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EXHIBIT 1
to AMENDMENT NO. 1
to SCHEDULE 13D
WARRANT AGREEMENT
Dated as of
June 29, 1999
among
GT INTERACTIVE SOFTWARE CORP.
and
THE HOLDERS NAMED HEREIN
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WARRANT AGREEMENT, dated as of June 29, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, this Agreement"), by and
among GT INTERACTIVE SOFTWARE CORP., a Delaware corporation (the Company"), and
the Holders of the Warrants described herein.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement dated as of September 11,
1998 (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), by and among the Company, the lenders parties thereto
(collectively, the "Lenders") and the Administrative Agent, the Lenders made
certain loans and other extensions of credit to the Company as more particularly
described therein;
WHEREAS, the Company, the Lenders and the Administrative Agent have
agreed to execute a Second Amendment, Waiver and Agreement, dated as of June 29,
1999 (the "Second Amendment"), under the Credit Agreement to, among other
things, amend certain provisions thereof;
WHEREAS, in connection with the execution of the Second Amendment, the
Company, the Administrative Agent and the Holders have agreed to execute the
Commitment Letter, dated June 29, 1999 (the "Commitment Letter") and each of the
Holders have severally agreed to make a Subordinated Loan (as defined in the
Commitment Letter) to the Company;
WHEREAS, in consideration of, among other things, each of the Holder's
agreement to execute the Commitment Letter and make the Subordinated Loan, the
Company has agreed to execute and deliver this Agreement and issue warrants (the
"Warrants") to purchase from the Company shares of common stock of the Company;
and
WHEREAS, in connection with the issuance of the Warrants to the Holders
pursuant to this Agreement, the Company hereby confirms that the Warrant Shares
are entitled to the registration rights granted by the Company pursuant to the
Registration Rights Agreement, dated as of February 28, 1999, by and among the
Company and the persons and entities listed on Schedule 1 thereto (as amended,
restated, supplemented or otherwise modified, the "Registration Rights
Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
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ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person or any of its
Subsidiaries. The term "control" means (a) the power to vote ten percent (10%)
or more of the securities or other equity interests of a Person having ordinary
voting power, or (b) the possession, directly or indirectly, of any other power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in New York City are
authorized by law, regulation or executive order to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the date of
exercise over the Exercise Price per share and the denominator of which is the
Current Market Value per share of the Common Stock on the date of exercise.
"Combination" means an event or series of events in which the Company
consolidates with, merges with or into, or sells all or substantially all its
property and assets to, another Person or Persons.
"Common Stock" means the common stock, $0.01 par value, of the Company
together with any other equity securities that may be issued by the Company in
substitution therefor.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the fifth anniversary of the date hereof.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or
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other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Holder" means any holder of a Warrant under the terms of this Warrant
Agreement.
"Officer" means any of the following: the chief executive officer,
chief operating officer, chief financial officer or vice president of the
Company.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Rule 144" means Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any successor rule or regulation
hereinafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission (or any successor
thereto).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by or the management is otherwise
controlled by such Person (irrespective of whether, at the time, capital stock
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency).
"Transfer Restricted Securities" means the Warrants and the Warrant
Shares issued to Holders upon exercise of the Warrants, whether or not such
exercise has been effected. Each such security shall cease to be a Transfer
Restricted Security when the legend set forth in Section 2.5 is, or may be,
removed pursuant to Section 2.4(b)(v).
"Voting Stock" of a corporation means all classes of capital stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Warrant Certificates" means the certificates evidencing the Warrants
to be delivered pursuant to this Agreement, substantially in the form of Exhibit
A hereto.
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"Warrant Shares" means the shares of Common Stock of the Company to be
issued and received, or issued and received, as the case may be, upon exercise
of the Warrants.
SECTION 1.2 Other Definitions.
Term Defined in Section
---- ------------------
"Agreement".......................................... Preamble
"Cashless Exercise".................................. 3.4
"Certificate Register"............................... 2.3
"Company"............................................ Preamble
"Credit Agreement"................................... Recitals
"Current Market Value"............................... 4.8
"Exercise Price"..................................... 3.1
"Fair Value"......................................... 4.2
"Registration Rights Agreement"...................... Recitals
"Required Holders"................................... 5.5
"Successor Company".................................. 4.5
"Time of Determination".............................. 4.8
"Transfer Agent"..................................... 3.5
"Warrants"........................................... Recitals
SECTION 1.3 Rules of Construction. Unless the text otherwise requires.
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural and words in the
plural include the singular.
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ARTICLE 2.
