock options to the
key employees of the Surviving Corporation listed on Schedule 5.13 after
the Effective Date. All such options shall be granted pursuant to the terms
and conditions of the 1997 Plan.
5.14. Employment Agreements. At the Effective Date, each of Nicholas
Alexander, Robert, David and Thomas shall enter into an employment
agreement with the Surviving Corporation in the form of Exhibits D, E, F
and G hereto, respectively (the "Employment Agreements").
5.15. Registration Rights Agreement. At the Closing, TTIS shall enter
into a registration rights agreement with the Shareholders, substantially
in the form attached hereto as Exhibit H (the "Registration Rights
Agreement"), with respect to a portion of the Share Consideration.
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5.16. Business Office. Cincinnati, Ohio shall be the principal place
of business for the Surviving Corporation for the next five (5) years.
5.17. TTIS Board of Directors. The members of the board of directors
of TTIS (the "TTIS Board") shall use their best efforts to have appointed
and elected Robert Alexander as a member of the TTIS Board, effective
within three (3) days of the Closing Date, to hold such office in
accordance with applicable law, the Certificate of Incorporation of TTIS
and its By-Laws until his resignation, removal or replacement.
6. Conditions of Merger.
6.1. Conditions to Obligations of TTIS and Subsidiary to Effect the
Merger. The respective obligations of TTIS and Subsidiary to effect the
Merger shall be subject to the fulfillment at or prior to the Effective
Date of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of each of JAG and the Shareholders
contained in any Shareholders Document or JAG Document delivered by
either or both of them shall have been true when made, and, in
addition, shall be true in all material respects on and as of the
Closing Date with the same force and effect as though made on and as
of the Closing Date.
(b) Performance of Agreements. Each of JAG and the Shareholders,
as the case may be, shall have performed, observed and complied in all
material respects with all of their obligations, covenants and
agreements, and shall have satisfied or fulfilled in all material
respects conditions contained in any Shareholders Document or JAG
Document and required to be performed, observed or complied with, or
to be satisfied or fulfilled, by JAG or the Shareholders at or prior
to the Effective Date.
(c) Results of Investigation. TTIS and Subsidiary shall be
satisfied with the results of any investigation of the business and
affairs of JAG undertaken by them pursuant to Subsection 5.1 hereof,
including, without limitation, satisfaction that the transaction would
be "accretive" to the Earnings Per Share (fully diluted basis) of TTIS
for the 1998 fiscal year.
(d) Board Authorization. Approval by the Board of Directors and
the shareholders of JAG with respect to the execution and delivery of,
and the performance by JAG of its obligations under, this Agreement
and the transactions contemplated hereunder.
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(e) Pooling of Interests. TTIS shall have received an opinion, in
form attached as Exhibits I-1 and I-2, from each of Aronowitz, Chaiken
& Hardesty, LLP and Price Waterhouse Coopers, LLP, independent
auditors of JAG and TTIS, respectively, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, such accountants may rely upon reasonable
representations and certificates of JAG and TTIS and their respective
directors, officers and shareholders.
(f) Affiliate Letters. TTIS shall have received a letter in
substantially the form annexed hereto as Exhibit J from each of JAG,
its officers and directors, the holders of JAG Capital Stock (or other
securities of JAG) and any of its other "affiliates" within the
meaning of Rule 145 of the Securities Act.
(g) Financing Arrangements. TTIS and JAG shall have executed a
definitive agreement consistent with the term sheet attached hereto as
Schedule 6.1(g) with respect to financing arrangements with respect to
the on-going operations of JAG.
(h) Tangible Net Worth. JAG shall have at least $1,800,000 of
Tangible Net Worth as of the Closing Date. For purposes hereof,
"Tangible Net Worth" shall mean the amount reflected on JAG's Balance
Sheet as "Stockholder's Equity."
(i) Opinion of Counsel for JAG. TTIS and Subsidiary shall have
received an opinion of Keating, Muething & Klekamp, P.L.L., counsel
for JAG and the Shareholders, dated the Closing Date, in substantially
the form of Exhibit K hereto.
(j) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions
contemplated hereby, and no claim, suit, action, inquiry,
investigation or proceeding in which it will be, or it is, sought to
restrain, prohibit or change the terms of or obtain damages or other
relief in connection with this Agreement or any of the transactions
contemplated hereby, shall have been instituted or threatened by any
person or entity, and which, in the reasonable judgment of TTIS (based
on the likelihood of success and material consequences of such claim,
suit, action, inquiry or proceeding), makes it inadvisable to proceed
with the consummation of such transactions.
(k) Consents and Approvals. All consents, waivers, approvals,
licenses and authorizations by third parties
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and governmental and administrative authorities (and all amendments or
modifications to existing agreements with third parties) (the
"Consents") including, without limitation, all Consents from the
primary lending institutions of each of JAG, TTIS and the
Subsidiaries, required as a precondition to the performance by JAG and
the Shareholders of their respective obligations hereunder and under
any agreement delivered pursuant hereto, or which in TTIS's reasonable
judgment are necessary to continue unimpaired, subsequent to the
Effective Date, any rights in and to the Assets and/or the Business
which could be impaired by the Merger, shall have been duly obtained
and shall be in full force and effect.
(l) Date of Consummation. The Merger shall have been consummated
on or prior to August 31, 1998, or such later date as the parties
shall agree by a written instrument signed by all of them.
(m) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all
agreements, instruments, opinions, certificates and other documents
delivered by JAG and the Shareholders pursuant hereto, shall be
satisfactory in all material respects to TTIS and its counsel.
(n) No Material Adverse Change. Except as otherwise provided by
this Agreement, there shall not have occurred after the date hereof,
in the reasonable judgment of TTIS, a material adverse change in the
financial or business condition of JAG.
(o) Employment Agreements. Each of Nicholas Alexander, Robert,
David and Thomas shall have executed and delivered their respective
Employment Agreements.
(p) Closing Certificate. Each of the Shareholders shall have
furnished TTIS and Subsidiary with certificates, all dated the Closing
Date, to the effect that all the representations and warranties of JAG
and the Shareholders are true and complete and all covenants to be
performed by JAG or the Shareholders at or as of the Closing have been
performed and conditions to be satisfied at or as of the Closing have
been waived or satisfied.
6.2. Conditions to Obligations of JAG and the Shareholders to Effect
the Merger. The obligations of JAG and the Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective
Date of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of TTIS and Subsidiary contained in any
TTIS Documents delivered by either
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TTIS or Subsidiary or both of them shall have been true when made,
and, in addition, shall be true in all material respects, on and as of
the Closing Date with the same force and effect as though made on and
as of the Closing Date.
(b) Performance of Agreements. Each of TTIS and Subsidiary shall
have performed, observed and complied, in all material respects, with
all obligations, covenants and agreements, and shall have satisfied or
fulfilled in all material respects all conditions contained in any
TTIS Document and required to be performed, observed or complied with,
or satisfied or fulfilled, by TTIS and Subsidiary of them at or prior
to the Closing Date.
(c) Board Authorization. Approval by the TTIS Board of the
execution and delivery of, and the performance by TTIS of its
obligations under, this Agreement and the transactions contemplated
thereunder.
(d) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions
contemplated hereby, and no claim, suit, action, inquiry,
investigation or proceeding in which it will be, or it is, sought to
restrain, prohibit or change the terms of or obtain damages or other
relief in connection with this Agreement or any of the transactions
contemplated hereby shall have been instituted or threatened by any
person or entity, and which in the reasonable judgment of the
Shareholders (based on the likelihood of success and material
consequences of such claim, suit, action, inquiry or proceeding),
makes it inadvisable to proceed with the consummation of such
transactions.
(e) Consents and Approvals. All consents, waivers, approvals,
licenses and authorizations by third parties and governmental and
administrative authorities (and all amendments and modifications to
existing agreements with third parties) required as a precondition to
the performance by TTIS and Subsidiary of their respective obligations
hereunder and under any agreement delivered pursuant hereto, shall
have been duly obtained and shall be in full force and effect.
(f) Pooling of Interests. TTIS shall have received an opinion, in
form attached as Exhibits I-1 and I-2, from each of Aronowitz, Chaiken
& Hardesty, LLP and Price Waterhouse Coopers, LLP, independent
auditors of JAG and TTIS, respectively, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
(g) Opinion of Counsel for TTIS and the Subsidiary. JAG shall
have received an opinion of Tenzer Greenblatt LLP, counsel for TTIS
and the Subsidiary, dated the Closing Date, in substantially the form
of Exhibit L hereto.
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(h) No Material Adverse Change. Except as otherwise provided by
this Agreement, there shall not have occurred after the date hereof,
in the reasonable judgment of JAG, a material adverse change in the
financial or business condition of TTIS and its subsidiaries, taken as
a whole.
(i) Date of Consummation. The Merger shall have been consummated
on or prior to August 31, 1998, or such later date as the parties
shall agree by a written instrument signed by all of them.
(j) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all
agreements, instruments, opinions, certificates and other documents
delivered by TTIS and Subsidiary pursuant hereto, shall be
satisfactory in all material respects to the Shareholders and its
counsel.
(k) Stock Options. TTIS shall have authorized the issuance
pursuant to its 1997 Plan of options to purchase up to an aggregate of
250,000 shares of the TTIS Common Stock to key employees of the
Surviving Corporation listed on Schedule 5.13.
(l) Employment Agreements. The Surviving Corporation shall have
executed and delivered to each of Nicholas Alexander, Robert, David
and Thomas their respective Employment Agreements.
(m) Registration Rights Agreement. TTIS shall have entered into
the Registration Rights Agreement.
(n) Closing Certificate. Each of TTIS and Subsidiary shall have
furnished JAG with certificates, each executed by their respective
presidents, dated the Closing Date, to the effect that all the
representations and warranties of TTIS or Subsidiary, as the case may
be, are true and complete in all material respects and all covenants
to be performed by each of TTIS or Subsidiary, as the case may be, at
or as of the Closing have been performed in all material respects and
conditions to be satisfied at or as of the Closing have been waived or
satisfied in all material respects.
7. The Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8, the closing of the Merger (the "Closing") will take place at the offices of
Tenzer Greenblatt LLP as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions set forth in
Section 6 but in no event later than August 31, 1998 (the "Closing Date"); or
such later date as shall have been fixed by a written instrument signed by the
parties.
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7.1. Deliveries by TTIS and Subsidiary at the Closing. At the Closing,
TTIS and Subsidiary shall deliver the following:
(a) stock certificate(s), representing the Share Consideration
registered in the names of the Shareholders;
(b) copies of (i) resolutions adopted by the TTIS Board
authorizing TTIS to execute and deliver the TTIS Documents to which it
is a party, to perform its obligations thereunder and to effect the
Merger upon the terms and subject to the conditions set forth therein,
and (ii) resolutions adopted by the board of directors of the
Subsidiary, and the written consent of the sole shareholder,
authorizing Subsidiary to execute and deliver the Subsidiary Documents
to which it is a party, to perform its obligations thereunder and to
effect the Merger upon the terms and subject to the conditions set
forth therein, duly certified by the Secretaries or Assistant
Secretaries of TTIS and the Subsidiary, respectively;
(c) certificates of the Secretary or Assistant Secretary of each
of TTIS and Subsidiary certifying as to the incumbency and specimen
signatures of the officers of TTIS and Subsidiary executing the TTIS
Documents on behalf of such corporation;
(d) confirmation, in the form of satisfactory to the parties
hereto, from the States of Delaware and Ohio that the Certificate of
Merger of the Subsidiary with and into JAG has been filed with such
Secretaries of State; together with a copy of the executed form of
such agreement;
(e) the Registration Rights Agreement duly executed by TTIS;
(f) the Employment Agreements, duly executed by the Surviving
Corporation; and
(g) the incentive stock options pursuant to Section 5.13.
7.2. Deliveries by JAG and/or the Shareholders at the Closing. At the
Closing, JAG and/or the Shareholders, as applicable, shall deliver to TTIS
and/or Subsidiary, as the case may be, the following:
(a) stock certificate(s) representing the JAG Capital Stock, duly
executed by the Shareholders;
(b) a copy of the resolutions of the Board of Directors of JAG,
and the written consent of the Shareholders, authorizing JAG to
execute and deliver the JAG Documents, to perform its obligations
thereunder and to effect the Merger upon
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the terms and conditions thereunder, duly certified by the Secretary
or assistant Secretary of JAG;
(c) certificates of the Secretary or Assistant Secretary of JAG
certifying as to the incumbency and specimen signatures of the
officers of JAG executing the JAG Documents on behalf of such
corporation;
(d) the Employment Agreements, duly executed by Nicholas
Alexander, Robert, David and Thomas;
(e) the Registration Rights Agreement duly executed by the
Shareholders; and
(f) the Investment Representation Agreement, in the form of
Exhibit M, duly executed by the Shareholders.
7.3. Other Deliveries. In addition, the parties shall execute and
deliver such other documents as may be required by this Agreement and as
either of them or their respective counsel may reasonably require in order
to document and carry out the transactions contemplated by this Agreement.
8. Termination, Amendment and Waiver.
8.1. Termination. This Agreement may be terminated at any time prior
to the Effective Date:
(a) By mutual consent of the Boards of Directors of TTIS and JAG;
or
(b) By TTIS, on the one hand, or JAG and the Shareholders, on the
other hand, if any of the conditions precedent with respect to the
other party, as set forth in Sections 6.1 and 6.2, respectively, have
not been satisfied or waived on or before the Closing Date.
(c) By TTIS, on the one hand, or JAG and the Shareholders, on the
other hand, if (i) the Merger shall not have been consummated by
August 31, 1998, or such later date as the parties shall have fixed by
written instrument signed by the parties hereto; provided, however,
that the right to terminate this Agreement under this Subsection shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Effective Date to occur on or before such date or (ii)
a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their reasonable efforts to
vacate), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement.
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(d) By TTIS, on the one hand, or by JAG and the Shareholders, on
the other hand, if, in the reasonable judgment of TTIS or JAG and the
Shareholders, as the case may be, (and provided such parties are not
then in material breach of their respective obligations hereunder), it
shall have been determined that the transaction contemplated by this
Agreement has become inadvisable or impracticable by reason of the
institution or threat by state, local or federal governmental
authorities or by any other person of material litigation or
proceedings against TTIS or JAG.
(e) By TTIS, on the one hand, or JAG and the Shareholders, on the
other hand, if, in the reasonable judgment of TTIS or JAG or the
Shareholders, as the case may be (and provided such parties are not
then in material breach of their respective obligations hereunder), it
shall be determined that the business or financial condition of the
other unrelated corporate party hereto has been materially and
adversely affected since the date of its last balance sheet (to wit,
April 30, 1998 as to TTIS and June 30, 1998 as to JAG), whether by
reason of changes, developments or operations in the normal course of
business or otherwise.
8.2. Effect of Termination. In the event of the termination of this
Agreement as provided in this Section 8, this Agreement shall, forthwith
become null and void and there shall be no liability on the part of any
party hereto and nothing herein shall relieve any party from liability for
any wilful breach hereof. Such termination shall not, however, affect the
obligations of the parties with respect to any Confidential Information
exchanged by the parties pursuant to Section 5.1 hereof.
8.3. Fees and Expenses.
(a) TTIS and the Subsidiary, on the one hand, and the
Shareholders, on the other hand, shall bear their own expenses in
connection with the transactions contemplated hereby; provided,
however, that TTIS and/or the Subsidiary shall reimburse JAG for the
reasonable legal and other professional fees incurred by JAG in
connection with this transaction, up to a maximum amount of $50,000,
in the event that the Merger is not consummated by any reason other
than JAG's failure to meet the tangible net worth requirement of
Section 6.1(h).
(b) TTIS shall issue 50,000 shares of TTIS Common Stock to JAG
(which stock will not be registered under the Act) in the event that
the Merger is terminated by the TTIS Board for any reason other than a
decision to terminate the Merger pursuant to Sections 6.1(c), (e),
(g), (h) and (k) hereof or with respect to the granting of
registration rights, in which event TTIS shall have no obligation to
issue any shares to JAG.
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8.4. Waiver. At any time prior to the Effective Date, any party hereto
may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
9. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that: (i) representations and
warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto with respect to tax matters,
environmental compliance and ERISA matters shall survive the respective statutes
of limitations for such matters; and (ii) all other representations or
warranties made herein shall survive the Closing Date for a period of two (2)
years after the Effective Date.
10. General Provisions.
10.1. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the earlier of the date delivered or mailed if
delivered personally, by overnight courier or mailed by express, registered
or certified mail (postage prepaid, return receipt requested) or by
facsimile transmittal, confirmed by express, certified or registered mail,
to the parties 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 TTIS or Subsidiary: Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attn: Ryan A. Brant
with a copy to: Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Barry S. Rutcofsky, Esq.
If to JAG or
the Shareholders: Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, Ohio 45069
Attn: Nicholas R. Alexander
with a copy to: KEATING, MUETHING & KLEKAMP, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
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Attn: J. David Rosenberg, Esq.
10.2. 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.
10.3. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement, and supersede all prior agreements
and undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
10.4. Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
10.5. Schedules. All references in this Agreement to Schedules shall
mean the schedules identified in this Agreement, which are incorporated
into this Agreement and shall be deemed a part of the representations and
warranties to which they relate. To the extent a disclosure has been made
by TTIS, Subsidiary, JAG or the Shareholders on any Schedule, it shall be
in writing, shall indicate the section pursuant to which it is being
delivered, and shall be initialed by the delivering party. For purposes of
this Agreement, information which is necessary to make a given Schedule
complete and accurate, but is omitted therefrom, shall nevertheless be
deemed to be contained therein if it is contained on any other Schedule;
but only if such information appears on such other Schedule in such form
and detail that it is responsive to the requirements of such given
Schedule.
10.6. No Assignment. This Agreement shall not be assigned by operation
of law or otherwise, and any assignment shall be null and void.
10.7. 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. Each of TTIS, Subsidiary, JAG and
the Shareholders hereby irrevocably and unconditionally consents to submit
to the jurisdiction of the courts of the State of New York and of the
United States located in the County of New York, State of New
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York for any litigation arising out of or relating to this Agreement and
the transactions contemplated hereby waives any objection to the laying of
venue of any such litigation in such courts and agrees not to plead or
claim that such litigation brought in any such courts has been brought in
an inconvenient forum.
[END OF PAGE - SECTION 10.8 AND SIGNATURE PAGE FOLLOWS]
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10.8. 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.
IN WITNESS WHEREOF, each of Take-Two Interactive Software, Inc.,
Subsidiary, JAG, Ltd., by their respective officers thereunto duly authorized,
the Shareholders, individually, have caused this Agreement to be executed as of
the date first written above.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Ryan A. Brant
--------------------------------------------
Name: Ryan A. Brant
Title: Chairman of the Board
JAG ACQUISITION CORP.
By: /s/ Ryan A. Brant
--------------------------------------------
Name: Ryan A. Brant
Title: President
JACK OF ALL GAMES, INC.
By: /s/ Nicholas R. Alexander
--------------------------------------------
Name: Nicholas R. Alexander
Title: Chief Executive Officer
/s/ David Rosenbaum
--------------------------------------------------
DAVID ROSENBAUM
/s/ Thomas Rosenbaum
--------------------------------------------------
THOMAS ROSENBAUM
/s/ Robert Alexander
--------------------------------------------------
ROBERT ALEXANDER
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REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of August 31, 1998, by and between
Take-Two Interactive Software, Inc., a Delaware corporation (the "Company"), and
the persons whose names and addresses appear on the signature page attached
hereto (each a "Holder" and collectively, the "Holders").