Warrant Certificates
SECTION 2.1 Issuance and Dating. The Warrants shall initially be issued
on the date hereof. The Warrants shall be evidenced by Warrant Certificates
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company) and
shall bear the legend required by Section 2.5. Each Warrant shall be dated the
date of its execution by the Company. The terms of the Warrants set forth in
Exhibit A are part of the terms of this Agreement.
SECTION 2.2 Execution.
(a) With respect to the Warrants to be issued on the date hereof, one
or more Warrant Certificates representing the Warrants shall be executed on
behalf of the Company by manual or facsimile signature by one Officer and
attested by its Secretary or an Assistant Secretary under its corporate seal
which may be impressed, affixed, imprinted or reproduced on such Warrant
Certificates or may be in facsimile form.
(b) With respect to all other Warrants, the Warrant Certificates
therefor shall be executed on behalf of the Company by one Officer and attested
by its Secretary or an Assistant Secretary under its corporate seal. Such
signature may be manual or facsimile signature. The Company' seal shall be
impressed, affixed, imprinted or reproduced on the Warrant Certificates and may
be in facsimile form.
(c) Upon written order from any Holder, the Company shall execute and
deliver to such Holder Warrant Certificates registered in the name or names and
for such number of Warrants as shall be specified by such Holder in such order
in exchange for Warrant Certificate(s) then held by such Holder for a like
number of Warrants.
SECTION 2.3 Certificate Register. The Company shall keep a register
("Certificate Register") of the Warrant Certificates and of their transfer and
exchange. The Certificate Register shall show the names and addresses of the
respective Holders and the date and number of Warrants evidenced on the face of
each of the Warrant Certificates.
SECTION 2.4 Transfer and Exchange. (a) When Warrants are presented to
the Company with a request to register the transfer of such Warrants or to
exchange such Warrants for an equal number of Warrants of other authorized
denominations, the Company shall register the transfer or make the exchange as
requested; provided, however, that the Warrant Certificates representing such
Warrants surrendered for transfer or exchange:
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(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Warrants that are Transfer Restricted
Securities, shall be accompanied by the following additional
information and documents:
(A) a certificate from such Holder in substantially
the form of Exhibit C hereto certifying that:
(1) such securities are being delivered for
registration in the name of such Holder without
transfer;
(2) such securities are being transferred to
the Company;
(3) such securities are being transferred
pursuant to an effective registration statement under
the Securities Act; or
(4) such securities are being transferred
(w) to a "qualified institutional buyer" ("QIB") as
defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, if available, (x) in an
offshore transaction in accordance with Rule 904
under the Securities Act, (y) in a transaction
meeting the requirements of Rule 144 under the
Securities Act or (z) pursuant to another available
exemption from the registration requirements of the
Securities Act; and
(B) in the case of any transfer described under
clause (a)(ii)(A)(4)(x), (y) or (z) of this Section 2.4,
evidence reasonably satisfactory to the Company (which may
include an opinion of counsel) as to compliance with the
restrictions set forth in the legend in Section 2.5.
(b) (i) To permit registrations of transfers and exchanges,
the Company shall execute Warrant Certificates as required pursuant to the
provisions of this Section 2.4.
(ii) All Warrant Certificates issued upon any registration of
transfer or exchange of Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Agreement, as the Warrant Certificates
surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Company may deem and treat the Person in whose name any Warrant
is registered as the absolute owner of such Warrant and the Company shall not be
affected by notice to the contrary.
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(iv) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Warrant Certificate.
However, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrants pursuant to an
effective registration statement under the Securities Act, pursuant to Rule
144(k) under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required, the Company shall permit
the Holder thereof to exchange such Warrants for Warrants represented by Warrant
Certificates that do not bear the legend set forth in Section 2.5 and rescind
any restriction on the transfer of such Warrants.
SECTION 2.5 Legends. Except for Warrant Certificates delivered pursuant
to Section 2.4(b)(v) of this Agreement, each Warrant Certificate evidencing the
Warrants (and all Warrant Certificates issued in exchange therefor or
substitution thereof) and each certificate representing the Warrant Shares
(unless such Warrant Shares are not Transfer Restricted Securities) shall bear a
legend in substantially the following form (with any appropriate modification
for the Warrant Shares):
"THE WARRANTS AND THE COMMON STOCK (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER
THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN
OFFSHORE TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE
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EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Company or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue a replacement Warrant Certificate if
the requirements of Section 8-405 of the Uniform Commercial Code as in effect in
the State of New York are met. If required by the Company, such Holder shall
furnish an indemnity sufficient in the reasonable judgment of the Company to
protect the Company from any loss which it may suffer if a Warrant Certificate
is replaced. The Company may charge the Holder for its reasonable expenses in
replacing a Warrant Certificate. Every replacement Warrant Certificate is an
additional obligation of the Company.
SECTION 2.7 Cancellation. (a) In the event the Company shall purchase
or otherwise acquire Warrants, the Warrant Certificates in respect thereof shall
thereupon be delivered to the Company for cancellation.
(b) The Company shall cancel and destroy all Warrant Certificates
surrendered for transfer, exchange, replacement, exercise or cancellation. The
Company may not issue new Warrant Certificates to replace Warrant Certificates
to the extent they evidence Warrants which have been exercised or Warrants which
the Company has purchased or otherwise acquired.
SECTION 2.8 Issuance of Additional Warrants. Upon the occurrence of
each of the events set forth on Schedule 1 hereto, on the applicable date with
respect to such event, the number of Warrants shall automatically be increased
by the number of additional Warrants set forth opposite such event on Schedule
1.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall entitle the Holder
thereof to purchase one share of Common Stock for a per share exercise price of
$0.01 (the "Exercise Price").
SECTION 3.2 Limitations on Exercise. Except as otherwise provided in
the relevant Warrant Certificate with respect to Warrants which are not
exercisable prior to the occurrence of certain events as set forth therein, each
Warrant may be exercised at any time in the discretion of the Holder thereof,
provided, that no Warrant shall be exercisable after the Expiration Date.
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SECTION 3.3 Expiration. A Warrant shall terminate and become void as of
the earlier of (a) the close of business on the Expiration Date and (b) the time
and date such Warrant is exercised. The Warrants shall terminate and become void
after the Expiration Date.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon (a)
surrender to the Company of the Warrant Certificates, together with the form of
election to purchase Common Stock attached as Exhibit B hereto duly filled in
and signed by the Holder thereof and (b) payment to the Company of the Exercise
Price for the number of Warrant Shares in respect of which such Warrant is then
exercised. Such payment shall be made (i) in cash or by certified or official
bank check payable to the order of the Company or by wire transfer of funds to
an account designated by the Company for such purpose or (ii) by the surrender
(which surrender shall be evidenced by cancellation of the number of Warrants
represented by any Warrant Certificate presented in connection with a Cashless
Exercise) of a Warrant or Warrants (represented by one or more relevant Warrant
Certificates), and without the payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price as of the
date of exercise were being made in cash and (2) the Cashless Exercise Ratio. An
exercise of a Warrant in accordance with clause (ii) of the immediately
preceding sentence is herein called a "Cashless Exercise". All provisions of
this Agreement shall be applicable with respect to an exercise of Warrant
Certificates pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Subject to Section 3.2, the rights represented by
the Warrants shall be exercisable at the election of the Holders thereof either
in full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the Expiration Date a
new Warrant Certificate exercisable for the remaining Warrant Shares will be
issued. The Company shall execute and deliver to the relevant Holders the
required new Warrant Certificates.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section 2.6, upon
the surrender of Warrant Certificates and payment of the per share Exercise
Price, as set forth in Section 3.4, the Company shall issue (and, if applicable,
cause any transfer agent for the Common Stock (the "Transfer Agent") to
countersign) and deliver to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered or otherwise to
the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.6 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. Such certificate or certificates shall be deemed to
have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the per share
Exercise Price.
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SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the Current Market Value for one Warrant Share on the Business Day
immediately preceding the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. Any registrar for the Common Stock shall at all times until the
Expiration Date, or the time at which all Warrants have been exercised or
canceled, reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with any
Transfer Agent. All Warrant Shares which may be issued upon exercise of Warrants
shall, upon issue, be fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof. The Company will supply any Transfer Agent with duly executed
stock certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.6. The Company
will furnish to any Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder.
SECTION 3.8 Compliance with Law. If any shares of Common Stock required
to be reserved for purposes of exercise of Warrants require, under any other
Federal or state law or applicable governing rule or regulation of any national
securities exchange, registration with or approval of any Governmental
Authority, or listing on any such national securities exchange before such
shares may be issued upon exercise, the Company will cause such shares to be
duly registered or approved by such Governmental Authority or listed on the
relevant national securities exchange; provided that the Company shall not have
any obligation to register the Warrant Shares under the Securities Act except
pursuant to the Registration Rights Agreement.
SECTION 3.9 Registration Rights. The holders of the Warrants and the
Warrant Shares shall be entitled to the registration rights in respect of the
Warrant Shares set forth in the Registration Rights Agreement.