WHEREAS, the Company issued to the Holders pursuant to the merger of a
wholly-owned subsidiary of the Company with and into Jack of All Games, Inc.
("Jack"), an aggregate of 2,750,000 shares (the "Shares") of the Company's
Common Stock, par value $.01 per share, as described in the Agreement and Plan
of Merger dated August 22, 1998 by and among the Company and its subsidiary,
Jack and each of the Holders (the "Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, the Company has agreed to grant
to the Holders registration rights set forth herein with respect to the Shares.
NOW, THEREFORE, the parties do hereby agree as follows:
1. Registration. (a) The Company shall include a number of Shares
having a market value of $1,500,000 (as measured by the average of the
closing bid price of the Common Stock on the five trading days immediately
preceding the filing of a registration statement) in the next registration
statement, if any, for an underwritten public offering for gross proceeds
to the Company of greater than $12,000,000 (the "Company Offering");
provided, however, that if in the opinion of the Company's underwriter or
managing underwriter of the underwriting group for such offering, the
inclusion of all or a portion of the Shares, when added to the securities
being registered by the Company or selling shareholder(s), if any, will
exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or
(ii) without otherwise having an adverse effect on the offering, then the
Company may exclude from such offering all or a portion of the Shares which
it has sought to register.
(b) The Company shall include a number of Shares having a market value
of $3,500,000 (as measured by the average of the closing bid price of the
Common Stock on the five trading days immediately preceding the filing of a
registration statement) in a registration statement on Form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act") as soon
as reasonably practicable following the date the Company first publishes at
least thirty (30) days of combined
results of operations of the Company and Jack in accordance with applicable
accounting rules relating to a "pooling of interests" (which is anticipated
to be on or before November 15, 1998) and use its reasonable efforts to
cause such Registration Statement to become effective under the Act in the
event the Company Offering is not consummated on or before December 15,
1998 (and such Secondary Offering is not, subject to the good faith mutual
determination of the Holder and the Company, still pending at such time);
provided that in the event a Company Offering is in process, the Holder
agrees not to sell or otherwise dispose of the Shares in accordance with
Section 3 hereof.
(c) The Company shall include a number of Shares having a market value
of up to $5,000,000 less the market value of any Shares registered pursuant
to paragraph (a) above in a Registration Statement 180 days following the
effective date of a Company Offering and shall use reasonable efforts to
cause the Registration Statement to become effective under the Act so as to
permit a public offering and sale of the Shares for a period of nine (9)
months.
(d) The Company shall use reasonable efforts to include a number of
Shares having a market value of $2,000,000 (as measured by the average of
the closing bid price of the Common Stock on the five trading days
immediately preceding the filing of a registration statement) in a
registration statement, if any, for any underwritten public offering
subsequent to the Company Offering for gross proceeds to the Company of
greater than $12,000,000 having an effective date on or before the first
anniversary of the date of this Agreement (a "Subsequent Offering");
provided, however, that if in the opinion of the Company's underwriter or
managing underwriter of the underwriting group for such offering, the
inclusion of all or a portion of the Shares, when added to the securities
being registered by the Company or selling shareholder(s), if any, will
exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or
(ii) without otherwise having an adverse effect on the offering, then the
Company may exclude from such offering all or a portion of the Shares which
it has sought to register.
(e) The rights granted herein shall be pro rata with respect to the
Holders.
2. Covenants of the Company With Respect to Registration. The Company
hereby covenants and agrees as follows:
(a) Following the effective date of any registration statement, the
Company shall, upon the request of the Holder, forthwith supply such
reasonable number of copies of the registration statement and prospectus as
shall be reasonably requested by the Holder to permit the Holder to make a
public
-2-
distribution of the Shares. The obligations of the Company hereunder with
respect to the Shares are expressly conditioned on the Holder's furnishing
to the Company such appropriate information concerning the Holder, the
Shares and the terms of the Holder's offering of such shares as the Company
may request.
(b) The Company will pay all costs, fees and expenses in connection
with any Registration Statement filed; provided, that the Holder shall be
solely responsible for the fees of any counsel retained by the Holder in
connection with such registration and any transfer taxes or underwriting
discounts, selling commissions or selling fees applicable to the Shares
sold by the Holder pursuant thereto.
(c) The Company will use reasonable efforts to qualify or register the
Shares included in a registration statement for offering and sale under the
securities or blue sky laws of such states as are reasonably requested by
the Holder, provided that the Company shall not be obligated to execute or
file any general consent to service of process (unless the Company is
already then subject to service in such jurisdiction) or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction,
except as may be required by the Act and its rules and regulations.
(d) Notwithstanding anything contained herein to the contrary, the
Company will have no obligation to register the Shares if it receives a
written opinion of counsel that the Shares are eligible for sale under Rule
144.
3. Covenant of the Holder. The Holder, upon receipt of notice from the
Company that an event has occurred which requires a post-effective amendment to
a registration statement or a supplement to the prospectus included therein,
shall promptly discontinue the sale of Shares until the Holder receives a copy
of a supplemented or amended prospectus from the Company, which the Company
shall provide as soon as reasonably practicable after such notice. The Holder
hereby agrees that if requested by an underwriter, it will agree not to sell or
otherwise dispose of the Shares on the same terms as management of the Company,
except for the Shares sold, if any, pursuant to Section 1(a).
4. Indemnification. The Company agrees to indemnify, defend and hold
harmless the Holder from and against any and all losses, claims, damages and
liabilities caused by or arising out of any untrue statement of a material fact
contained in a registration statement or prospectus included therein or caused
by or arising out of any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
circumstances which they are made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission based upon information furnished or required to be
-3-
furnished in writing to the Company by the Holder expressly for use therein;
provided, however, that the indemnification in this Section shall not inure to
the benefit of the Holder on account of any such loss, claim, damage or
liability arising from the sale of Shares by the Holder, if a copy of a
subsequent prospectus correcting the untrue statement or omission in such
earlier prospectus was provided to the Holder by the Company prior to the sale
and the subsequent prospectus was not delivered or sent by the Holder to the
purchaser prior to such sale. The Holder agrees to indemnify the Company, its
directors, each officer signing a registration statement, each person who
controls the Company within the meaning of the Act, any underwriter and any
person who controls any underwriter within the meaning of the Act from and
against any and all losses, claims, damages and liabilities caused by or arising
out of any untrue statement of a material fact contained in a registration
statement or prospectus included therein, or caused by or arising out of any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case, only
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use therein.
5. Governing Law.
(a) This Agreement shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal substantive
laws of the State of New York, without giving effect to the choice of law
rules thereof.
(b) Each of the Company and the Holder hereby irrevocably and
unconditionally consents to submit to the jurisdiction of the courts of the
State of New York and of the United States located in the County of New
York, State of New York (the "New York Courts") for any litigation arising
out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except
in such courts), waives any objection to the laying of venue of any such
litigation in the New York Courts and agrees not to plead or claim that
such litigation brought in any New York Courts has been brought in an
inconvenient forum.
6. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by express, registered or certified mail, postage prepaid, return
receipt requested, as follows:
If to the Company, at:
Take-Two Interactive Software, Inc.
575 Broadway
-4-
New York, New York 10012
Attn: Ryan A. Brant, Chairman
with a copy of the same to:
Tenzer Greenblatt LLP
405 Lexington Avenue, 23rd Floor
New York, New York 10174
Attn: Barry S. Rutcofsky, Esq.
If to the Holder(s), at that address set forth under their name on the
signature page.
with a copy of the same to:
Keating Meuthing & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Gehl Babinec, Esq.
Or such other address as has been indicated by either party in accordance
with a notice duly given in accordance with the provisions of this Section.
7. Amendment. This Agreement may only be amended by a written instrument
executed by the Company and the Holders.
8. Entire Agreement. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
9. Assignment; Benefits. This Agreement and the rights granted hereunder
may not be assigned by any Holder and any purported assignment shall be void ab
initio; provided that the Holders may assign the rights granted herewith to (i)
immediate family members (including in connection with estate planning and
family trusts) (ii) the other Holders and (iii) Nicholas A. Alexander. Nothing
herein contained, express or implied, is intended to confer upon any person
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
10. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
11. Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as
-5-
to such jurisdiction(s), ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
-6-
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
Company: TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Ryan A. Brant
-----------------------------------
Name: Ryan A. Brant
Title: Chairman
Holders:
/s/ David Rosenbaum
-----------------------------------
David Rosenbaum
Address: 540 Locust Run Road
Cincinnati, OH 45245
Number of Shares: 1,237,500
/s/ Thomas Rosenbaum
-----------------------------------
Thomas Rosenbaum
Address: 614 Woodburn Lane
Loveland, OH 45140
Number of Shares: 137,500
/s/ Robert Alexander
-----------------------------------
Robert Alexander
Address: 1255 Coventry Woods
Cincinnati, OH 45230
Number of Shares: 1,375,000
-7-
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 31, 1998 between Jack of All Games, Inc., an
Ohio corporation (the "Employer" or the "Company"), and Nicholas Alexander (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its Chief Executive
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 serve Employer for a five (5) year period commencing as of
the date of this Agreement (the "Effective Date") (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 Executive Officer reporting
directly to the Chairman of the Board of Take-Two Interactive
Software, Inc. (the "Parent") and the Board of Directors (the "Board")
of the Employer. 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 2909 Crescentville Road, Ohio, 45069, although the
Employee may be required 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) During the term of this Agreement, the Employer shall pay the
Employee a salary (the "Salary") at a rate of $200,000 per annum in
respect of each Employment Year, payable in equal installments
bi-weekly, or at such other times as may mutually be agreed upon
between the Employer and the Employee. Such Salary may be increased
from time to time at the discretion of the Board.
(b) In addition to the foregoing, the Employee shall be eligible
for a quarterly incentive bonus (the "Bonus") up to an amount of
$25,000 per quarter, based on certain gross margin and earning targets
with respect to each quarter of the Company's fiscal year, as mutually
agreed to by the parties hereto. Gross margin and earnings shall be
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. Gross margin and earnings for
each quarter shall be determined no later than 45 days following the
end of such quarter and the Bonus attributable thereto shall be paid
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 the Parent as having been determined in accordance with the
provisions of this Section 3(b).
(c) In addition to the foregoing, and subject to the terms and
conditions of the Parent's 1997 Stock Option Plan (the "Plan"), a copy
of which has been made available to the Employee, the Employee shall
be granted as a matter of separate agreement, and not in lieu of
Salary or any other compensation for services, the right and option
(the "Option"), in the form of incentive stock options to the extent
available, to purchase pursuant to the Plan all or any part of an
aggregate of up to 125,000 shares of the authorized but unissued
common stock, par value $.01 per share, of the Parent (the "Shares"),
at the exercise price of $5.625 per Share, exercisable during the five
(5) year period, with respect to any incentive stock options, or ten
(10) year period (with respect to all other options granted pursuant
hereto) commencing as of the date hereof and terminating on the close
of business on August 31, 2008, or August 31, 2003, respectively, as
follows: (i) 62,500 of the Shares are immediately vested and may be
purchased as of the date hereof and (ii) an additional 62,500 of the
Shares may be purchased commencing on the first anniversary hereof;
and then, only to the extent that the Employee is still eligible under
the terms of the Plan; provided, however, in the event that the
Employee is terminated by reason of death or disability pursuant to
Section 6(b) hereof or in the event of any transaction pursuant to
Section 4 of the Plan, any options not vested at the time of
termination pursuant thereto shall immediately vest.
-2-
4. Benefits.
(a) During the term of this Agreement, the Employee shall have
the right to receive or participate in all benefits and plans, as set
forth on Schedule A hereto ("Benefits"), or as the Company and Parent
may from time to time institute during such period for its senior
management employees and for which the Employee is eligible. 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 the number of paid holidays, personal days off, vacation
days and sick leave days in each calendar year as are available to the
Company's senior management employees. 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.
5. Travel Expenses. All travel and other expenses incident to the
rendering of services reasonably incurred on behalf of the Company by the
Employee during the term of this Agreement shall be paid by the Employer.
If any such expenses are paid in the first instance by the Employee, the
Employer shall reimburse him therefor on presentation of appropriate
receipts for any such expenses.
6. 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
Section 6(a), the Employer shall have no further obligation or duties
to the Employee and the Employee shall have no further obligations or
duties to the Employer, except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) the
inability of the Employee, by reason of physical or mental disability,
to continue substantially to perform his duties hereunder for a period
of 180 consecutive days, (the "Disability Period") during which
Disability Period Salary and any other benefits hereunder shall not be
suspended or diminished. Upon any termination of the Employee's
employment under this Section 6(b), (y) any options granted pursuant
to Section 3(c) hereof and not yet vested shall immediately vest in
the Employee and (z) the Employer shall have no further obligations or
duties to the Employee, except payment of Salary and such incentive
compensation and Benefits, if any, having
-3-
accrued to the Employee pursuant to Section 3(b) hereof through the
date of death or the expiration of the Disability Period, as
applicable, and as provided in Sections 5.
(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 (i) payment of Salary and such incentive compensation, if
any, having accrued to the Employee (or having vested, in the case of
the Options) as provided in Section 3 hereof through the date of
termination and as provided in Section 5 and (ii) payment of Salary
and health and life insurance benefits as indicated on Schedule A
hereto for 30 months following the date of such termination or the
remaining term of this Agreement, whichever is less, and Employee
shall have no further obligations or duties to the Employer, except as
provided in Section 7.
(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, monetarily or otherwise, (iii)
the conviction of the Employee of a felony, (iv) gross negligence on
the part of the Employee resulting in material harm to the Company or
(v) other willful misconduct of the Employee in the performance of his
duties hereunder resulting in material harm to the Company. 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) or (iv) above.
(e) Notwithstanding anything to the contrary contained in this
Section 6, in the event that the Employee terminates his employment
for any reason during the term of this Agreement (other than in the
event of death), the provisions of Sections 7(b) (non-compete) and
7(c) (non-solicitation) (the "Restrictive Covenants") shall be
extended from one (1) year to 30 months after the date of termination;
provided, however, in no event shall the period of the Restrictive
Covenants be extended beyond the six (6) year anniversary of the
Effective Date.
7. Confidentiality; Noncompetition. In addition to and supplementing
the covenants contained in Section 5.2 of the Agreement and Plan of Merger
(the "Merger Agreement"), dated August 22, 1998, among the Parent, JAG
Acquisition Corp., Jack of All Games, Inc. and the Employee, the Employer
and Employee agree as follows:
(a) The Employer and the Employee acknowledge that the services
to be performed by the Employee under
-4-
this Agreement may result in the Employee being in possession of
confidential information relating to the business practices of the
Company and the Parent. The term "confidential information" shall mean
any and all information (verbal and written) relating to the Company,
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 other than as the result of
breach of the provisions of this Section 7(a), including, but not
limited to, information relating to: existing and proposed projects,
source codes, object codes, forecasts, assumptions, trade secrets,
personnel lists, financial information, research projects, services,
pricing, customers, customer lists and prospects, product sourcing,
marketing and selling and servicing. The Employee agrees that he will
not, at any time during or after the termination of his employment,
directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, within any county (or adjacent county) in the States of
Ohio and 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) competitive with the
Parent's or the Company's business activities engaged in business
during the period of the Employee's employment or on the date of
termination of the Employee's employment.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, take any action which constitutes an interference with
or a disruption of any of the Parent's or Company's business
activities including, without limitation, the solicitations of the
Parent's or Company's customers, or persons listed on the personnel
lists of the Parent 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 or Company.
(d) For purposes of clarification, but not of limitation, the
Employee hereby acknowledges and agrees that the provisions of
subparagraphs 7(b) and (c) above shall serve as a prohibition against
him, during the period referred to therein, directly or indirectly,
hiring, offering to hire, enticing,
-5-
soliciting or in any other manner persuading or attempting to persuade
any officer, employee, agent, lessor, lessee, licensor, licensee or
customer who has been previously contacted by either a representative
of the Parent or Company, including the Employee, to discontinue or
alter his or its relationship with the Parent or 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 or Parent which are in the possession of the
Employee including all copies thereof, shall be promptly returned to
the Company.
(f) 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 during the term 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.
(g) 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 7, (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.
(h) The rights and remedies enumerated in Section 7(g) shall be
in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
(i) If any provision contained in this Section 7 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.
-6-
(j) It is the intent of the parties hereto that the covenants
contained in this Section 7 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 7 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.
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, sent by telecopy
(receipt confirmed) or 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 so personally delivered, one business
day after being sent by telecopy or three (3) days after being mailed.
To the Employer:
Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, OH 45069
Attention: Chief Executive Officer
Telecopier: (513) 326-2853
With copies to:
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant, Chief Executive Officer
Telecopier:
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Kenneth Selterman, Esq.
Telecopier: 212-885-5001
-7-
To the Employee:
Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, OH 45069
Attention: Nicholas Alexander
Telecopier: (513) 326-2853
With a copy to:
Keating Muething & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Gehl Babinee, Esq.
Telecopier: (513) 579-6457
(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; provided that the
provisions of Section 5.2 of the Merger Agreement shall also apply to
Employee. 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) Employee Warranty. Employee hereby warrants and represents as
follows:
(i) That the execution of this Agreement and the discharge
of Employee's obligations hereunder will not breach or conflict
with any other contract, agreement, or understanding between
Employee and any other party or parties.
(ii) Employee has ideas, information and know-how relating
to the type of business conducted by Employer, and Employee's
disclosure of such ideas, information and know-how to Employer
will not conflict with or violate the rights of any third party
or parties.
-8-
(f) Company Warranty. The Company hereby warrants and represents
that the execution of this Agreement and the discharge of the
Company's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between the Company and
any other party or parties.
(g) 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.
(h) 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.
JACK OF ALL GAMES, INC.
By: /s/ Ryan A. Brant
-----------------------------------
Name: Ryan A. Brant
Title: Chairman of the Board
/s/ Nicholas Alexander
-----------------------------------
Nicholas Alexander
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 31, 1998 between Jack of All Games, Inc., an
Ohio corporation (the "Employer" or the "Company"), and Robert Alexander (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its President 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 serve Employer for a five (5) year period commencing as of
the date of this Agreement (the "Effective Date") (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 President reporting directly to the
Chief Executive Officer and the Board of Directors (the "Board") of
the Employer. 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 2909 Crescentville Road, Ohio, 45069, although the
Employee may be required 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) During the term of this Agreement, the Employer shall pay the
Employee a salary (the "Salary") at a rate of $233,000 per annum in
respect of each Employment Year, payable in equal installments
bi-weekly, or at such other times as may mutually be agreed upon
between the Employer and the Employee. Such Salary may be increased
from time to time at the discretion of the Board.
(b) In addition to the foregoing, the Employee shall be eligible
for a quarterly incentive bonus (the "Bonus") up to an amount of
$25,000 per quarter, based on certain gross margin and earning targets
with respect to each quarter of the Company's fiscal year, as mutually
agreed to by the parties. Gross margin and earnings shall be
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. Gross margin and earnings for
each quarter shall be determined no later than 45 days following the
end of such quarter and the Bonus attributable thereto shall be paid
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 Section 3(b).