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ARTICLE 4.
Antidilution Provisions
SECTION 4.1 Changes in Common Stock. In the event that at any time or
from time to time after the date hereof the Company shall (a) pay a dividend or
make a distribution on its Common Stock in shares of its Common Stock or other
shares of capital stock, (b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (c) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or (d)
increase or decrease the number of shares of Common Stock outstanding by
reclassification of its Common Stock, then the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately after the happening of
such event shall be adjusted so that, after giving affect to such adjustment,
the Holder of each Warrant shall be entitled to receive the number of shares of
Common Stock upon exercise that such holder would have owned or have been
entitled to receive had such Warrants been exercised immediately prior to the
happening of the events described above (or, in the case of a dividend or
distribution of Common Stock, immediately prior to the record date therefor). An
adjustment made pursuant to this Section 4.1 shall become effective immediately
after the effective date, retroactive to the record date therefor in the case of
a dividend or distribution in shares of Common Stock, and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
SECTION 4.2 Cash Dividends and Other Distributions. In the event that
at any time or from time to time after the date hereof the Company shall
distribute to holders of Common Stock (a) any dividend or other distribution of
cash, evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (b) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case set
forth in (a) and (b), (i) any dividend or distribution described in Section 4.1
or (ii) any rights, options, warrants or securities described in Section 4.3)
then the number of shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock purchasable upon the exercise
of such Warrant immediately prior to the record date for any such dividend or
distribution by a fraction, the numerator of which shall be the Current Market
Value per share of Common Stock on the record date for such distribution, and
the denominator of which shall be such Current Market Value per share of Common
Stock less the sum of (x) any cash distributed per share of Common Stock and (y)
the fair value (the "Fair Value") (as determined in good faith by the Board,
whose determination shall be evidenced by a Board resolution delivered to each
Holder) of the portion, if any, of the distribution applicable to one share of
Common Stock consisting of evidences of indebtedness, shares of stock,
securities, other property, warrants, options or subscription of purchase rights
(notwithstanding the foregoing, if the Fair Value per share of Common Stock in
the above formula equals or exceeds the Current Market Value per share of Common
Stock in the
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above formula, then the Current Market Value per share of Common Stock shall be
equal to the Fair Value per share of the Common Stock on the record date as
determined in good faith by the Board and described in a Board resolution
delivered to each Holder). Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution; provided, however,
that the Company is not required to make an adjustment pursuant to this Section
4.2 if at the time of such distribution the Company makes the same distribution
to Holders of Warrants as it makes to holders of Common Stock pro rata based on
the number of shares of Common Stock for which such Warrants are exercisable
(whether or not currently exercisable).
SECTION 4.3 Rights Issue. In the event that at any time or from time to
time after the date hereof the Company shall issue, sell, distribute or
otherwise grant any rights to subscribe for or to purchase, or any options or
warrants for the purchase of, or any securities convertible or exchangeable
into, Common Stock, entitling such holders to subscribe for or purchase shares
of Common Stock or stock or securities convertible into Common Stock, whether or
not immediately exercisable, convertible or exchangeable, as the case may be,
and the price per share of Common Stock issuable upon exercise, conversion or
exchange thereof is lower at the record date for such issuance than the then
Current Market Value per share of Common Stock, then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately prior to the
date of issuance of such rights, options, warrants or securities by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities are convertible or exchangeable, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
total number of shares of Common Stock which could be purchased at the Current
Market Value with the aggregate consideration received through issuance of such
rights, warrants, options, or convertible securities. Such adjustment shall be
made whenever such rights, options or warrants are issued and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such rights, options, warrants or
securities. Notwithstanding any other provision of this Section 4.3, the number
of shares of Common Stock purchasable upon exercise of any Warrant shall not be
adjusted pursuant to this Section 4.3 in connection with the issuance or grant
of Common Stock upon the exercise of rights or options to the Company's
employees under bona fide employee benefit plans adopted prior to the date of
this Agreement by the Board and approved by the holders of Common Stock when
required by law, if the number of shares of Common Stock underlying such rights
and options do not exceed 5% of the Common Stock outstanding on the date of this
Agreement.
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If the Company at any time shall issue two or more securities as a unit
and one or more of such securities shall be rights, options or warrants for or
securities convertible or exchangeable into, Common Stock subject to this
Section 4.3, the consideration allocated to each such security shall be
determined in good faith by the Board.