(c) In addition to the foregoing, and subject to the terms and
conditions of the Parent's 1997 Stock Option Plan (the "Plan"), a copy
of which has been made available to the Employee, the Employee shall
be granted as a matter of separate agreement, and not in lieu of
Salary or any other compensation for services, the right and option
(the "Option"), in the form of incentive stock options to the extent
available, to purchase pursuant to the Plan all or any part of an
aggregate of up to 125,000 shares of the authorized but unissued
common stock, par value $.01 per share, of the Parent (the "Shares"),
at the exercise price of $5.625 per Share, exercisable during the five
(5) year period, with respect to any incentive stock options, or ten
(10) year period (with respect to all other options granted pursuant
hereto) commencing as of the date hereof and terminating on the close
of business on August 31, 2008 or August 31, 2003, respectively, as
follows: (i) 62,500 of the Shares are immediately vested and may be
purchased as of the date hereof and (ii) an additional 62,500 of the
Shares may be purchased commencing on the first anniversary hereof;
and then, only to the extent that the Employee is still eligible under
the terms of the Plan; provided, however, in the event that the
Employee is terminated by reason of death or disability pursuant to
Section 6(b) hereof or in the event of any transaction pursuant to
Section 4 of the Plan, any options not vested at the time of
termination pursuant thereto shall immediately vest.
-2-
4. Benefits.
(a) During the term of this Agreement, the Employee shall have
the right to receive or participate in all benefits and plans, as set
forth on Schedule A hereto ("Benefits"), or as the Company and Parent
may from time to time institute during such period for its senior
management employees and for which the Employee is eligible. 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 the number of paid holidays, personal days off, vacation
days and sick leave days in each calendar year as are available to the
Company's senior management employees. 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.
5. Travel Expenses. All travel and other expenses incident to the
rendering of services reasonably incurred on behalf of the Company by the
Employee during the term of this Agreement shall be paid by the Employer.
If any such expenses are paid in the first instance by the Employee, the
Employer shall reimburse him therefor on presentation of appropriate
receipts for any such expenses.
6. 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
Section 6(a), the Employer shall have no further obligation or duties
to the Employee and the Employee shall have no further obligations or
duties to the Employer, except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) the
inability of the Employee, by reason of physical or mental disability,
to continue substantially to perform his duties hereunder for a period
of 100 consecutive days, (the "Disability Period") during which
Disability Period Salary and any other benefits hereunder shall not be
suspended or diminished. Upon any termination of the Employee's
employment under this Section 6(b), (y) any options granted pursuant
to Section 3(c) hereof and not yet vested shall immediately vest in
the Employee and (z) the Employer shall have no further obligations or
duties to the Employee, except payment of Salary
-3-
and such incentive compensation and Benefits, if any, having accrued
to the Employee pursuant to Section 3(b) hereof through the date of
death or the expiration of the Disability Period, as applicable, and
as provided in Sections 5.
(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 (i) payment of Salary and such incentive compensation, if
any, having accrued to the Employee (or having vested, in the case of
the Options) as provided in Section 3 hereof through the date of
termination and as provided in Section 5, and (ii) payment of Salary
and health and life insurance benefits as indicated on Schedule A
hereto for 30 months following the date of such termination or the
remaining term of this Agreement, whichever is less, and Employee
shall have no further obligations or duties to the Employer, except as
provided in Section 7.
(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, monetarily or otherwise, (iii)
the conviction of the Employee of a felony, (iv) gross negligence on
the part of the Employee resulting in material harm to the Company or
(v) willful other misconduct of the Employee in the performance of his
duties hereunder resulting in harm to the Company. 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) or
(iv) above.
(e) Notwithstanding anything to the contrary contained in this
Section 6, in the event that the Employee terminates his employment
for any reason during the term of this Agreement (other than in the
event of death), the provisions of Sections 7(b) (non-compete) and
7(c) (non-solicitation) (the "Restrictive Covenants") shall be
extended from one (1) year to 30 months after the date of termination;
provided, however, in no event shall the period of the Restrictive
Covenants be extended beyond the six (6) year anniversary of the
Effective Date.
7. Confidentiality; Noncompetition. In addition to and supplementing
the covenants contained in Section 5.2 of the Agreement and Plan of Merger
(the "Merger Agreement"), dated August 22, 1998, among the Parent, JAG
Acquisition Corp., Jack of All Games, Inc. and Employee, the Employer and
Employee agree as follows:
-4-
(a) The Employer and the Employee acknowledge that the services
to be performed by the Employee under this Agreement may result in the
Employee being in possession of confidential information relating to
the business practices of the Company and the Parent. The term
"confidential information" shall mean any and all information (verbal
and written) relating to the Company, 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 other than as the result of breach of the provisions of
this Section 7(a), including, but not limited to, information relating
to: existing and proposed projects, source codes, object codes,
forecasts, assumptions, trade secrets, personnel lists, financial
information, research projects, services, pricing, customers, customer
lists and prospects, product sourcing, marketing and selling and
servicing. The Employee agrees that he will not, at any time during or
after the termination of his employment, directly or indirectly, use,
communicate, disclose or disseminate to any person, firm or
corporation any confidential information.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, within any county (or adjacent county) in the States of
Ohio and 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) competitive with the
Parent's or the Company's business activities engaged in business
during the period of the Employee's employment or on the date of
termination of the Employee's employment.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, take any action which constitutes an interference with
or a disruption of any of the Parent's or Company's business
activities including, without limitation, the solicitations of the
Parent's or Company's customers, or persons listed on the personnel
lists of the Parent 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 or Company.
(d) For purposes of clarification, but not of limitation, the
Employee hereby acknowledges and agrees that the provisions of
subparagraphs 7(b) and (c) above shall serve as a prohibition against
him, during the period referred to therein,
-5-
directly or indirectly, hiring, offering to hire, enticing, soliciting
or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee or
customer who has been previously contacted by either a representative
of the Parent or Company, including the Employee, to discontinue or
alter his or its relationship with the Parent or 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 or Parent which are in the possession of the
Employee including all copies thereof, shall be promptly returned to
the Company.
(f) 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 during the term 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.
(g) 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 7, (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.
(h) The rights and remedies enumerated in Section 7(g) shall be
in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
(i) If any provision contained in this Section 7 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.
-6-
(j) It is the intent of the parties hereto that the covenants
contained in this Section 7 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 7 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.
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, sent by telecopy
(receipt confirmed) or 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 so personally delivered, one business
day after being sent by telecopy or three (3) days after being mailed.
To the Employer:
Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, Ohio 45069
Attention: Chief Executive Officer
Telecopier: (513) 326-3026
With copies to:
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant, Chief Executive Officer
Telecopier:
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Kenneth Selterman, Esq.
Telecopier: 212-885-5001
-7-
To the Employee:
Robert Alexander
Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, Ohio 45069
Telecopier:
With a copy to:
Keating Muething & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Gehl Babinec, Esq.
Telecopier: (513) 579-6457
(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; provided that the
provisions of Section 5.2 of the Merger Agreement shall also apply to
Employee. 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) Employee Warranty. Employee hereby warrants and represents as
follows:
(i) That the execution of this Agreement and the discharge
of Employee's obligations hereunder will not breach or conflict
with any other contract, agreement, or understanding between
Employee and any other party or parties.
(ii) Employee has ideas, information and know-how relating
to the type of business conducted by Employer, and Employee's
disclosure of such ideas, information and know-how to Employer
will not conflict with or violate the rights of any third party
or parties.
-8-
(f) Company Warranty. The Company hereby warrants and represents
that the execution of this Agreement and the discharge of the
Company's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between the Company and
any other party or parties.
(g) 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.
(h) 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.
JACK OF ALL GAMES, INC.
By: /s/ Ryan A. Brant
-------------------------------------
Name: Ryan A. Brant
Title: Chairman of the Board
/s/ Robert Alexander
-------------------------------------
Robert Alexander
JACK OF ALL GAMES, INC.
2909 Crescentville Road
West Chester, OH 45069
September 10, 1998
Robert Alexander
1255 Coventry Woods
Cincinnati, Ohio 45230
Re: Amendment to Employment Agreement
Dear Mr. Alexander:
Reference is made to the employment agreement, dated August 31, 1998,
between you and Jack of All Games, Inc.
This letter confirms our agreement that Section 3(c) of the Employment
Agreement, with respect to Options granted to the employee, is hereby amended in
its entirety to provide for 100,000 Options in lieu of 125,000 Options, to read
as follows:
"(c) In addition to the foregoing, and subject to the terms and
conditions of the Parent's 1997 Stock Option Plan (the "Plan"), a copy of
which has been made available to the Employee, the Employee shall be
granted as a matter of separate agreement, and not in lieu of Salary or any
other compensation for services, the right and option (the "Option"), in
the form of incentive stock options to the extent available, to purchase
pursuant to the Plan all or any part of an aggregate of up to 100,000
shares of the authorized but unissued common stock, par value $.01 per
share, of the Parent (the "Shares"), at the exercise price of $5.625 per
Share, exercisable during the five (5) year period, with respect to any
incentive stock options, or ten (10) year period (with respect to all other
options granted pursuant hereto) commencing as of the date hereof and
terminating on the close of business on August 31, 2008 or August 31, 2003,
respectively, as follows: (i) 50,000 of the Shares are immediately vested
and may be purchased as of the date hereof and (ii) an additional 50,000 of
the Shares may be purchased commencing on the first anniversary hereof; and
then, only to the extent that the Employee is still eligible under the
terms of the Plan; provided, however, in the event
Robert Alexander
September 10, 1998
Page 2
that the Employee is terminated by reason of death or disability pursuant
to Section 6(b) hereof or in the event of any transaction pursuant to
Section 4 of the Plan, any options not vested at the time of termination
pursuant thereto shall immediately vest."
Except as set forth herein, the Employment Agreement shall remain in full
force and effect.
Very truly yours,
JACK OF ALL GAMES, INC.
By: /s/ Nicolas A. Alexander
--------------------------------
Nicolas A. Alexander
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Robert A. Alexander
- ------------------------
Robert A. Alexander
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 31, 1998 between Jack of All Games, Inc., an
Ohio corporation (the "Employer" or the "Company"), and David Rosenbaum (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its Chairman of the
Board 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 serve Employer for a five (5) year period commencing as of
the date of this Agreement (the "Effective Date") (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 Chairman of the Board reporting
directly to the Chief Executive Officer and the Board of Directors
(the "Board") of the Employer. 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 2909 Crescentville Road, Ohio, 45069, although the
Employee may be required 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) During the term of this Agreement, the Employer shall pay the
Employee a salary (the "Salary") at a rate of $233,000 per annum in
respect of each Employment Year, payable in equal installments
bi-weekly, or at such other times as may mutually be agreed upon
between the Employer and the Employee. Such Salary may be increased
from time to time at the discretion of the Board.
(b) In addition to the foregoing, the Employee shall be eligible
for a quarterly incentive bonus (the "Bonus") up to an amount of
$25,000 per quarter, based on certain gross margin and earning targets
with respect to each quarter of the Company's fiscal year, as set
forth on Schedule A annexed hereto. Gross margin and earnings shall be
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. Gross margin and earnings for
each quarter shall be determined no later than 45 days following the
end of such quarter and the Bonus attributable thereto shall be paid
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 Section 3(b).
(c) In addition to the foregoing, and subject to the terms and
conditions of the 1997 Stock Option Plan (the "Plan") of Take-Two
Interactive Software, Inc. (the "Parent"), of which a copy of the Plan
has been made available to the Employee, the Employee shall be granted
as a matter of separate agreement, and not in lieu of Salary or any
other compensation for services, the right and option (the "Option")
in the form of incentive stock options to the extent available, to
purchase pursuant to the Plan all or any part of an aggregate of up to
125,000 shares of the authorized but unissued common stock, par value
$.01 per share, of the Parent (the "Shares"), at the exercise price of
$5.625 per Share, exercisable during the five (5) year period with
respect to any incentive stock options, or ten (10) year period (with
respect to all other options granted pursuant hereto) commencing as of
the date hereof and terminating on the close of business on August 31,
2008 or August 31, 2003, respectively, as follows: (i) 62,500 of the
Shares are immediately vested and may be purchased as of the date
hereof and (ii) an additional 62,500 of the Shares may be purchased
commencing on the first anniversary hereof; and then, only to the
extent that the Employee is otherwise still eligible under the terms
of the Plan; provided, however, in the event that the Employee is
terminated by reason of death or disability pursuant to Section 6(b)
hereof or in the event of any transaction
-2-
pursuant to Section 4 of the Plan, any options not vested at the time
of termination pursuant thereto shall immediately vest.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have
the right to receive or participate in all benefits and plans, as set
forth on Schedule A hereto ("Benefits"), or as the Company and Parent
may from time to time institute during such period for its senior
management employees and for which the Employee is eligible. 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 the number of paid holidays, personal days off, vacation
days and sick leave days in each calendar year as are available to the
Company's senior management employees. 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.
5. Travel Expenses. All travel and other expenses incident to the
rendering of services reasonably incurred on behalf of the Company by the
Employee during the term of this Agreement shall be paid by the Employer.
If any such expenses are paid in the first instance by the Employee, the
Employer shall reimburse him therefor on presentation of appropriate
receipts for any such expenses.
6. 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
Section 6(a), the Employer shall have no further obligation or duties
to the Employee and the Employee shall have no further obligations or
duties to the Employer, except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) the
inability of the Employee, by reason of physical or mental disability,
to continue substantially to perform his duties hereunder for a period
of 180 consecutive days, (the "Disability Period") during which
Disability Period Salary and any other benefits hereunder shall not be
suspended or diminished. Upon any termination of the Employee's
employment under this Section 6(b), (y) any options granted pursuant
to Section 3(c) hereof and not yet vested shall immediately vest in
-3-
the Employee and (z) the Employer shall have no further obligations or
duties to the Employee, except payment of Salary and such incentive
compensation and Benefits, if any, having accrued to the Employee
pursuant to Section 3(b) hereof through the date of death or the
expiration of the Disability Period, as applicable, and as provided in
Sections 5.
(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 (i) payment of Salary and such incentive compensation, if
any, having accrued to the Employee (or having vested, in the case of
the Options) as provided in Section 3 hereof through the date of
termination and as provided in Section 5, and (ii) payment of Salary
and health and life insurance benefits as indicated on Schedule A
hereto for 30 months following the date of such termination or the
remaining term of this Agreement, whichever is less, and Employee
shall have no further obligations or duties to the Employer, except as
provided in Section 7.
(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, monetarily or otherwise, (iii)
the conviction of the Employee of a felony, (iv) gross negligence on
the part of the Employee resulting in material harm to the Company or
(v) other willful misconduct of the Employee in the performance of his
duties hereunder resulting in material harm to the Company. 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) or (iv) above.
(e) Notwithstanding anything to the contrary contained in this
Section 6, in the event that the Employee terminates his employment
for any reason during the term of this Agreement (other than in the
event of death), the provisions of Sections 7(b) (non-compete) and
7(c) (non-solicitation) (the "Restrictive Covenants") shall be
extended from one (1) year to 30 months after the date of termination;
provided, however, in no event shall the period of the Restrictive
Covenants be extended beyond the six (6) year anniversary of the
Effective Date.
7. Confidentiality; Noncompetition. In addition to and supplementing
the covenants contained in Section 5.2 of the Agreement and Plan of Merger
(the "Merger Agreement"), dated August 22, 1998, among the Parent, JAG
Acquisition Corp., Jack of All Games, Inc. and Employee, the Employer and
Employee agree as follows:
-4-
(a) The Employer and the Employee acknowledge that the services
to be performed by the Employee under this Agreement may result in the
Employee being in possession of confidential information relating to
the business practices of the Company and the Parent. The term
"confidential information" shall mean any and all information (verbal
and written) relating to the Company, 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 Section 7(a), including, but not limited to,
information relating to: existing and proposed projects, source codes,
object codes, forecasts, assumptions, trade secrets, personnel lists,
financial information, research projects, services, pricing,
customers, customer lists and prospects, product sourcing, marketing
and selling and servicing. The Employee agrees that he will not, at
any time during or after the termination of his 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 or Parent and
that Employee agrees that all confidential information shall be the
sole property of the Company.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, within any county (or adjacent county) in the States of
Ohio and 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) competitive with the
Parent's or the Company's business activities engaged in business
during the period of the Employee's employment or on the date of
termination of the Employee's employment.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, take any action which constitutes an interference with
or a disruption of any of the Parent's or Company's business
activities including, without limitation, the solicitations of the
Parent's or Company's customers, or persons listed on the personnel
lists of the Parent 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 or Company.
(d) For purposes of clarification, but not of limitation, the
Employee hereby acknowledges and agrees that the
-5-
provisions of subparagraphs 7(b) and (c) above shall serve as a
prohibition against him, during the period referred to therein,
directly or indirectly, hiring, offering to hire, enticing, soliciting
or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee or
customer who has been previously contacted by either a representative
of the Parent or Company, including the Employee, to discontinue or
alter his or its relationship with the Parent or 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 or Parent which are in the possession of the
Employee including all copies thereof, shall be promptly returned to
the Company.
(f) 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 during the term 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.
(g) 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 7, (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.
(h) The rights and remedies enumerated in Section 7(g) shall be
in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
(i) If any provision contained in this Section 7 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
-6-
restriction shall thereafter be enforceable as contemplated hereby.
(j) It is the intent of the parties hereto that the covenants
contained in this Section 7 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 7 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.
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, sent by telecopy
(receipt confirmed) or 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 so personally delivered, one business
day after being sent by telecopy or three (3) days after being mailed.
To the Employer:
Jack of All Games, Inc.
2090 Crescentville Road
Cincinnati, OH 45069
Attention: Chief Executive Officer
Telecopier: (513) 326-3026
With copies to:
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant, Chief Executive Officer
Telecopier:
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
-7-
Attention: Kenneth Selterman, Esq.
Telecopier: 212-885-5001
To the Employee:
David Rosenbaum
c/o Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, OH 45069
With a copy to:
Keating Muething & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Gehl Babinec, Esq.
Telecopier: (513) 579-6457
(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; provided that the
provisions of Section 5.2 of the Merger Agreement shall also apply to
Employee. 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) Employee Warranty. Employee hereby warrants and represents as
follows:
(i) That the execution of this Agreement and the discharge
of Employee's obligations hereunder will not breach or conflict
with any other contract, agreement, or understanding between
Employee and any other party or parties.
(ii) Employee has ideas, information and know-how relating
to the type of business conducted by Employer, and Employee's
disclosure of such ideas, information and know-how
-8-
to Employer will not conflict with or violate the rights of any
third party or parties.
(f) Company Warranty. The Company hereby warrants and represents
that the execution of this Agreement and the discharge of the
Company's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between the Company and
any other party or parties.
(g) 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.
(h) 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.
-9-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
JACK OF ALL GAMES, INC.
By: /s/ Ryan A. Brant
-----------------------------------------
Name: Ryan A. Brant
Title: Chairman of the Board
/s/ David Rosenbaum
-----------------------------------------
David Rosenbaum
JACK OF ALL GAMES, INC.
2909 Crescentville Road
West Chester, OH 45069
September 10, 1998
David Rosenbaum
540 Locust Run Road
Cincinnati, OH 45245
Re: Amendment to Employment Agreement
Dear Mr. Rosenbaum:
Reference is made to the employment agreement, dated August 31, 1998,
between you and Jack of All Games, Inc.
This letter confirms our agreement that Section 3(c) of the Employment
Agreement, with respect to Options granted to the employee, is hereby amended in
its entirety to provide for 100,000 Options in lieu of 125,000 Options, to read
as follows:
"(c) In addition to the foregoing, and subject to the terms and
conditions of the Parent's 1997 Stock Option Plan (the "Plan"), a copy of
which has been made available to the Employee, the Employee shall be
granted as a matter of separate agreement, and not in lieu of Salary or any
other compensation for services, the right and option (the "Option"), in
the form of incentive stock options to the extent available, to purchase
pursuant to the Plan all or any part of an aggregate of up to 100,000
shares of the authorized but unissued common stock, par value $.01 per
share, of the Parent (the "Shares"), at the exercise price of $5.625 per
Share, exercisable during the five (5) year period, with respect to any
incentive stock options, or ten (10) year period (with respect to all other
options granted pursuant hereto) commencing as of the date hereof and
terminating on the close of business on August 31, 2008 or August 31, 2003,
respectively, as follows: (i) 50,000 of the Shares are immediately vested
and may be purchased as of the date hereof and (ii) an additional 50,000 of
the Shares may be purchased commencing on the first anniversary hereof; and
then, only to the extent that the Employee is still eligible under the
terms of the Plan; provided, however, in the event
Robert Alexander
September 10, 1998
Page 2
that the Employee is terminated by reason of death or disability pursuant
to Section 6(b) hereof or in the event of any transaction pursuant to
Section 4 of the Plan, any options not vested at the time of termination
pursuant thereto shall immediately vest."
Except as set forth herein, the Employment Agreement shall remain in full
force and effect.
Very truly yours,
JACK OF ALL GAMES, INC.
By: /s/ Nicolas A. Alexander
--------------------------------
Nicolas A. Alexander
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ David Rosenbaum
- ------------------------
David Rosenbaum
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 31, 1998 between Jack of All Games, Inc., an
Ohio corporation (the "Employer" or the "Company"), and Thomas Rosenbaum (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its Senior Vice
President 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 serve Employer for a five (5) year period commencing as of
the date of this Agreement (the "Effective Date") (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 reporting
directly to the Chief Executive Officer and the Board of Directors
(the "Board") of the Employer. 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 2909 Crescentville Road, Ohio, 45069, although the
Employee may be required 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) During the term of this Agreement, the Employer shall pay the
Employee a salary (the "Salary") at a rate of $140,000 per annum in
respect of each Employment Year, payable in equal installments
bi-weekly, or at such other times as may mutually be agreed upon
between the Employer and the Employee. Such Salary may be increased
from time to time at the discretion of the Board.
(b) In addition to the foregoing, and subject to the terms and
conditions of the 1997 Stock Option Plan (the "Plan") of Take-Two
Interactive Software, Inc. (the "Parent"), of which a copy of the Plan
has been made available to the Employee, the Employee shall be granted
as a matter of separate agreement, and not in lieu of Salary or any
other compensation for services, the right and option (the "Option")
in the form of incentive stock options to the extent available, to
purchase pursuant to the Plan all or any part of an aggregate of up to
25,000 shares of the authorized but unissued common stock, par value
$.01 per share, of the Parent (the "Shares"), at the exercise price of
$5.625 per Share, exercisable during the five (5) year period with
respect to any incentive stock options, or ten (10) year period (with
respect to all other options granted pursuant hereto) commencing as of
the date hereof and terminating on the close of business on August 31,
2008 or August 31, 2003, respectively, as follows: (i) 12,500 of the
Shares are immediately vested and may be purchased as of the date
hereof and (ii) an additional 12,500 of the Shares may be purchased
commencing on the first anniversary hereof; and then, only to the
extent that the Employee is otherwise still eligible under the terms
of the Plan; provided, however, in the event that the Employee is
terminated by reason of death or disability pursuant to Section 6(b)
hereof or in the event of any transaction pursuant to Section 4 of the
Plan, any options not vested at the time of termination pursuant
thereto shall immediately vest.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have
the right to receive or participate in all benefits and plans, as set
forth on Schedule A hereto ("Benefits"), or as the Company and Parent
may from time to time institute during such period for its senior
management employees and for which the Employee is eligible. 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 the number of paid holidays, personal days off, vacation
days and sick leave days in each calendar year as are available to the
Company's senior management
-2-
employees. 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.
5. Travel Expenses. All travel and other expenses incident to the
rendering of services reasonably incurred on behalf of the Company by the
Employee during the term of this Agreement shall be paid by the Employer.
If any such expenses are paid in the first instance by the Employee, the
Employer shall reimburse him therefor on presentation of appropriate
receipts for any such expenses.
6. 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
Section 6(a), the Employer shall have no further obligation or duties
to the Employee and the Employee shall have no further obligations or
duties to the Employer, except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) the
inability of the Employee, by reason of physical or mental disability,
to continue substantially to perform his duties hereunder for a period
of 180 consecutive days, (the "Disability Period") during which
Disability Period Salary and any other benefits hereunder shall not be
suspended or diminished. Upon any termination of the Employee's
employment under this Section 6(b), (y) any options granted pursuant
to Section 3(c) hereof and not yet vested shall immediately vest in
the Employee and (z) the Employer shall have no further obligations or
duties to the Employee, except payment of Salary and such incentive
compensation and Benefits, if any, having accrued to the Employee
pursuant to Section 3(b) hereof through the date of death or the
expiration of the Disability Period, as applicable, and as provided in
Sections 5.
(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 (i) payment of Salary and such incentive compensation, if
any, having accrued to the Employee (or having vested, in the case of
the Options) as provided in Section 3 hereof through the date of
termination and as provided in Section 5, and (ii) payment of Salary
and health and life insurance benefits as indicated on Schedule A
hereto for 30 months following the date of such termination or the
remaining term of this Agreement, whichever is less, and Employee
shall
-3-
have no further obligations or duties to the Employer, except as
provided in Section 7.
(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, monetarily or otherwise, (iii)
the conviction of the Employee of a felony, (iv) gross negligence on
the part of the Employee resulting in material harm to the Company or
(v) other willful misconduct of the Employee in the performance of his
duties hereunder resulting in material harm to the Company. 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) or (iv) above.
(e) Notwithstanding anything to the contrary contained in this
Section 6, in the event that the Employee terminates his employment
for any reason during the term of this Agreement (other than in the
event of death), the provisions of Sections 7(b) (non-compete) and
7(c) (non-solicitation) (the "Restrictive Covenants") shall be
extended from one (1) year to 30 months after the date of termination;
provided, however, in no event shall the period of the Restrictive
Covenants be extended beyond the six (6) year anniversary of the
Effective Date.
7. Confidentiality; Noncompetition. In addition to and supplementing
the covenants contained in Section 5.2 of the Agreement and Plan of Merger
(the "Merger Agreement"), dated August 22, 1998, among the Parent, JAG
Acquisition Corp., Jack of All Games, Inc. and Employee, the Employer and
Employee agree as follows:
(a) The Employer and the Employee acknowledge that the services
to be performed by the Employee under this Agreement may result in the
Employee being in possession of confidential information relating to
the business practices of the Company and the Parent. The term
"confidential information" shall mean any and all information (verbal
and written) relating to the Company, 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 Section 7(a), including, but not limited to,
information relating to: existing and proposed projects, source codes,
object codes, forecasts, assumptions, trade secrets, personnel lists,
financial information, research projects, services, pricing,
customers,
-4-
customer lists and prospects, product sourcing, marketing and selling
and servicing. The Employee agrees that he will not, at any time
during or after the termination of his 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 or Parent and
that Employee agrees that all confidential information shall be the
sole property of the Company.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, within any county (or adjacent county) in the States of
Ohio and 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) competitive with the
Parent's or the Company's business activities engaged in business
during the period of the Employee's employment or on the date of
termination of the Employee's employment.
(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 (subject to Sections 6(c) and 6(e) hereof), directly
or indirectly, take any action which constitutes an interference with
or a disruption of any of the Parent's or Company's business
activities including, without limitation, the solicitations of the
Parent's or Company's customers, or persons listed on the personnel
lists of the Parent 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 or Company.
(d) For purposes of clarification, but not of limitation, the
Employee hereby acknowledges and agrees that the provisions of
subparagraphs 7(b) and (c) above shall serve as a prohibition against
him, during the period referred to therein, directly or indirectly,
hiring, offering to hire, enticing, soliciting or in any other manner
persuading or attempting to persuade any officer, employee, agent,
lessor, lessee, licensor, licensee or customer who has been previously
contacted by either a representative of the Parent or Company,
including the Employee, to discontinue or alter his or its
relationship with the Parent or 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
-5-
refer or relate to any aspect of the business of the Company or Parent
which are in the possession of the Employee including all copies
thereof, shall be promptly returned to the Company.
(f) 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 during the term 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.
(g) 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 7, (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.
(h) The rights and remedies enumerated in Section 7(g) shall be
in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
(i) If any provision contained in this Section 7 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.
(j) It is the intent of the parties hereto that the covenants
contained in this Section 7 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 7 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
-6-
invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of said provision in any other
jurisdiction.
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, sent by telecopy
(receipt confirmed) or 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 so personally delivered, one business
day after being sent by telecopy or three (3) days after being mailed.
To the Employer:
Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, OH 45069
Attention: Chief Executive Officer
Telecopier: (513) 326-3026
With copies to:
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Attention: Ryan A. Brant, Chief Executive Officer
Telecopier:
and
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Kenneth Selterman, Esq.
Telecopier: 212-885-5001
To the Employee:
Thomas Rosenbaum
c/o Jack of All Games, Inc.
2909 Crescentville Road
Cincinnati, OH 45069
Telecopier: _____________________
-7-
With a copy to:
Keating Muething & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Gehl Babinec, Esq.
Telecopier: (513) 579-6457
(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; provided that the
provisions of Section 5.2 of the Merger Agreement shall also apply to
Employee. 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) Employee Warranty. Employee hereby warrants and represents as
follows:
(i) That the execution of this Agreement and the discharge
of Employee's obligations hereunder will not breach or conflict
with any other contract, agreement, or understanding between
Employee and any other party or parties.
(ii) Employee has ideas, information and know-how relating
to the type of business conducted by Employer, and Employee's
disclosure of such ideas, information and know-how to Employer
will not conflict with or violate the rights of any third party
or parties.
(f) Company Warranty. The Company hereby warrants and represents that
the execution of this Agreement and the discharge of the Company's
obligations hereunder will not breach or conflict with any other contract,
agreement, or understanding between the Company and any other party or
parties.
(g) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a
-8-
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.
(h) 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.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
JACK OF ALL GAMES, INC.
By: /s/ Ryan A. Brant
-------------------------------------
Name: Ryan A. Brant
Title: Chairman of the Board
/s/ Thomas Rosenbaum
-------------------------------------
Thomas Rosenbaum
ASSET BASED
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of August 31, 1998, between Jack of All Games, Inc., an
Ohio corporation ("Borrower"), whose mailing address is 2909 Crescentville Road,
West Chester, Ohio 45069, and The Provident Bank ("Bank"), an Ohio banking
corporation whose mailing address is One East Fourth Street, Cincinnati, Ohio
45202.
This Agreement is executed in substitution of, and replaces, the Amended
and Restated Loan and Security Agreement between Borrower and Bank dated August
27, 1997.
1. Definitions. As used herein, the following terms, when initial capital
letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Uniform Commercial Code as adopted in Ohio
shall have the meanings given therein unless otherwise defined herein.
1.1 Accounts shall mean all of Borrower's accounts (as that term is defined
in the Uniform Commercial Code), accounts receivable, chattel paper, contract
rights, documents and instruments; all other obligations or indebtedness owed to
Borrower from whatever source arising; all guarantees of any of the foregoing
and all security therefor; all of the right, title and interest of Borrower in
and with respect to the goods, services or other property which gave rise to or
which secure any of the foregoing and all insurance policies and proceeds
relating thereto; all of the foregoing whether now owned by Borrower or
hereafter acquired or in existence.
1.2 Affiliate shall mean any person, company or business entity
controlling, controlled by or under common control with, Borrower, whether such
common control is direct or indirect, and all of the partners, officers,
directors and shareholders of Borrower and such entities.
1.3 Cash Collateral Account shall mean that deposit account maintained by
Borrower at Bank into which all collections on the Collateral shall be deposited
and over which Bank shall have the sole power of withdrawal as provided in
Section 7.1.
1.4 Collateral shall mean (a) all of Borrower's Accounts, Equipment,
General Intangibles, Inventory and all other items of personal property now
owned or hereafter acquired by Borrower or in which Borrower has granted or may
in the future grant a security interest to Bank hereunder or in any supplement
hereto or otherwise; (b) all of Borrower's right, title and interest in and to
all goods or other property represented by or securing any of the Accounts,
including all goods that may be reclaimed or repossessed from or returned by
Debtors; (c) all of Borrower's rights as an unpaid seller, including
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stoppage in transit, detinue and reclamation; (d) all additional amounts due to
Borrower from any Debtor, irrespective of whether such additional amounts have
been specifically assigned to Bank; (e) all guaranties or other agreements or
property securing or relating to any of the items referred to in (a) above, or
acquired for the purpose of securing and enforcing any of such items; (f) all
instruments, documents, securities, cash, property, deposit accounts (including
but not limited to deposits made to Borrower's Cash Collateral Account), and the
proceeds of any of the foregoing, owned by Borrower or in which it has an
interest, which are now or may hereafter be in the possession or control of Bank
or in transit by mail or carrier to or from Bank, or in possession of any third
party acting on behalf of Bank, without regard to whether Bank received same in
pledge, for safekeeping, as agent for collection or transmission or otherwise or
whether Bank had conditionally released the same; (g) all ledger sheets, files,
records, documents, blueprints, drawings and instruments (including, without
limitation, computer programs, tapes and related electronic data processing
software) evidencing an interest in or relating to the foregoing; and (h) all
proceeds and products of the collateral described above, including, without
limitation, all claims against third parties for damage to or loss or
destruction of any of the foregoing, including insurance proceeds, and accounts,
contract rights, chattel paper and general intangibles arising out of any sale,
lease or other disposition of any of the foregoing.
1.5 Debtor shall mean the account debtor with respect to any of Borrower's
Accounts and/or the prospective purchaser with respect to any contract right,
and/or any party who enters into or proposes to enter into any contract or other
arrangement with Borrower pursuant to which Borrower is to deliver any personal
property or perform any service.
1.6 Eligible Inventory shall mean such of Borrower's Inventory as is
acceptable to Bank in its sole discretion and in which Bank shall have a
perfected first priority security interest.
1.7 Eligible Accounts shall mean such Accounts which are and at all times
shall continue to be acceptable to Bank in all respects and in which Bank shall
have a perfected first priority security interest. Criteria for eligibility
shall be fixed and revised from time to time solely by Bank in its exclusive
judgment. In general, an Account shall in no event be deemed to be eligible
unless (a) delivery of the merchandise or the rendition of services has been
completed; (b) no return, rejection or repossession has occurred; (c) such
merchandise or services have been finally accepted by the customer without
dispute, offset, defense or counterclaims; (d) such Account continues to be in
full conformity with the representations and warranties made by Borrower to Bank
with respect thereto; (e) no more than 90 days have elapsed from the invoice
date; and (f) Bank is and continues to be satisfied with the credit standing
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of the Debtor in relation to the amount of credit extended. Accounts due from
Debtors who are Affiliates of Borrower shall in no event be deemed to be
eligible.
1.8 Equipment shall mean all of Borrower's equipment (as that term is
defined in the Uniform Commercial Code), including, without limitation, all
furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor, all
whether now owned or hereafter acquired by Borrower.
1.9 General Intangibles shall mean all of Borrower's general intangibles
(as that term is defined in the Uniform Commercial Code), including, without
limitation, all goodwill, patents, formulas, blueprints, proprietary
manufacturing processes, trademarks, trade names, licenses, franchises,
beneficial interests in trusts, joint venture interests, partnership interests,
rights to tax refunds, rights to insurance proceeds (including, but not limited
to, any proceeds of credit insurance policies on Borrower's customers), rights
under causes of action, rights to pension plan overfundings, literary rights and
other contractual rights of Borrower, all whether now owned or hereafter
acquired by Borrower.
1.10 Guarantors shall mean the collective reference to Take-Two Interactive
Software, Inc., a Delaware corporation ("Take-Two"), David Rosenbaum
("Rosenbaum") and Robert Alexander.
1.11 Inventory shall mean all of Borrower's inventory (as that term is
defined in the Uniform Commercial Code), including, without limitation, all
goods, merchandise and other personal property which are held for sale or lease,
or are furnished or to be furnished under any contract of service by Borrower,
or are raw materials, work-in-progress, supplies or materials used or consumed
in Borrower's business, and all products thereof, and all substitutions,
replacements, additions and accessories thereto, all whether now owned or
hereafter acquired by Borrower; and all of Borrower's right, title and interest
in and to any leases or rental agreements for such inventory.
1.12 Inventory Cap shall mean $7,500,000 during the months of August
through January and shall mean $6,000,000 during the months of February through
July.
1.13 Loan Documents shall mean the collective reference to this Agreement,
the Notes, the Rosenbaum Guaranty, the Robert Alexander Guaranty, the Take-Two
Guaranty, the Rosenbaum Life Insurance Assignment, the Robert Alexander Life
Insurance Assignment, the Nicholas Alexander Life Insurance Assignment, the
Warrant Agreement, the Warrant and all other documents, instruments,
certificates and agreements (including without limitation financing statements)
executed or delivered in connection with the transactions contemplated under
this Agreement.
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1.14 Loans shall mean the collective reference to the Revolving Credit
Loans, the Term Loan A and the Term Loan B.
1.15 Notes shall mean the collective reference to the Revolving Credit
Note, the Term Note A and the Term Note B.
1.16 Obligations shall mean, without limitation, all Loans and all other
debts, obligations and liabilities of every kind and description of Borrower to
Bank, now due or to become due, direct or indirect, absolute or contingent,
presently existing or hereafter arising, joint or several, secured or unsecured,
whether for payment or performance, regardless of how the same arise or by what
instrument, agreement or book account they may be evidenced, or whether
evidenced by any instrument, agreement or book account, including, without
limitation, all loans (including any loan by renewal or extension), all
overdrafts, all guarantees, all bankers acceptances, all agreements, all letters
of credit issued by Bank for Borrower and the applications relating thereto, all
indebtedness of Borrower to Bank, all undertakings to take or refrain from
taking any action and all indebtedness, liabilities and obligations owing from
Borrower to others which Bank may obtain by purchase, negotiation, discount,
assignment or otherwise. Obligations shall also include all interest and other
charges chargeable to Borrower or due from Borrower to Bank from time to time
and all costs and expenses referred to in Section 12.
1.17 Permitted Liens shall mean the liens and interests in favor of Bank
granted in connection herewith and, to the extent reflected on Borrower's books
and records and not impairing the operations of Borrower or any performance
hereunder or contemplated hereby:
(i) liens arising by operation of law for taxes not yet due and
payable;
(ii) statutory liens of mechanics, materialmen, shippers and
warehousemen for services or materials for which payment is not yet due;
(iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(iv) liens, if any, specifically permitted by Bank from time to time
in writing; and (v) the following if the validity or amount thereof is
being contested in good faith and by appropriate and lawful proceedings
promptly initiated and diligently conducted of which Borrower has given
prior notice to Bank and for which appropriate reserves (in Bank's
reasonable judgment) have been established and so long as levy and
execution have been and continue to be stayed: claims and liens for taxes
due and payable and claims of mechanics, materialmen, shippers,
warehousemen, carriers and landlords.
-5-
1.18 Prime Rate shall mean that annual percentage rate of interest which is
established by Bank from time to time as its prime rate, whether or not such
rate is publicly announced, and which provides a base to which loan rates may be
referenced. The Prime Rate is not necessarily the lowest lending rate of Bank.
1.19 Subordinated Debt shall mean indebtedness subordinated to the
Obligations of Borrower to Bank in form and substance satisfactory to Bank.
2. Loans
2.1 Revolving Credit Loans. Bank will make revolving credit loans to
Borrower (the "Revolving Credit Loans") in an aggregate amount not to exceed the
lesser of (a) $20,000,000 (the "Revolving Loan Cap") or (b) (i) the lesser of
(A) 50% of the cost or market value, whichever is lower, of Borrower's Eligible
Inventory or (B) the then-applicable Inventory Cap plus (ii) 85% of the
outstanding amount of Borrower's Eligible Accounts owed by Debtors with respect
to which Borrower has credit insurance in amounts and in formats acceptable to
Bank ("Insured Customers") plus (iii) 75% of the outstanding amount of
Borrower's other Eligible Accounts plus (iv) 100% of the balance of the Cash
Collateral Account (the amount calculated under (b) being sometimes referred to
herein as the "Borrowing Base" and the lesser of (a) and (b) being sometimes
referred to herein as the "Maximum Revolving Loan Amount"). Should the
outstanding amount of Revolving Credit Loans at any time exceed the upper limits
therefor set forth in the immediately preceding sentence, Borrower shall on
demand immediately repay such excess amount. The Revolving Credit Loans shall be
evidenced by, and shall bear interest and be payable in accordance with, an
Amended and Restated Promissory Note (the "Revolving Credit Note") in
substantially the form attached hereto as Exhibit A. If the average outstanding
principal balance of the Revolving Credit Loans during any calendar quarter is
less than the Revolving Loan Cap, Borrower shall pay Bank a fee, in arrears on
the first day after the end of such calendar quarter, equal to .25% per annum of
the amount of the difference between the average outstanding principal amount of
the Revolving Credit Loans during such quarter and the Revolving Loan Cap.
2.2 Term Loan A. Bank has made a term loan (the "Term Loan A") to Borrower
in the principal amount of $200,000. The Term Loan A shall be evidenced by, and
shall bear interest and be payable in accordance with, the Promissory Note (the
"Term Note A") dated as of August 27, 1997 given by Borrower to Bank, a copy of
which is attached hereto as Exhibit B. No repayment or prepayment of Term Loan A
shall be reason for any relending or additional lending of Term Loan A proceeds
to Borrower.
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2.3 Term Loan B. Bank has made another term loan (the "Term Loan B") to
Borrower in the principal amount of $2,000,000. The Term Loan B shall be
evidenced by, and shall bear interest and be payable in accordance with, an
Amended and Restated Promissory Note (the "Term Note B") in substantially the
form attached hereto as Exhibit C. No repayment or prepayment of Term Loan B
shall be reason for any relending or additional lending of Term Loan B proceeds
to Borrower.
2.4 Default Rate. Upon the occurrence of an Event of Default, the Loans
shall bear interest at a rate of 4% per annum greater than the rate otherwise
applicable to the Loans (the "Default Rate").
2.5 Interest Calculation. Interest on the Loans will be calculated on the
basis of the actual number of days elapsed over an assumed year consisting of
360 days.
2.6 Change in Law. In case of any change in law or governmental rules,
regulations, guidelines or orders (or any interpretations thereof) or the
introduction of new laws, regulations or guidelines, which require Bank to
reserve for unfunded credit commitments, Bank may charge Borrower an additional
fee which will reasonably compensate Bank for such requirements. Bank agrees to
provide Borrower with written notice setting forth such requirements.
2.7 Loan Payments. All payments of interest, principal and all other
amounts owing hereunder or under the Notes shall be made by Borrower to Bank in
immediately available funds at its principal office in Cincinnati, Ohio or at
such other place as Bank may designate in writing, at such times as shall be set
forth herein or in the Notes or if not so set forth, such amounts shall be
payable on demand. Borrower hereby authorizes Bank, at Bank's option, to charge
any account or charge or increase any Loan balance of Borrower at Bank for the
payment or repayment of any interest or principal of the Loans or any fees,
charges or other amounts due to Bank hereunder.
2.8 Prepayment, Refinancing. In the event of prepayment of the principal
amount of any of the Loans in whole or in part prior to the maturity date
thereof (except for regularly-scheduled installments due on Term Loan A and
except for prepayment of the Revolving Credit Loans in full) with cash obtained
from any source (including without limitation another lender) other than the
operation of Borrower's business in the ordinary course, Borrower shall pay Bank
a fee in the amount of 2% of the amount so prepaid, and in the event of
prepayment of the principal amount of the Revolving Credit Loans in full prior
to the maturity date thereof with cash obtained from any source (including
without limitation another lender) other than the operation of Borrower's
business in the ordinary course, Borrower shall pay Bank a fee in the amount of
$400,000. In the event that at any time prior to June 1, 1999 Borrower should
receive a bona fide commitment for refinancing of any of the Loans, Borrower
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shall notify Bank thereof in writing, and Bank shall have the right of first
refusal to provide financing to Borrower on the same general terms as are
provided in such commitment, and Bank shall notify Borrower within two weeks
after receipt of such notification whether Bank elects to exercise such right.
2.9 Letters of Credit. Bank proposes, subject to the terms and conditions
of this Agreement, to issue commercial and/or standby letters of credit for the
account of Borrower (the "Letters of Credit"), which shall be secured by the
Collateral, shall have expiration dates that are not later than the Revolving
Credit Maturity Date, and shall be in such amounts as Borrower may from time to
time request and as are acceptable to Bank; provided, however, that in no event
shall the total aggregate face amount of all Letters of Credit outstanding at
any time exceed the difference between (a) the Maximum Revolving Loan Amount and
(b) the outstanding principal balance of the Revolving Credit Loans. Bank's
approval or disapproval of each Letter of Credit shall be made no later than
five business days after a written request from Borrower is received by Bank
accompanied by an original of Bank's standard form letter of credit application
and agreement duly executed by Borrower. Each Letter of Credit shall be fully
reserved from and subject to the limitations of the availability to Borrower of
the Revolving Credit Loans, and upon any draw under a Letter of Credit, the
amount so drawn shall immediately and automatically be deemed a Revolving Credit
Loan advance by Bank to Borrower hereunder. Borrower shall pay Bank a per annum
fee in the amount of 1.5% of the face amount of each standby Letter of Credit
and shall pay Bank's standard fee for each commercial Letter of Credit, as well
as Bank's customary fees ancillary to the issuance, transfer, cancellation and
payment of letters of credit; such fees shall be due and payable upon the
issuance, transfer, cancellation or payment, as applicable, of such Letter of
Credit.
2.10 Use of Proceeds. Borrower shall use the proceeds of Term Loan A only
for the purpose of financing capital expenditures and shall use the proceeds of
the Revolving Credit Loans and Term Loan B only for refinancing existing loans
and providing for future working capital needs.
3. Security for the Obligations.
3.1 Grant of Security Interest. To secure the payment and performance of
all of the Obligations, as herein defined, Borrower hereby grants to Bank a
continuing security interest in and assigns to Bank all of the Collateral.
3.2 Additional Security. The full and timely payment and performance of all
of the Obligations shall be further secured by (a) the payment guaranty of
Rosenbaum in substantially the form of Exhibit D attached hereto (the "Rosenbaum
Guaranty"); (b) the payment guaranty of Robert Alexander in
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substantially the form of Exhibit E attached hereto (the "Robert Alexander
Guaranty"); (c) the payment guaranty of Take-Two in substantially the form of
Exhibit F attached hereto (the "Take-Two Guaranty"); (d) an assignment of the
proceeds of a $1,000,000 insurance policy on the life of Rosenbaum as previously
provided to Bank (the "Rosenbaum Life Insurance Assignment"), and in the event
of the death of Rosenbaum, the proceeds of the insurance thereunder shall be
applied to the Obligations in such order of application as Bank may, in its sole
discretion, elect; (e) an assignment of the proceeds of a $2,000,000 insurance
policy on the life of Robert Alexander as previously provided to Bank (the
"Robert Alexander Life Insurance Assignment"), and in the event of the death of
Robert Alexander, proceeds of the insurance thereunder shall be applied to the
Obligations in such order of application as Bank may, in its sole discretion,
elect; and (f) an assignment of the proceeds of a $2,000,000 insurance policy on
the life of Nicholas Alexander pursuant to an Assignment of Life Insurance
Policy as Collateral in substantially the form of Exhibit G attached hereto (the
"Nicholas Alexander Life Insurance Assignment"), which shall be duly completed,
executed and delivered to Bank within 60 days after the date hereof, together
with the original life insurance policy therefor and evidence of the payment of
all premiums due thereon, and in the event of the death of Nicholas Alexander,
the proceeds of the insurance thereunder shall be applied to the Obligations in
such order of application as Bank may, in its sole discretion, elect. The
Rosenbaum Guaranty and the Robert Alexander Guaranty shall be released at such
time after December 1, 1998, if any, as: (i) Take-Two has provided at least
$2,000,000 in capital (in addition to any capital provided prior to the date
hereof or contemporaneously with the closing of the transactions contemplated
hereunder) or Subordinated Debt to Borrower, (ii) Borrower's Consolidated
Tangible Net Worth (as hereinafter defined) as reflected in Borrower's financial
statements provided to Bank pursuant to Section 5.4 as of the end of any
calendar quarter, commencing with the calendar quarter ended December 31, 1998,
is at least $5,000,000, and (iii) no Event of Default hereunder has occurred.
4. Representations and Warranties. Borrower hereby represents and warrants
to Bank that:
4.1 (a) Organization and Authority. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has the corporate power and authority to conduct its business as now
conducted and as proposed to be conducted while this Agreement is in effect; (b)
the execution and delivery of this Agreement, the Notes and the other Loan
Documents to which Borrower is a party and the performance of the transactions
contemplated hereby and thereby are within the corporate authority of Borrower
and have been duly authorized by all proper and necessary corporate
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action; (c) the execution and delivery of this Agreement, the Notes and the
other Loan Documents to which Borrower is a party and the performance of the
transactions contemplated hereby and thereby will not violate or contravene any
provisions of law or the articles of incorporation or code of regulations of
Borrower, or result in a breach or default in respect of the terms of any other
agreement to which Borrower is a party or by which it is bound, which breach or
default would result in the creation, imposition or enforcement of any lien
against any of the Collateral, or would have a material adverse affect on the
conduct of Borrower's business as it is now being conducted and proposed to be
conducted while this Agreement is in effect, or would otherwise impair the value
of the security interest granted to Bank hereunder; and (d) Borrower is duly
qualified as a foreign corporation and is in good standing and duly authorized
to do business in every jurisdiction where the nature of its properties or the
conduct of its business requires such qualification and authorization.
4.2 Binding Effect of Documents. This Agreement, the Notes and the other
Loan Documents to which it is a party are legal and binding obligations of
Borrower enforceable in accordance with their terms.
4.3 Government Consent. The execution and delivery of this Agreement, the
Notes and the other Loan Documents to which it is a party and the performance of
the transactions contemplated hereby and thereby do not require any approval or
consent of any governmental agency or authority, or of any other party.
4.4 Financial Statements. Borrower has delivered to Bank copies of its
audited financial statements as of and for the year ending December 31, 1997 and
its internally-prepared financial statements as of and for the interim period
ending July 31, 1998. All of these financial statements are true and correct,
are in accordance with the respective books of account and records of Borrower
and its subsidiaries (if any) and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods, and accurately present the financial condition of Borrower
and its subsidiaries (if any) and their assets and liabilities and the results
of their operations as at such date.
4.5 No Change in Financial Condition. Since the ending date of the interim
financial statements described in Section 4.4, there has been no change in the
assets, liabilities, financial condition or operation of Borrower, other than
changes in the ordinary course of business, the effect of which have not,
individually or in the aggregate, been materially adverse.
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4.6 No Other Liabilities. Except to the extent reflected in the interim
financial statements described in Section 4.4 or as otherwise disclosed to Bank
by Borrower in writing, Borrower, as of the date of this Agreement, does not
know or have reasonable grounds to know of any basis for the assertion against
it of any material liabilities or obligations of any nature, direct or indirect,
accrued, absolute or contingent, including, without limitation, liabilities for
taxes then due or to become due whether incurred in respect of or measured by
the income of Borrower for any period prior to the date of this Agreement or
arising out of transactions entered into, or any state of facts existing, prior
thereto.
4.7 Taxes. Borrower has filed all federal, state, local and other tax
returns and reports required to be filed by it and such returns and reports are
true and correct. Borrower has paid all taxes, assessments and other
governmental charges lawfully levied or imposed on or against it or its
properties, other than those presently payable without penalty or interest.
4.8 No Litigation. Except as reflected on Schedule 4.8 attached hereto,
there is no litigation or proceeding or governmental investigation pending or,
to the knowledge of Borrower, threatened against or relating to Borrower, its
properties or business which is not reflected in the interim financial
statements described in Section 4.4.
4.9 Compliance with Laws. Borrower is not, to its knowledge, in violation
of or default under any statute, regulation, license, permit, order, writ,
injunction or decree of any government, governmental department, commission,
board, bureau, agency, instrumentality or court, which violation or default
would have a material adverse effect on the business, properties or condition,
financial or otherwise, of Borrower.
4.10 No Default. Borrower is not, to its knowledge, in default under a
material order, writ, judgment, injunction, decree, indenture, agreement, lease
or other instrument or contract, which default would have a material adverse
effect on the business, properties or condition, financial or otherwise, of
Borrower, or in the performance of any covenants or conditions respecting any of
its indebtedness, and no holder of any indebtedness of Borrower has given notice
of any asserted default thereunder, and no liquidation or dissolution of
Borrower and no receivership, insolvency, bankruptcy, reorganization or other
similar proceedings relative to Borrower or its properties is pending or, to the
knowledge of Borrower, is threatened against Borrower.
4.11 Location of Collateral. Borrower maintains places of business and owns
collateral only at 2909 Crescentville Road, West Chester, Ohio 45069 and
maintains its books of account and records, including all records concerning
Collateral, only at 2909 Crescentville Road, West Chester, Ohio 45069.
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Borrower maintains its chief executive office at 2909 Crescentville Road, West
Chester, Ohio 45069.
4.12 Title to Collateral. With respect to the Collateral, at the time the
Collateral becomes subject to Bank's security interest, Borrower is and at all
times will be the sole owner of and have good and marketable title to the
Collateral, free from all liens, encumbrances and security interests in favor of
any person other than Bank except Permitted Liens and except as reflected on
Schedule 4.12 attached hereto, and has full right and power to grant Bank a
security interest therein. All information furnished to Bank concerning the
Collateral is and will be complete, accurate and correct in all material
respects when furnished.
4.13 Rights of Borrower to Accounts. As to each and every Account (a) it is
a bona fide existing obligation, valid and enforceable against the Debtor for a
sum certain for sales of goods shipped or delivered, or goods leased, or
services rendered in the ordinary course of business; (b) all supporting
documents, instruments, chattel paper and other evidence of indebtedness, if
any, delivered to Bank are complete and correct and valid and enforceable in
accordance with their terms, and all signatures and endorsements that appear
thereon are genuine, and all signatories and endorsers have full capacity to
contract; (c) the Debtor is liable for and is obligated to make payment of the
amount expressed in such Account according to its terms; (d) it will be subject
to no discount, allowance or special terms of payment without the prior approval
of Bank, except for discounts, allowances and special terms of payments offered
in the ordinary course of business; (e) with respect to each Eligible Account,
it is subject to no dispute, defense or offset, real or claimed; (f) it is not
subject to any prohibition or limitation upon assignment; (g) Borrower has full
right and power to grant Bank a security interest therein and the security
interest granted in such Account to Bank in Section 3 hereof is a valid first
security interest which will inure to the benefit of Bank without further
action. The warranties set out herein shall be deemed to have been made with
respect to each and every Account now owned or hereafter acquired by Borrower.
4.14 Rights of Borrower in Inventory. (a) The Inventory is and will be of
good and merchantable quality, free from defects and (b) none of the Inventory
is or will be stored with a bailee without the prior written consent of Bank.
4.15 Employee Benefit Plans. Borrower has complied with, and shall continue
to comply with, all applicable state and federal laws and regulations governing
employee benefit plans, including, but not limited to all regulations under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Borrower
has not received any notice to the effect that is not in full compliance with
any
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of the requirements of ERISA, and no fact or situation, including but not
limited to any "Reportable Event," or "Prohibited Transaction," as such terms
are defined in ERISA, exists which is or could in any way be construed as a
violation of ERISA in connection with any Plan. Borrower has complied with all
applicable provisions of ERISA, including minimum funding requirements, has made
all filings required to be made by Borrower or any of its Plans (now or at any
time in the past maintained) under ERISA, has not applied for any extensions of
time in which to make contributions to any Plan maintained (now or at any time
in the past) by it or to which it is, or has been, required to contribute, has
timely made all contributions and paid all premiums required to be paid to the
Pension Benefit Guaranty Corporation, and no matters are presently pending
before the United States Labor Department or the Internal Revenue Service
concerning any Plan maintained (now or at any time in the past) by Borrower to
which it is or was required to contribute. Each employee pension benefit plan
(as defined in Section 3 (2) of ERISA) maintained by Borrower is qualified and
tax exempt under the Internal Revenue Code. Borrower has never had any
obligation or liability with respect to a multi-employer plan as defined in
Section 4001 (a)(3) of ERISA.
4.16 Accuracy of Representations. No representation or warranty by or with
respect to Borrower contained herein or in any certificate or other document
furnished by Borrower pursuant hereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made.
4.17 Representations as Inducement to Bank. The foregoing representations and
warranties are made by Borrower with the knowledge and intention that Bank will
rely thereon, and shall survive the execution and delivery of this Agreement and
the making of all Loans hereunder. The receipt of Borrower of each Loan advance
shall constitute a representation and warranty by Borrower that the
representations and warranties of Borrower contained in this Section 4 are true
and correct as of the date of such Loan advance, except to the extent such
representations and warranties expressly relate to an earlier date.
5. Affirmative Covenants. Borrower covenants and agrees that until all of the
Obligations have been paid in full, unless Bank shall otherwise consent in
writing, it shall:
5.1 Books and Records. Maintain complete and accurate books of account and
records pertaining to the Collateral and the operations of Borrower, and all
such books of account and records shall be kept and maintained at the location
specified in Section 4.11. Borrower shall not move such books of account and
records or change its chief executive office or open any new office without
giving Bank at least 30
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days prior written notice. Prior to moving any of such books of account and
records or changing the location of its chief executive office or opening any
new office, Borrower shall execute and deliver to Bank financing statements
satisfactory to Bank. All such books of account and records and all financial
statements and reports furnished to Bank shall be maintained and prepared in
accordance with GAAP applied on a basis consistent with prior periods.
5.2 Access to Information. Grant Bank, or its representatives, full and
complete access to the Collateral and to all books of account, records,
correspondence and other papers relating to the Collateral during normal
business hours and the right to inspect, examine, verify and make abstracts from
the copies of such books of account, records, correspondence and other papers,
and to investigate such other records, activities and business of Borrower as
they may deem necessary or appropriate at the time.
5.3 Evidence of Accounts. Upon the creation of Accounts, or from time to
time as Bank may require, deliver to Bank schedules of all outstanding Accounts.
Such schedules shall be in form satisfactory to Bank and shall show the age of
such Accounts in intervals of not more than 30 days, and contain such other
information and be accompanied by such supporting documents as Bank may from
time to time prescribe. Borrower shall also deliver to Bank copies of Debtor's
invoices, evidences of shipment or delivery and such other schedules and
information as Bank may reasonably request. The items to be provided under this
Section are to be prepared and delivered to Bank from time to time solely for
its convenience in maintaining records of the Collateral and Borrower's failure
to give any of such items to Bank shall not affect, terminate, modify or
otherwise limit Bank's security interest granted herein.
5.4 Financial Statements. Deliver to Bank not more than 30 days after the
close of each month, or within such further time as Bank may permit,
consolidated and consolidating financial statements for Borrower and its
subsidiaries, including a balance sheet and related profit and loss statement,
prepared in accordance with GAAP (excluding footnotes and year-end adjustments
or accruals) by Borrower, which financial statements shall be accompanied by a
certification, signed by an officer of Borrower, certifying the accuracy of the
financial statements.
Deliver to Bank not more than 90 days after the close of each fiscal year
of Borrower, or within such further time as Bank may permit, consolidated and
consolidating audited financial statements for Borrower and its subsidiaries,
including a balance sheet and related profit and loss statement, prepared in
accordance with GAAP by independent certified public accountants acceptable to
Bank, who shall give their unqualified opinion with respect hereto.
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Deliver to Bank a copy of Take-Two's quarterly report on Form 10-Q promptly
after the filing thereof with the Securities Exchange Commission.
5.5 Other Information. Furnish to Bank such other financial and business
information and reports, including without limitation accounts receivable
agings, accounts payable agings, listings of inventory and borrowing base
reports, in form and substance satisfactory to Bank as and when Bank may from
time to time request.
5.6 Maintenance of Existence and Licenses. While this Agreement remains in
effect and until the Obligations have been paid in full, (a) maintain its
corporate existence in good standing; (b) make no material change in the nature
or character of its business; (c) maintain and keep in full force and effect all
licenses and permits necessary to the proper conduct of its business and (d) at
the request of Bank, qualify as a foreign corporation and obtain all requisite
licenses and permits in each state (other than the state of its incorporation)
where Borrower does business and is required to qualify.
5.7 Maintenance and Insurance of Properties. Maintain and keep all of its
properties, real and personal, in good working order, condition and repair and
insure and keep insured all such properties at all times against loss of damage
by fire, theft, and such other risks and hazards as are customarily insured
against by corporations in similar circumstances, or as Bank may specify from
time to time, with insurers and in amounts reasonably acceptable to Bank. If
Borrower fails to do so, Bank may obtain such insurance and charge the cost
thereof to Borrower's account and add it to the Obligations. Borrower agrees
that, if any loss should occur, the proceeds of all such insurance policies may
be applied to the payment of all or any part of the Obligations, as Bank may
direct. Bank shall be named loss payee, with a lender's loss payable
endorsement, on such insurance policies to the extent that such policies insure
the Collateral. All policies shall provide for at least 10 days prior written
notice of cancellation to Bank. Borrower shall deliver at least annually to
Bank, or sooner if requested by Bank, certificates of insurance evidencing
Borrower's compliance herewith. Bank or Bank's designated agent is hereby
irrevocably constituted and appointed Borrower's attorney-in-fact to (either in
the name of Borrower or in the name of Bank) make adjustments of all insurance
losses, sign all applications, releases and other papers necessary for the
collection of any such loss, make settlements and endorse and collect all
instruments payable to Borrower or issued in connection therewith; provided,
however, that so long as no Event of Default has occurred, Borrower may exercise
all of the foregoing rights relating to insurance losses.
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5.8 Liability Insurance. At all times, maintain in full force and effect
such liability insurance with respect to its activities and business
interruption and other insurance as may be reasonably required by Bank, such
insurance to be provided by insurer(s) acceptable to Bank, and if requested by
Bank, such insurance shall name Bank as an additional insured. Borrower shall
deliver at least annually to Bank, or sooner if requested by Bank, certificates
of insurance evidencing Borrower's compliance herewith.
5.9 Notice of Certain Events. Give prompt notice in writing to Bank of any
Event of Default hereunder, or of any condition which with the passage of time
or the giving of notice or both would give rise to an Event of Default, and of
any development, financial or otherwise, which would materially adversely affect
its business, properties or affairs or the ability of Borrower to perform its
obligations under this Agreement, the Notes or any of the other Loan Documents.
5.10 Payment of Taxes. Pay all taxes, assessments or governmental charges
lawfully levied or imposed on or against it and its properties prior to the date
when such taxes, assessments or charges shall become delinquent, unless Borrower
shall contest the validity thereof in good faith and shall post any bond or
other security required by applicable law or by Bank against the payment
thereof.
5.11 Dealings in Inventory. With respect to the Inventory (a) sell or
dispose of the Inventory only to buyers in the ordinary course of business, (b)
immediately notify Bank of any change in location of any of the Inventory and,
prior to any such change, execute and deliver to Bank such financing statements
satisfactory to Bank as Bank may request and (c) report, in form satisfactory to
Bank and with such frequency as determined by Bank, such information as Bank may
request regarding the Inventory.
5.12 Claims Against Borrower. Immediately upon learning thereof, report to
Bank any reclamation, return or repossession of goods, any claim or dispute
asserted by any Debtor or other obligor, and any other matters affecting the
value and enforceability or collectibility of any of the Collateral which have
not arisen in the ordinary course of business. In addition, Borrower shall, at
its sole cost and expense (including attorney's fees), settle any and all such
claims and disputes and indemnify and protect Bank against any liability, loss
or expense arising therefrom or out of any such reclamation, return or
repossession of goods, provided, however, if Bank shall so elect following the
occurrence of an Event of Default, it shall have the right at all times to
settle, compromise, adjust or litigate all claims or disputes directly with the
Debtor or other obligor upon such terms and conditions as it deems advisable and
charge all costs and expenses thereof (including attorneys' fees) to Borrower's
account and add them to the Obligations.
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5.13 Defense of Collateral. Defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein and
pay all costs and expenses (including attorneys' fees) incurred in connection
with such defense.
5.14 Financing Statements; Further Assurances. At the request of Bank,
execute and deliver such financing statements, documents and instruments, and
perform all other acts as Bank deems necessary or desirable, to carry out and
perform the intent and purpose of this Agreement, and pay, upon demand, all
expenses (including reasonable attorneys' fees) incurred by Bank in connection
therewith. A photocopy of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
5.15 Financial Covenants. Maintain the following financial covenants:
(a) Consolidated Tangible Net Worth at all times greater than (i)
$2,000,000 from the date hereof through November 30, 1998, (ii) $4,500,000
from December 1, 1998 through January 31, 1999 and (ii) $5,000,000 on and
after February 1, 1999.
(b) A ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth of not more than (i) 15:1 for the months of August through November,
inclusive, (ii) 10:1 for the months December through January, inclusive,
and (iii) 8:1 for the months of February through May, inclusive.
(c) Consolidated Net Working Capital of not less than $900,000.
(d) Consolidated Income Before Taxes of not less than (i) $250,000 for
the quarter ending October 31, 1998, (ii) $750,000 for the quarter ending
January 31, 1999 and (iii) $0 for the quarter ending April 30, 1999.
The following terms shall have the following meaning when used herein:
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean, at any time, all assets or liabilities, respectively, that
should, in accordance with GAAP, be classified as current assets or current
liabilities, respectively, on a consolidated balance sheet of Borrower and
its subsidiaries (if any).
"Consolidated Liabilities" shall mean all indebtedness, obligations
and other liabilities of Borrower, whether matured or unmatured, liquidated
or unliquidated, direct or contingent or joint or several, that should, in
accordance with GAAP, be classified as liabilities on a consolidated
balance sheet of Borrower and its subsidiaries (if any).
"Consolidated Net Working Capital" shall mean, at any time, the amount
by which Consolidated Current Assets exceed Consolidated Current
Liabilities.
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"Consolidated Tangible Net Worth" shall mean, at any time,
Stockholder's Equity, less the sum of (i) any surplus resulting from any
write-up of assets subsequent to December 31, 1996, (ii) goodwill,
including any amounts, however designated on a consolidated balance sheet
of Borrower and its subsidiaries, representing the excess of the purchase
price paid for assets or stock acquired over the value assigned thereto on
the books of Borrower, (iii) patents, trademarks, tradenames and
copyrights, (iv) any amount at which shares of capital stock of Borrower
appear as an asset on Borrower's balance sheet, (v) deferred expenses and
(vi) any other amount in respect of an intangible that should be classified
as an asset on a consolidated balance sheet of Borrower in accordance with
GAAP.
"Stockholder's Equity" shall mean, at any time, the aggregate of the
following amounts set forth on a consolidated balance sheet of Borrower and
its subsidiaries prepared in accordance with GAAP: (i) the par or stated
value of all outstanding capital stock, (ii) capital surplus, (iii)
retained earnings and (iv) Subordinated Debt.
"Consolidated Income Before Taxes" shall mean, at any time, the net
income before taxes of Borrower and its subsidiaries, as determined in
accordance with GAAP.
5.16 Maintenance of Bank Accounts. At Bank's option, maintain all of its
depository accounts with Bank, including without limitation, all demand deposit,
lock box, time deposit, concentration and zero balance accounts. A balance of at
least $20,000 shall be maintained in Borrower's operating account at all times.
5.17 Compliance. Comply in all material respects with all applicable laws,
rules, regulations and orders applicable to Borrower or its business, operations
or properties.
6. Negative Covenants. Borrower covenants and agrees that until the
Obligations have been paid in full, unless Bank shall consent in advance in
writing, it shall not and shall not permit any subsidiary to:
6.1 Sale of Assets or Merger. Discontinue its business or liquidate, sell,
transfer, lease, assign or otherwise dispose of a material part of its assets or
of the Collateral, by sale, merger, consolidation or otherwise, provided,
however, that it may sell in the ordinary course of business and for a full
consideration in money or money's worth, any product, merchandise or service
produced, marketed or furnished by it.
6.2 Liens and Encumbrances. Sell, assign, pledge, grant or suffer to exist
a security interest, lien, mortgage or other encumbrance on any of the
Collateral or any other properties or assets of Borrower to any person other
than Bank, or permit any lien, encumbrance or security interest to attach to any
of
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the Collateral or any other properties or assets of Borrower, except in favor of
Bank and except Permitted Liens, without the prior written consent of Bank.
6.3 Contingent Liabilities. Endorse, guarantee or become surety for the
obligations of any person, firm or corporation, except that Borrower may endorse
checks and negotiable instruments for collection or deposit in the ordinary
course of business.
6.4 Loans. Not make loans, advances or extensions of credit to others in
excess of $10,000 in aggregate without the prior written consent of Bank.
6.5 Distributions. Declare or pay any dividends or make any other payments
on its capital stock, issue, redeem, repurchase, retire or otherwise acquire,
directly or indirectly, any of its capital stock, or grant or issue any warrant,
right or option pertaining thereto or other security convertible into any of the
foregoing, or make any other distribution to its shareholders; provided,
however, that Borrower may distribute funds to its shareholders, no more
frequently than quarterly, in order to enable such shareholders to pay estimated
federal and state taxes on Borrower's taxable income for each taxable year of
Borrower. A fiscal year-end reconciliation of such distributions shall be made
taking into consideration the actual taxable income of Borrower each year. In
the event that it is determined that the shareholders have received
distributions in excess of those allowable under this Section 6.5, then the
excess amount received by any such shareholder shall be immediately repaid to
Borrower.
6.6 Dealings with Accounts. Compromise or discount any Account except for
ordinary trade discounts or allowances for prompt payment in the ordinary course
of Borrower's business, consistent with past practices.
6.7 Investments. Change its name, dissolve or consolidate or merge with any
other corporation or acquire or purchase any equity interest in any other
entity, including shares of stock of other corporations, or acquire or purchase
any assets or assume any obligations of any other entity , except that Borrower
is permitted to own notes and other receivables acquired in the ordinary course
of business.
6.8 Change in Management or Business. Change its management or its capital
structure or make any material change in any of its business objectives,
purposes and operations which might in any way adversely affect the repayment of
the Loans; provided, however that Bank's consent to any change in management
shall not be unreasonably withheld.
6.9 Change in Ownership. Permit to occur a change in record or beneficial
ownership of voting stock of Borrower which Bank, in its sole discretion, deems
material with respect to the control over Borrower, without the prior written
consent of Bank.
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6.10 Transaction with Affiliates. Enter into, or be a party to, any
transaction with any of Borrower's Affiliates, except in the ordinary course of
business, pursuant to the reasonable requirements of Borrower's business, and
upon fair and reasonable terms which are fully disclosed to Bank and are no less
favorable to Borrower than Borrower could obtain in a comparable arm's length
transaction with a person not an Affiliate of Borrower.
6.11 Indebtedness. Directly or indirectly create, incur, assume, guaranty
or be or remain liable with respect to any indebtedness, except for (a) the
Obligations, (b) any existing indebtedness disclosed in the financial statements
referenced in Section 4.4 hereof, (c) any purchase money indebtedness not to
exceed $20,000 in the aggregate, (d) any other indebtedness to which Bank has
consented in writing and (e) trade obligations arising in the normal course of
business.
7. Collection of Collateral and Notice of Assignment
7.1 Collections on Collateral. So long as Bank does not request that the
Debtors on the Collateral be notified of the consignment thereof to Bank or that
all collections be directed to a lock box at Bank, Borrower may make collections
on the Collateral. All collections on the Collateral shall be the property of
Bank, shall be held in trust for Bank by Borrower and shall not be commingled
with Borrower's other funds or be deposited in any bank account of Borrower
(except for the Cash Collateral Account), or used in any manner except to pay
the Obligations. Borrower shall immediately deposit all collections on the
Collateral in the Cash Collateral Account of Borrower maintained at Bank for
that purpose, over which Bank alone shall have the sole power of withdrawal. On
a daily basis, Bank will apply all or part of the collected balance of the Cash
Collateral Account against the Obligations, the amount, order and method of such
application to be in the sole discretion of Bank. In no event shall Bank be
obligated to apply any funds deposited in the Cash Collateral Account before the
first business day after the day of deposit. Any part of the collected balance
in the Cash Collateral Account which Bank elects not to apply to Borrower's
obligations may be paid over and deposited by Bank to Borrower's commercial
account. The crediting of items deposited in the Cash Collateral Account to the
reduction of the Obligations shall be conditioned upon final payment of the item
and if any item is not so paid, the amount of any credit given for it may be
charged to the Obligations or to any other deposit account of Borrower, whether
or not the item is returned.
7.2 Notice of Assignment. Bank shall have the right at any time following
an Event of Default to notify Debtors of its security interest in the Accounts
and to require payments to be made directly to Bank. Upon request of Bank at any
time following an Event of Default, Borrower will so notify the
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Debtors and will indicate on all billings to the Debtors that the Accounts are
payable to Bank. To facilitate direct collection, Borrower hereby appoints Bank
and any officer or employee of Bank, as Bank may from time to time designate, as
attorney-in-fact for Borrower to (a) receive, open and dispose of all mail
addressed to Borrower and take therefrom any payments on or proceeds of
Accounts; (b) take over Borrower's post office boxes or make other arrangements,
in which Borrower shall cooperate, to receive Borrower's mail, including
notifying the post office authorities to change the address for delivery of mail
addressed to Borrower to such address as Bank shall designate; (c) endorse the
name of Borrower in favor of Bank upon any and all checks, drafts, money orders,
notes, acceptances or other evidences or payment or Collateral that may come
into Bank's possession; (d) sign and endorse the name of Borrower on any invoice
or bill of lading relating to any of the Accounts, on verifications of Accounts
sent to any Debtor, to drafts against Debtors, to assignments of Accounts and to
notices to Debtors; and (e) do all acts and things necessary to carry out this
Agreement, including signing the name of Borrower on any instruments required by
law in connection with the transactions contemplated hereby and on financing
statements as permitted by the Uniform Commercial Code. Borrower hereby ratifies
and approves all acts of such attorneys-in-fact pursuant to this section, and
neither Bank nor any other such attorney-in-fact shall be liable for any acts of
commission or omission, or for any error of judgment or mistake of fact or law.
This power, being coupled with an interest, is irrevocable so long as any of the
Obligations remain unsatisfied.
7.3 Enforcement of Accounts. In the event Bank exercises its rights under
Section 7.2, Bank (a) shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any Accounts or any instruments received in payment thereof or for
any damage resulting therefrom; (b) may, without notice to or consent from
Borrower, sue upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts or any securities, instruments or insurance applicable thereto and/or
release the obligor thereon; and (c) is authorized to accept the return of the
goods represented by any of the Accounts, without notice to or consent by
Borrower, or without discharging or any way affecting the Obligations hereunder.
7.4 Returned or Rejected Goods. In the event Bank exercises its rights
under Section 7.2, upon receipt of any returned or rejected goods Borrower shall
immediately issue and deliver a copy of the credit memo to Bank with respect
thereto. Or, at Bank's election, Borrower shall set aside such goods, mark them
in Bank's name and hold them in trust for Bank at Borrower's expense and shall,
upon
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Bank's request, deliver such goods to Bank. Bank may sell or cause the goods to
be sold, at public or private sale, at such prices, to such purchasers and upon
such terms as Bank deems advisable. Borrower shall remain liable to Bank for any
deficiency and shall pay the costs and expenses of such sale, including
reasonable attorneys' fees.
7.5 Limitation of Bank's Liability. Bank shall not be liable for or
prejudiced by any loss, depreciation or other damage to Accounts or other
Collateral unless caused by Bank's willful and malicious act, and Bank shall
have no duty to take any action to preserve or collect any Account or other
Collateral.
7.6 Verification of Accounts. Bank may confirm and verify all Accounts in a
manner consistent with its usual practices at any time. Bank shall have no
obligation to disclose or discuss with Borrower the names or identities of any
Debtors from whom Bank obtains or requests information as to Accounts. Borrower
agrees to cooperate with Bank in the confirmation and verification of any
Accounts, or reconciling any discrepancy between those amounts verified by Bank
and information provided to Bank by Borrower.
8. Service Charges. In addition to the principal and interest on the Loans
and the reimbursement of expenses to Bank pursuant to this Agreement, Borrower
shall pay to Bank a monthly service charge for the services provided by Bank in
connection with this Agreement in the amount of $500.00. In addition to the
monthly service charge, Borrower shall pay to Bank a service charge of 3% per
annum on the excess amount for each day on which the outstanding principal
balance of the Revolving Credit Loans exceeds the Maximum Revolving Loan Amount.
All service charges shall be payable monthly on the due date for the payment of
principal and/or interest on the Loans.
9. One General Obligation: Cross Collateral. All Loans and advances by Bank
to Borrower under this Agreement and under all other agreements constitute one
loan, and all indebtedness and Obligations of Borrower to Bank under this and
under all other agreements, present and future, constitute one general
obligation secured by the Collateral and security held and to be held by Bank
hereunder and by virtue of all other assignments and security agreements between
Borrower and Bank now and hereafter existing. It is expressly understood and
agreed that all of the rights of Bank contained in this Agreement shall likewise
apply insofar as applicable to any modification of or supplement to this
Agreement and to any other agreements, present and future, between Bank and
Borrower.
10. Conditions Precedent. The agreement of Bank to make the Loans is
subject to the satisfaction prior to or concurrently with the making of the
Loans, of each of the following conditions precedent:
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10.1 Bank shall have received the following, each of which shall be
reasonably acceptable in form and substance to Bank:
(a) The Revolving Credit Note, duly executed and delivered to Bank;
(b) The Term Note B, duly executed and delivered to Bank;
(c) The Rosenbaum Guaranty, duly executed and delivered to Bank;
(d) The Robert Alexander Guaranty, duly executed and delivered to
Bank;
(e) The Take-Two Guaranty, duly executed and delivered to Bank;
(f) A Warrant Certificate for shares of Take-Two in substantially the
form of Exhibit H attached hereto (the "Warrant Certificate");
(g) Evidence, satisfactory to Bank, that Take-Two has provided at
least $500,000 of additional capital or Subordinated Debt to Borrower
contemporaneously with the closing of the transactions contemplated
hereunder;
(h) Payment to Bank of a closing fee in the amount of $50,000;
(i) An opinion or opinions from counsel to Borrower, Take-Two,
Rosenbaum and Robert Alexander, in form satisfactory to Bank and its
counsel, to the effect that: (i) Borrower is duly incorporated, validly
existing and in good standing under the laws of the State of Ohio, and
Take-Two is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware; (ii) Borrower has full power and
authority to carry on its business as presently conducted by it, to own and
operate the properties used in such business, and to execute and deliver
this Agreement, the Notes and the other Loan Documents to which it is a
party and to perform its obligations hereunder and thereunder, and Take-Two
has full power and authority to carry on its business as presently
conducted by it, to own and operate the properties used in such business,
and to execute and deliver the Take-Two Guaranty and the Warrant
Certificate and to perform its obligations thereunder; (iii) the execution
and delivery by Borrower of this Agreement, the Notes and the other Loan
Documents to which it is a party, and the performance by Borrower of its
obligations hereunder and thereunder, have been duly authorized by all
necessary corporate action, and are not in conflict with any provision of
law or any provision of the Articles of Incorporation or Regulations of
Borrower or, to such counsel's knowledge, with any agreement, order or
decree binding upon Borrower; the execution and delivery by Take-Two of the
Take- Two Guaranty and the Warrant Certificate, and the performance by
Take-Two of its obligations thereunder, have been duly authorized by all
necessary corporate action, and are not in conflict with any provision of
law or any provision of the Certificate of Incorporation or Bylaws of
Take-Two or, to such
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counsel's knowledge, with any agreement, order or decree binding upon
Take-Two; the execution and delivery by Rosenbaum of the Rosenbaum
Guaranty, and the performance by Rosenbaum his obligations thereunder, are
not in conflict with any provision of law or, to such counsel's knowledge,
with any agreement, order or decree binding upon Rosenbaum; and the
execution and delivery by Robert Alexander of the Robert Alexander
Guaranty, and the performance by Robert Alexander of his obligations
thereunder, are not in conflict with any provision of law or, to such
counsel's knowledge, with any agreement, order or decree binding upon
Robert Alexander; (iv) this Agreement, the Notes and the other Loan
Documents to which Borrower is a party have been duly authorized, executed
and delivered by Borrower and constitute the legal, valid and binding
obligation of Borrower, enforceable in accordance with their terms against
Borrower; the Take-Two Guaranty and the Warrant Certificate have been duly
authorized, executed and delivered by Take-Two and constitute the legal,
valid and binding obligation of Take-Two, enforceable in accordance with
their terms against Take-Two; the Rosenbaum Guaranty has been duly executed
and delivered by Rosenbaum and constitutes the legal, valid and binding
obligation of Rosenbaum, enforceable against Rosenbaum in accordance with
its terms; and the Robert Alexander Guaranty has been duly executed and
delivered by Robert Alexander and constitutes the legal, valid and binding
obligation of Robert Alexander, enforceable against Robert Alexander in
accordance with its terms; (v) no governmental or third party approvals,
authorizations, licenses or consents are required to be obtained in
connection with the execution and delivery by Borrower of this Agreement,
the Notes or the other Loan Documents to which it is a party, the execution
and delivery by Take-Two of the Take-Two Guaranty or the Warrant
Certificate, the execution and delivery by Rosenbaum of the Rosenbaum
Guaranty, or the execution and delivery by Robert Alexander of the Robert
Alexander Guaranty, or the performance by any of them of their respective
obligations in accordance therewith, or the exercise by Bank of its rights
thereunder; (vi) to such counsel's knowledge, there is no threatened or
pending legal or governmental proceeding or action to which any of
Borrower, Take-Two, Rosenbaum or Robert Alexander is a party or to which
any of its or his property is subject, which, if adversely determined,
could materially and adversely affect its or his condition, assets or
operation or result in an Event of Default under this Agreement; and (vii)
the shares of Common Stock, par value $.01 per share, of Take-Two to be
issued to Bank upon the exercise of the Warrants provided under the Warrant
Certificate have been duly authorized and, when issued in accordance with
the terms of the Warrant Certificate and upon payment in full of the
exercise price as provided therein, will be duly and validly issued and
outstanding, fully paid and nonassessable.
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(j) A copy of the resolutions of the Board of Directors of Borrower
authorizing (i) the execution, delivery and performance of this Agreement,
the Notes and the other Loan Documents to which Borrower is a party, (ii)
the borrowings contemplated hereunder and (iii) the granting by Borrower of
the liens and security interests pursuant to this Agreement, certified by
the President, Secretary or Assistant Secretary of Borrower as of the date
hereof as being in full force and effect and not amended, modified, revoked
or rescinded;
(k) A copy of the resolutions of the Board of Directors of Take-Two
authorizing the execution, delivery and performance of the Take-Two
Guaranty and the Warrant Certificate, certified by the Secretary or
Assistant Secretary of Take-Two as of the date hereof as being in full
force and effect and not amended, modified, revoked or rescinded;
(l) A certificate of the President, Secretary or Assistant Secretary
of Borrower dated as of the date hereof as to the incumbency and signature
of the officers of Borrower executing this Agreement, the Notes and the
other Loan Documents to which Borrower is a party;
(m) A certificate of the Secretary or Assistant Secretary of Take-Two
dated as of the date hereof as to the incumbency and signature of the
officers of Take-Two executing the Take-Two Guaranty, the Warrant Agreement
and the Warrant;
(n) Copies of (i) the Articles of Incorporation of Borrower certified
as correct and complete by the President, Secretary or Assistant Secretary
of Borrower as of the date hereof and by the Ohio Secretary of State as of
a recent date, (ii) the Regulations of Borrower certified as correct and
complete by the President, Secretary or Assistant Secretary of Borrower as
of the date hereof and (iii) a certificate of good standing of Borrower as
of a recent date from the Ohio Secretary of State;
(o) Copies of (i) the Certificate of Incorporation of Take-Two
certified as correct and complete by the Secretary or Assistant Secretary
of Take-Two as of the date hereof and by the Delaware Secretary of State as
of a recent date, (ii) the Bylaws of Take-Two certified as correct and
complete by the Secretary or Assistant Secretary of Take-Two as of the date
hereof, and (iii) a certificate of good standing of Take-Two as of a recent
date from the Delaware Secretary of State; and
(p) Borrower shall have delivered to Bank its internally-prepared
financial statements as of and for the interim period ending July 31, 1998.
10.2 Borrower shall have provided such other documents, instruments and
information, executed such other agreements and certificates, and generally
taken such other actions as Bank may reasonably require.
-25-
11. Events of Default and Remedies.
11.1 Event of Default. The following shall constitute Events of Default
under this Agreement, it being agreed that time is of the essence hereof: (a)
failure of Borrower to pay when due any of the Obligations; (b) failure of
Borrower to observe or perform any covenant contained in this Agreement, the
Notes, the other Loan Documents or any other agreement between Borrower and
Bank, and such default is not fully cured within 30 days after Bank has given
written notice thereof to Borrower; (c) any representation or warranty at any
time made orally or in this Agreement, the Notes, the other Loan Documents or
any other agreement between Borrower and Bank, or in any document or instrument
delivered to Bank pursuant to this Agreement, the Notes, the other Loan
Documents or any such other agreement is, or becomes, untrue or misleading in
any material respect; (d) acceleration of the maturity of any of the
Obligations; (e) Borrower shall be in default or breach under any material
obligation for the payment of borrowed money or for the payment of rent under
any lease agreement covering real or personal property, which default is not
cured within any applicable grace period; (f) failure of Borrower or any
Guarantor, after request by Bank, to furnish financial information or to permit
the inspection of its or his books of account and records; (g) suspension by
Borrower or any Guarantor of the operation of its or his present business, or
the insolvency of Borrower or any Guarantor, or the inability of Borrower or any
Guarantor to meet its or his debts as they mature, or its or his admission in
writing to such effect, or its or his calling any meeting of all or any of its
or his creditors or committing any act of bankruptcy, or the filing by or
against Borrower or any Guarantor of any petition under any provision of the
Bankruptcy Act, as amended, or the entry of any judgment or filing of any lien
against Borrower or any Guarantor; (h) there shall occur any material adverse
change in Borrower's condition or affairs (financial or otherwise) or in that of
any endorser, Guarantor or surety for any of the Obligations; (i) loss, theft,
damage, destruction or encumbrance of or on any of the Collateral or any levy,
seizure or attachment thereof; (j) any Guarantor of the Obligations denies its
or his obligation to guarantee any Obligations then existing or attempts to
limit or terminate its or his obligation to guarantee any future Obligations,
including future Loan advances; and (k) the death of any co-maker, Guarantor or
surety of the Loans if, within fifteen (15) days after the date of such death,
Borrower has failed to satisfy Bank, in the exercise of Bank's sole discretion,
that such death will not adversely affect Borrower's business operations.
11.2 Rights of Bank upon Default. Upon the occurrence of an Event of
Default described in Section 11.1, Bank at its option may: (a) declare the
Obligations of Borrower immediately due and
-26-
payable (except upon the occurrence of any Event of Default described in Section
11.1(g), the Obligations shall automatically become due and payable), without
presentment, notice, protest or demand of any kind for the payment of all or any
part of the Obligations (all of which are expressly waived by Borrower) and
exercise all of its rights and remedies against Borrower and any Collateral
provided in this Agreement, the Notes, the other Loan Documents or any other
agreement between Borrower and Bank, at law or in equity and (b) exercise all
rights granted to a secured party under the Ohio Uniform Commercial Code or
otherwise. Upon the occurrence of an Event of Default, or in the event of
non-payment of the Loan when due in the case of a demand Loan, Bank may take
possession of the Collateral, or any part thereof, and Borrower hereby grants
Bank authority to enter upon any premises on which the Collateral may be
situated, and remove the Collateral from such premises or use such premises,
together with the materials, supplies, books and records of Borrower, to
maintain possession and/or the condition of the Collateral and to prepare the
Collateral for sale. Borrower shall, upon demand by Bank, assemble the
Collateral and make it available at a place designated by Bank which is
reasonably convenient to both parties. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Bank will give Borrower reasonable notice of the time and
place of any public sale thereof or of the time after which any private sales or
other intended disposition thereof is to be made. The requirement of reasonable
notice shall be met if such notice is mailed, postage prepaid, to the address of
Borrower shown at the beginning of this Agreement at least 5 days prior to the
time of such sale or disposition. Bank shall have the widest possible latitude
to preserve and protect the Collateral and Bank's security interest therein, and
Bank, at its option, shall have the right to appointment of a receiver for the
preservation, possession, protection and disposition of all or any part of the
Collateral and the collection and protection for Bank of any proceeds of use or
disposition of the Collateral and to do any other thing and exercise any other
right or remedy which Bank may, with or without judicial process, do or
exercise.
11.3 Application of Proceeds. Bank shall have the right to apply the
proceeds of any disposition of the Collateral to the payment of the Obligations
in such order of application as Bank may, in its sole discretion, elect. Bank
shall have no obligation to marshall any assets in favor of Borrower or any
other party.
11.4 Remedies Cumulative. The rights, options and remedies of Bank shall be
cumulative and no failure or delay by Bank in exercising any right, option or
remedy shall be deemed a waiver thereof or of any other right, option or remedy,
or waiver of any Event of Default hereunder, nor shall any single
-27-
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. Bank shall not be deemed to have waived any of Bank's rights
hereunder or under any other agreement, instrument or paper signed by Borrower
unless such waiver be in writing and signed by Bank.
12. Miscellaneous
12.1 Governing Law; Jurisdiction and Venue. The provisions of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Ohio. Bank and Borrower hereby designate all courts of record
sitting in Cincinnati, Ohio, both state and federal, as forums where any action,
suit or proceeding in respect of or arising out of this Agreement or the
transactions contemplated by this Agreement may be prosecuted as to all parties,
their successors and assigns, and by the foregoing designation Bank and Borrower
consent to the jurisdiction and venue of such courts.
12.2 MUTUAL WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR BANK TO EXTEND CREDIT TO BORROWER AND FOR BORROWER TO BORROW FROM BANK, AND
AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL, BORROWER AND BANK HEREBY
EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING
TO THIS AGREEMENT OR ARISING IN ANY WAY FROM THE OBLIGATIONS.
12.3 Other Waivers. Borrower waives notice of nonpayment, demand, notice of
demand, presentment, protest and notice of protest with respect to the
Obligations, or notice of acceptance hereof, notice of Loans made, credit
extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
12.4 Collection Costs. All costs and expenses incurred by Bank to obtain,
enforce or preserve the security interests granted by this Agreement or the
other Loan Documents and to collect the Obligations, including, without
limitation, stationery and postage, telephone and telegraph, secretarial and
clerical expenses, the fees or salaries of any collection agents utilized, all
costs to maintain and preserve the Collateral and all reasonable attorneys' fees
and legal expenses incurred in obtaining or enforcing payment of any of the
Obligations or foreclosing Bank's security interest in any of the Collateral,
whether through judicial proceedings or otherwise, or in enforcing or protecting
its rights and interests under this Agreement, the Notes or any other Loan
Document, or in protecting the rights of any holder or holders with respect
thereto, or in defending or prosecuting any actions or proceedings arising out
of or relating to Bank's transactions with Borrower, shall be paid by Borrower
to Bank, upon demand, or, at Bank's election, charged to Borrower's account and
added to the Obligations, and Bank may take
-28-
judgment against Borrower for all such costs, expenses and fees in addition to
all other amounts due from Borrower hereunder.
12.5 Expenses. Borrower shall reimburse Bank for all out-of-pocket costs
and expenses incurred by Bank in connection with the preparation of this
Agreement, the Notes and the other Loan Documents and the making of the Loans
hereunder, including all reasonable attorneys' fees and legal expenses, and for
all UCC search, filing, recording and other costs connected with the perfection
of Bank's security interest in the Collateral.
12.6 Notices. All notices, requests, directions, demands, waivers and other
communications provided for herein shall be in writing and shall be deemed to
have been given or made when delivered personally, by telecopy (if to Borrower,
at (513) 326-2853, and if to Bank, at (513) 579-2201), or sent by registered or
certified mail, postage prepaid and return receipt requested, addressed to
Borrower or Bank, as the case may be, at their respective addresses set forth at
the beginning of this Agreement (if to Borrower, Attention: Nicholas A.
Alexander, and if to Bank, Attention: John D. Rentz). Notices of changes of
address shall be given in the same manner.
12.7 Severability. Any provision of this Agreement which is prohibited and
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
12.8 Entire Agreement, Modification, Benefit. This Agreement shall
constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified, deleted or
amended in any manner except by agreement in writing executed by the parties.
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
assigns, provided, however, that Borrower shall not assign or transfer its
rights hereunder.
12.9 Construction. All references in this Agreement to the single number
and neuter gender shall be deemed to mean and include the plural number and all
genders, and vice versa, unless the context shall otherwise require.
12.10 Headings. The underlined headings contained herein are for
convenience only and shall not affect the interpretation of this Agreement.
12.11 Counterparts. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original.
-29-
12.12 Nonliability of Bank. The relationship between Borrower and Bank
shall be solely that of borrower and lender. Bank shall not have any fiduciary
responsibilities to Borrower. Bank undertakes no responsibility to Borrower to
review or inform Borrower of any matter in connection with any phase of
Borrower's business or operations.
12.13 Limitation of Liability. No claim may be made by Borrower against
Bank, or the Affiliates, directors, officers, employees, attorneys or agents of
Bank, for any special, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
12.14 Warrant of Attorney. Borrower authorizes any attorney at law,
including an attorney engaged by Bank, to appear in any court of record in the
State of Ohio or any other State or Territory of the United States, after the
occurrence of an Event of Default hereunder, and waive the issuance and service
of process and confess judgment against Borrower in favor of Bank, for the
amount of the Obligations then appearing due, together with costs of suit and,
thereupon, to release all errors and waive all rights of appeal and stay of
execution, but no such judgment or judgments against Borrower shall be a bar to
a subsequent judgment or judgments against any one or more than one of persons
against whom judgment has not been obtained hereon. Borrower hereby expressly
waives any conflict of interest that Bank's attorney may have in confessing such
judgment against Borrower and expressly consents to the confessing attorney
receiving a legal fee from the holder for confessing such judgment against
Borrower. This warrant of attorney to confess judgment is a joint and several
warrant of attorney. The foregoing warrant of attorney shall survive any
judgment; and if any judgment be vacated for any reason, Bank nevertheless may
thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against Borrower.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers as of the date first
set forth above.
WARNING-BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
JACK OF ALL GAMES, INC.
BY:________________________________________
TITLE:_____________________________________
BY:________________________________________
TITLE:_____________________________________
ATTEST:____________________________________
Secretary or Assistant Secretary
THE PROVIDENT BANK
BY:________________________________________
TITLE:_____________________________________
COMMERCIAL LOAN
AMENDED AND RESTATED PROMISSORY NOTE
$20,000,000.00
Cincinnati, Ohio August 31, 1998
The undersigned, for value received, promises to pay to the order of The
Provident Bank, at any of its offices, the sum of Twenty Million Dollars
($20,000,000.00), together with interest until maturity at the fluctuating rate
equal to The Provident Bank Prime Rate plus one and one quarter percent (1.25%)
per year computed on the basis of a year of 360 days for the actual number of
days elapsed, and after an Event of Default or maturity, whether at stated
maturity or by acceleration, at a rate four (4) percentage points greater than
the stated rate (the "Default Rate"). Interest payments shall be due and payable
monthly commencing on September 1, 1998, and on the first day of each month
thereafter and at maturity. Principal shall be due and payable in full on or
before June 1, 1999.
The undersigned hereby states that the purpose of the loans evidenced by
this Note is to refinance existing loans and provide for future working capital
needs. This Note amends and restates that certain Promissory Note in the
original principal amount of $15,500,000.00 dated as of August 27, 1997 given by
the undersigned to The Provident Bank (as amended from time to time) and that
certain Promissory Note in the original principal amount of $2,000,000.00 dated
as of August 19, 1998 given by the undersigned to The Provident Bank; amounts
outstanding as of the date hereof under such Promissory Notes shall not be
deemed cancelled or satisfied, but shall be evidenced by this Note instead of by
such Promissory Notes. This Note is issued and secured by the Second Amended and
Restated Loan and Security Agreement of even date herewith between the
undersigned and The Provident Bank (as amended, modified and supplemented from
time to time, the "Loan Agreement") and is further evidenced and secured by
additional Loan Documents (as defined in the Loan Agreement).
This Note evidences a revolving credit. Subject to the terms hereof, of the
Loan Agreement and of the other Loan Documents and until maturity, the
undersigned may borrow and reborrow from the holder and the holder shall,
provided no Event of Default has occurred, lend and relend to the undersigned
such amounts not to exceed the Maximum Revolving Loan Amount (as defined in the
Loan Agreement) as the undersigned may at any time and from time to time request
upon satisfactory notice to the holder.
If any payment of principal or interest is not paid when due or if an Event
of Default occurs as defined in the Loan Agreement or other Loan Documents, this
Note shall, at the option of its holder, become immediately due and payable
(except upon the occurrence of an Event of Default described in Section 11.1(g)
of the Loan Agreement, the same shall automatically become due and payable),
without demand or notice.
In the event the undersigned prepays the principal amount of this Note in
part prior to the maturity date hereof with cash obtained from any source
(including without limitation another lender) other than the operation of the
undersigned's business in the ordinary course, the undersigned shall pay the
holder hereof a fee in the amount of 2% of the amount so prepaid, and in the
event that the undersigned prepays the principal amount of this Note in full
prior to the maturity date hereof with cash obtained from any source (including
without limitation another lender) other than the operation of the undersigned's
business in the ordinary course, the undersigned shall pay the holder hereof a
fee in the amount of $400,000.
As collateral security for the payment of the amounts from time to time
owing hereunder, the undersigned hereby grants to the holder a security interest
in (i) all property in which the holder now or hereafter holds a security
interest pursuant to any and all assignments, pledges and security agreements,
including the Loan Agreement and Loan Documents, between the undersigned and the
holder and (ii) all accounts, securities and properties now or hereafter in the
possession of the holder and in which the undersigned has any interest. Upon
this Note becoming due under any of its terms and provisions, and not being
fully paid and satisfied, the total sum then due hereunder may, at any time and
from time to time, be charged against any account or accounts maintained with
the holder hereof by the undersigned, without notice to or further consent from
it, and the undersigned agrees to be and remain liable for all remaining
indebtedness represented by this Note in excess of the amount or amounts so
applied. The undersigned and the holder intend that this indebtedness shall be
secured by any and all mortgages hereafter granted by the undersigned in favor
of the holder.
There will be a minimum finance charge of $50.00 for each billing period.
Prime Rate is that annual percentage rate of interest which is established by
The Provident Bank from time to time as its prime rate, whether or not such rate
is publicly announced, and which provides a base to which loan rates may be
referenced. Prime Rate is not necessarily the lowest lending rate of The
Provident
Bank. The interest rate on this Note will change each time and as of the date
that the Prime Rate changes. If any payment of principal or interest is not paid
when due or if the undersigned shall otherwise default in the performance of its
obligations hereunder or under any other note or agreement with the holder, the
holder at its option, may charge and collect, or add to the unpaid balance
hereof, a late charge up to the greater of $250 or .1% of the unpaid balance of
this Note at the time of such delinquency for each such delinquency to cover the
extra expense incident to handling delinquent accounts, and/or increase the
interest rate on the unpaid balance to the Default Rate.
The undersigned (i) waives presentment, demand, notice of demand, protest,
notice of protest and notice of dishonor and any other notice required to be
given by law in connection with the delivery, acceptance, performance, default
or enforcement of this Note, of any indorsement or guaranty of this Note or of
any document or instrument evidencing any security for payment of this Note; and
(ii) consents to any and all delays, extensions, renewals or other modifications
of this Note or waivers of any term hereof or release or discharge by the holder
of any obligors hereof or release, substitution or exchange of any security for
the payment hereof or the failure to act on the part of the holder or any
indulgence shown by the holder, from time to time and in one or more instances,
(without notice to or further assent from the undersigned) and agrees that no
such action, failure to act or failure to exercise any right or remedy, on the
part of the holder shall in any way affect or impair the obligations of the
undersigned or be construed as a waiver by the holder of, or otherwise affect,
any of the holder's rights under this Note, under any indorsement or guaranty of
this Note or under any document or instrument evidencing any security for
payment of this Note. The undersigned further agrees to reimburse the holder for
all advances, charges, costs and expenses, including reasonable attorneys' fees,
incurred or paid in exercising any right, power or remedy conferred by this
Note, or in the enforcement thereof.
The undersigned authorizes any attorney at law, including an attorney
engaged by the holder, to appear in any court of record in the State of Ohio or
any other State or Territory of the United States, after the indebtedness
evidenced hereby, or any part thereof, becomes due and waive the issuance and
service of process and confess judgment against the undersigned in favor of the
holder, for the amount then appearing due, together with costs of suit and,
thereupon, to release all errors and waive all rights of appeal and stay of
execution. The foregoing warrant of attorney shall survive any judgment; and if
any judgment be vacated for any reason, the holder hereof nevertheless may
thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against the undersigned. The undersigned hereby expressly
waives any conflict of interest that the holder's attorney may have in
confessing such judgment against such parties and expressly consents to the
confessing attorney receiving a legal fee from the holder for confessing such
judgment against such parties.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF OHIO. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE HOLDER TO
EXTEND CREDIT TO THE UNDERSIGNED, AND AFTER HAVING THE OPPORTUNITY TO CONSULT
COUNSEL, THE UNDERSIGNED HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY LAWSUIT OR PROCEEDING RELATED TO THIS NOTE OR ARISING IN ANY WAY FROM ANY
INDEBTEDNESS OR OTHER TRANSACTIONS INVOLVING THE HOLDER AND THE UNDERSIGNED. THE
UNDERSIGNED HEREBY DESIGNATES ALL COURTS OF RECORD SITTING IN CINCINNATI, OHIO
AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS
WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF
THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL
PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE
UNDERSIGNED CONSENTS TO THE JURISDICTION AND VENUE OF SUCH COURTS.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
set forth above.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
JACK OF ALL GAMES, INC.
By:___________________________________________
Its:__________________________________________
By:___________________________________________
Its:__________________________________________
COMMERCIAL LOAN
AMENDED AND RESTATED PROMISSORY NOTE
$2,000,000.00
Cincinnati, Ohio August 31, 1998
The undersigned, for value received, promises to pay to the order of The
Provident Bank, at any of its offices, the sum of Two Million Dollars
($2,000,000.00), together with interest until maturity at the fixed rate of
16.5% per year computed on the basis of a year of 360 days for the actual number
of days elapsed, and after an Event of Default or maturity, whether at stated
maturity or by acceleration, at a rate four (4) percentage points greater than
the stated rate (the "Default Rate"). Interest payments shall be due and payable
monthly commencing on September 1, 1998, and on the first day of each month
thereafter and at maturity. Principal shall be due and payable in full on or
before June 1, 1999.
The undersigned hereby states that the purpose of the loan evidenced by
this Note is to refinance existing loans and provide for future working capital
needs. This Note amends and restates that certain Promissory Note in the
original principal amount of $2,000,000.00 dated as of August 27, 1997 given by
the undersigned to The Provident Bank; amounts outstanding as of the date hereof
under such Promissory Note shall not be deemed cancelled or satisfied, but shall
be evidenced by this Note instead of by such Promissory Note. This Note is
issued and secured by the Second Amended and Restated Loan and Security
Agreement of even date herewith between the undersigned and The Provident Bank
(as amended, modified and supplemented from time to time, the "Loan Agreement")
and is further evidenced and secured by additional Loan Documents (as defined in
the Loan Agreement).
If any payment of principal or interest is not paid when due or if an
Event of Default occurs as defined in the Loan Agreement or other Loan
Documents, this Note shall, at the option of its holder, become immediately due
and payable (except upon the occurrence of an Event of Default described in
Section 11.1(g) of the Loan Agreement, the same shall automatically become due
and payable), without demand or notice.
In the event the undersigned prepays the principal amount of this Note in
whole or in part prior to the maturity date hereof with cash obtained from any
source (including without limitation another lender) other than the operation of
the undersigned's business in the ordinary course, the undersigned shall pay the
holder hereof a fee in the amount of 2% of the amount so prepaid.
As collateral security for the payment of the amounts from time to time
owing hereunder, the undersigned hereby grants to the holder a security interest
in (i) all property in which the holder now or hereafter holds a security
interest pursuant to any and all assignments, pledges and security agreements,
including the Loan Agreement and Loan Documents, between the undersigned and the
holder and (ii) all accounts, securities and properties now or hereafter in the
possession of the holder and in which the undersigned has any interest. Upon
this Note becoming due under any of its terms and provisions, and not being
fully paid and satisfied, the total sum then due hereunder may, at any time and
from time to time, be charged against any account or accounts maintained with
the holder hereof by the undersigned, without notice to or further consent from
it, and the undersigned agrees to be and remain liable for all remaining
indebtedness represented by this Note in excess of the amount or amounts so
applied. The undersigned and the holder intend that this indebtedness shall be
secured by any and all mortgages hereafter granted by the undersigned in favor
of the holder.
There will be a minimum finance charge of $50.00 for each billing period.
Prime Rate is that annual percentage rate of interest which is established by
The Provident Bank from time to time as its prime rate, whether or not such rate
is publicly announced, and which provides a base to which loan rates may be
referenced. Prime Rate is not necessarily the lowest lending rate of The
Provident Bank. The interest rate on this Note will change each time and as of
the date that the Prime Rate changes. If any payment of principal or interest is
not paid when due or if the undersigned shall otherwise default in the
performance of its obligations hereunder or under any other note or agreement
with the holder, the holder at its option, may charge and collect, or add to the
unpaid balance hereof, a late charge up to the greater of $250 or .1% of the
unpaid balance of this Note at the time of such delinquency for each such
delinquency to cover the extra expense incident to handling delinquent accounts,
and/or increase the interest rate on the unpaid balance to the Default Rate.
The undersigned (i) waives presentment, demand, notice of demand, protest,
notice of protest and notice of dishonor and any other notice required to be
given by law in connection with the delivery, acceptance, performance, default
or enforcement of this Note, of any indorsement or guaranty of this Note or of
any document or instrument evidencing any security for payment of this Note; and
(ii)
consents to any and all delays, extensions, renewals or other modifications of
this Note or waivers of any term hereof or release or discharge by the holder of
any obligors hereof or release, substitution or exchange of any security for the
payment hereof or the failure to act on the part of the holder or any indulgence
shown by the holder, from time to time and in one or more instances, (without
notice to or further assent from the undersigned) and agrees that no such
action, failure to act or failure to exercise any right or remedy, on the part
of the holder shall in any way affect or impair the obligations of the
undersigned or be construed as a waiver by the holder of, or otherwise affect,
any of the holder's rights under this Note, under any indorsement or guaranty of
this Note or under any document or instrument evidencing any security for
payment of this Note. The undersigned further agrees to reimburse the holder for
all advances, charges, costs and expenses, including reasonable attorneys' fees,
incurred or paid in exercising any right, power or remedy conferred by this
Note, or in the enforcement thereof.
The undersigned authorizes any attorney at law, including an attorney
engaged by the holder, to appear in any court of record in the State of Ohio or
any other State or Territory of the United States, after the indebtedness
evidenced hereby, or any part thereof, becomes due and waive the issuance and
service of process and confess judgment against the undersigned in favor of the
holder, for the amount then appearing due, together with costs of suit and,
thereupon, to release all errors and waive all rights of appeal and stay of
execution. The foregoing warrant of attorney shall survive any judgment; and if
any judgment be vacated for any reason, the holder hereof nevertheless may
thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against the undersigned. The undersigned hereby expressly
waives any conflict of interest that the holder's attorney may have in
confessing such judgment against such parties and expressly consents to the
confessing attorney receiving a legal fee from the holder for confessing such
judgment against such parties.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF OHIO. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE HOLDER TO
EXTEND CREDIT TO THE UNDERSIGNED, AND AFTER HAVING THE OPPORTUNITY TO CONSULT
COUNSEL, THE UNDERSIGNED HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY LAWSUIT OR PROCEEDING RELATED TO THIS NOTE OR ARISING IN ANY WAY FROM ANY
INDEBTEDNESS OR OTHER TRANSACTIONS INVOLVING THE HOLDER AND THE UNDERSIGNED. THE
UNDERSIGNED HEREBY DESIGNATES ALL COURTS OF RECORD SITTING IN CINCINNATI, OHIO
AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS
WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF
THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL
PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE
UNDERSIGNED CONSENTS TO THE JURISDICTION AND VENUE OF SUCH COURTS.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
set forth above.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
JACK OF ALL GAMES, INC.
By:___________________________________________
Its:__________________________________________
By:___________________________________________
Its:__________________________________________
CONTINUING UNCONDITIONAL GUARANTY
To induce the Provident Bank ("Provident") to give and continue to give
credit to Jack of All Games, Inc. ("Borrower"), whether to Borrower alone or to
Borrower and others, and in consideration of the extension of such credit, the
undersigned, jointly and severally if more than one, hereby absolutely and
unconditionally guarantees prompt payment when due of any and all existing and
future indebtedness or liability of every kind, nature or character (including,
without limitation, principal, interest, all costs of collection and attorneys'
fees) owing to Provident by Borrower, all whether direct or indirect, absolute
or contingent and whether incurred as primary debtor, co-maker or guarantor
(hereinafter the "Indebtedness"). The undersigned further absolutely and
unconditionally guarantees the prompt performance when due of all terms,
covenants and conditions of any agreement between the Borrower and Provident
that relates to the Indebtedness. The undersigned undertakes this continuing,
absolute and unconditional guaranty of the aforementioned payment and
performance by Borrower notwithstanding that any portion of the Indebtedness
shall be void, voidable or unenforceable as between the Borrower and Provident.
It is understood that while the amount of credit that may be extended to, and
the amount of the Indebtedness or liability that may be incurred by Borrower is
not limited, the liability of each of the undersigned to Provident hereunder is
(check one of the following):
_X_ Unlimited in amount
| | Limited to _____________________________________________________
| | Limited to a principal amount of _______________, plus interest
thereon and all expenses reimbursable pursuant to the following
paragraph.
If none of the above boxes are checked, this guaranty shall be unlimited in
amount.
This absolute, continuing, unconditional and unrestricted guaranty is a
guaranty of payment and not a guaranty of collection. Upon Borrower's failure to
pay the Indebtedness promptly when due, Provident, at its sole option, may
proceed against the undersigned (or any one or more of them if more than one) to
collect the Indebtedness, with or without proceeding against the Borrower, any
co-maker or co-surety or co-guarantor, any indorser or any collateral held as
security for the Indebtedness. Any and all payments upon the Indebtedness made
by the Borrower, the undersigned, or any other person, and the proceeds of any
and all collateral securing the payment o the Indebtedness and this guaranty,
may be applied by Provident in whatever manner it may determine, it its sole
discretion. The undersigned agrees to reimburse Provident for all expenses of
any nature whatsoever including, without limitation, attorneys' fees incurred or
paid by Provident in exercising any right, power or remedy conferred by this
guaranty.
The obligations of the undersigned set forth in this guaranty shall extend
to all amendments, supplements, modifications, renewals, replacements or
extensions of the Indebtedness at any rate of interest. The liability of the
undersigned and the rights of Provident under this guaranty shall
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not be impaired or affected in any manner by, and the undersigned hereby
consents in advance to and waives any requirement of notice for, any (1)
disposition, impairment, release, surrender, substitution, or modification of
any collateral securing the Indebtedness or the obligations created by this
guaranty or any failure to perfect a security interest in any collateral; (2)
release (including adjudication or discharge in bankruptcy) or settlement with
any person primarily or secondarily liable for ht Indebtedness (including,
without limitation, any maker, indorser, guarantor or surety); (3) delay in
enforcement of payment of the Indebtedness or delay in enforcement of this
guaranty; (4) delay, omission, waiver, or forbearance in exercising any right or
power with respect to the Indebtedness or this guaranty; (5) defense arising
from the enforceability or validity of the Indebtedness or any part thereof or
the genuineness, enforceability or validity of any agreement relating thereto;
(6) defenses or counterclaims that the Borrower may assert on the Indebtedness,
including, but not limited to, failure of consideration, breach of warranty,
fraud, payment, statute of frauds, bankruptcy, infancy, statute of limitations,
lender liability, accord and satisfaction and usury; (7) extensions or
modifications of any indebtedness; or (8) other act or omission which might
constitute a legal or equitable discharge of the undersigned. The undersigned
waives all defenses based on suretyship or impairment of collateral,
presentment, protest, demand for payment, any right of set-off, notice of
dishonor or default, notice of acceptance of this guaranty, notice of the
incurring of any of
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the Indebtedness and notice of any other kind in connection with the
Indebtedness or this guaranty. The undersigned also waives any right to require
a commercially reasonable disposition of any collateral securing the
Indebtedness.
The undersigned agrees that in the event of (i) the dissolution or
insolvency of Borrower, (ii) the inability of Borrower to pay its debts as they
become due, (iii) an assignment by Borrower for the benefit of its creditors, or
(iv) the institution of any bankruptcy or other proceeding by or against the
Borrower alleging that Borrower is insolvent or unable to pay its debts as they
become due, and whether or not such event shall occur at a time when the
Indebtedness is not then due and payable, the undersigned shall pay the
Indebtedness to Provident promptly upon demand as if the Indebtedness was then
due and payable. The undersigned hereby waives, releases and discharges any
claim, right or remedy which the undersigned may now have or hereafter acquire
against Borrower that arises hereunder and/or from the performance by the
undersigned hereunder including, without limitation, any claim, remedy or right
of subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of Provident against Borrower or any
security which Provident 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.
The undersigned agrees that this guaranty shall continue to be effective or
be reinstated, as the case may be, if
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at any time payment, or any part thereof, of principal, interest or any other
amount with respect to the Indebtedness is avoided, rescinded or must otherwise
by restored by Provident upon the bankruptcy or reorganization of Borrower or
any other person or otherwise.
Upon any portion of the Indebtedness becoming due and not being fully paid
and satisfied, the total sum then due hereunder may immediately be charged
against any account or accounts maintained by the undersigned with Provident,
without notice to or further consent from the undersigned. The undersigned shall
promptly provide such financial information as the holder shall reasonably
request from time to time.
As a specially bargained inducement for Provident to extend credit to
Borrower: (i) THE UNDERSIGNED HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS GUARANTY OR ARISING IN ANY WAY FROM
THE INDEBTEDNESS OR TRANSACTIONS INVOLVING PROVIDENT AND THE BORROWER AND (ii)
THE UNDERSIGNED HEREBY DESIGNATE(S) ALL COURTS OF RECORD SITTING IN CINCINNATI,
OHIO AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS
FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT
OF THIS GUARANTY, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO
ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE
UNDERSIGNED CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH COURTS.
The undersigned authorizes any attorney at law, including an attorney
engaged by Provident, to appear in any
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court of record in the State of Ohio or any other State or Territory of the
United States, after the indebtedness evidenced hereby, or any part thereof,
becomes due and waive the issuance and service of process and confess judgment
against any one or more than one of the undersigned in favor of Provident, for
the amount then appearing due, together with costs of suit and, thereupon, to
release all errors and waive all rights of appeal and stay of execution, but no
such judgment or judgments against any one of the undersigned shall be a bar to
subsequent judgment or judgments against any one or more than one of such
persons against the undersigned. The undersigned hereby expressly waives any
conflict of interest that Provident's attorney may have in confessing such
judgment against the undersigned. This warrant of attorney to confess judgment
is a joint and several warrant of attorney. The forgoing warrant of attorney
shall survive any judgment, and if any judgment be vacated for any reason, the
holder thereof nevertheless may thereafter use the foregoing warrant of attorney
to obtain an additional judgment or judgments against the undersigned, or any
one or more of them.
This guaranty shall inure to the benefit of any bind the parties hereto,
their successors and assigns, and their legal representatives or heirs.
Provident may, at its option, assign this guaranty to any other party who is or
becomes the indorsee or assignee of any part of the Indebtedness or who is in
possession of or the bearer of any part of the Indebtedness that is payable to
the bearer, and the undersigned shall continue to be liable under this guaranty
to such other part to the extent of
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such indorsed, assigned or possessed indebtedness. This guaranty shall be deemed
to be a contract entered into and made pursuant to the laws of the State of Ohio
and shall in all respects be governed, construed, applied and enforced in
accordance with the laws of said state.
Each of the undersigned that is a corporation warrants that it has the
corporate power to execute this guaranty, that all the necessary corporate
actions have been taken to permit the undersigned to give this guaranty and that
the person(s) executing this guaranty is (are) duly empowered to do so on behalf
of the undersigned. Each of the undersigned that is a partnership warrants that
it has the power to execute this guaranty, that all necessary partnership
actions have been taken to permit the undersigned to give this guaranty, and
that the person(s) executing this guaranty is (are) duly empowered to do so on
behalf of the undersigned
Signed and delivered by the undersigned at Cincinnati, Ohio, on August 31,
1998.
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WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
WITNESS(S) GUARANTOR(S)
TAKE-TWO INTERACTIVE SOFTWARE, INC.
- --------------------------
Barbara A. Ras, Secretary
By:
-----------------------------
Ryan A. Brant, President
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