SECTION 4.4 Issuance of Additional Shares of Common Stock. In the event
that at any time or from time to time after the date hereof the Company shall
issue or sell any additional shares of Common Stock for consideration in an
amount per additional share of Common Stock less than the Current Market Value,
then the number of shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock purchasable upon the exercise
of each Warrant immediately prior to such issue or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale, and the denominator of which shall be the
sum of (i) the number of shares of Common Stock outstanding immediately prior to
such issue or sale, and (ii) the number of shares of Common Stock which could be
purchased at the Current Market Value with the aggregate consideration received
from the issuance or sale of the additional shares of Common Stock. For the
purposes of this Section 4.4, the date as of which the Current Market Value per
share of Common Stock shall be computed shall be the earlier of (x) the date on
which the Company shall enter into a firm contract for the issuance of such
additional shares of Common Stock or (y) the date of actual issuance of such
additional shares of Common Stock. Notwithstanding any other provision of this
Section 4.4, the number of shares of Common Stock purchasable upon exercise of
any Warrant shall not be adjusted pursuant to this Section 4.4 as a result of
the issuance or sale of Common Stock in connection with: (a) a bona fide firm
commitment underwritten public offering of Common Stock of the Company, (b) a
transaction to which Section 4.1, 4.2 or 4.3 is applicable, (c) the exercise of
the Warrants, the exercise of any other warrants issued by the Company prior to
the date of this Agreement or the exercise of any warrants issued in connection
with the Second Amendment, (d) a private placement of Common Stock of the
Company sold for a cash purchase price not more than 10% below the Current
Market Value of the Common Stock so sold in such private placement and (e) the
exercise of rights or options issued to the Company's employees under bona fide
employee benefit plans adopted by the Board and approved by the holders of
Common Stock when required by law, if such Common Stock would otherwise be
covered by this Section 4.4.
SECTION 4.5 Combination; Liquidation. (a) Except as provided in Section
4.5(b), in the event of any Combination, capital reorganization,
reclassification or spin-off by the Company of another Person (each, a
"Transaction"), each Warrant shall be automatically converted into the right to
receive (in the case of a Transaction other than a spin-off) or shall also be
exercisable for (in the case of a Transaction that is a spin-off) such number of
shares of capital stock or other securities or property upon or as a result of
such Transaction that a Holder of such Warrant would have been entitled to
receive had such Warrants been exercised immediately prior to such event.
▇▇▇▇▇▇▇▇▇ Page 33 of 80 Pages
(b) In the event of (i) a Transaction where consideration to holders of
Common Stock in exchange for their shares is payable solely in cash, or (ii) the
dissolution, liquidation or winding-up of the Company, then the Holders of the
Warrants will be entitled to receive distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price. In case of any Transaction described in this Section
4.5(b), the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company shall make payment to each
Holder by delivering a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by such Holder
surrendering such Warrants.
SECTION 4.6 Tender Offers: Exchange Offers. In the event that the
Company or any subsidiary of the Company shall purchase shares of Common Stock
pursuant to a tender offer or an exchange offer for a price per share of Common
Stock that is greater than the then Current Market Value per share of Common
Stock in effect at the end of the trading day immediately following the day on
which such tender offer or exchange offer expires, then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately prior to such
purchase by a fraction the numerator of which shall be the sum of (x) the fair
market value of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer or
exchange offer) of all shares of Common Stock validly tendered or exchanged and
not withdrawn as of the expiration time of such tender offer or exchange offer
(the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less the Purchased Shares) at the expiration time of such
offer or exchange offer and the first reported sales price of the Common Stock
on the trading day immediately following the day on which such tender offer or
exchange offer expires and the denominator of which shall be the number of
shares of Common Stock outstanding (including any Purchased Shares) at the
expiration time of such tender offer or exchange offer multiplied by the first
reported sales price of the Common Stock on the trading day immediately
following the day on which such tender offer or exchange offer expires, such
increase to become effective immediately prior to the opening of business on the
day immediately following the day on which such tender offer or exchange offer
expires.
SECTION 4.7 Other Events. If any event occurs as to which the foregoing
provisions of this Article 4 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board, fairly and
adequately protect the purchase rights of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of such Board, to protect such purchase rights as aforesaid, but
in no event shall any
▇▇▇▇▇▇▇▇▇ Page 34 of 80 Pages
such adjustment have the effect of decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant.
SECTION 4.8 Current Market Value. For the purpose of any computation of
Current Market Value under this Article 4 and Section 3.6, the "Current Market
Value" per share of Common Stock at any date shall be (a) for purposes of
Section 3.6, the closing price on the Business Day immediately prior to the date
of the exercise of the applicable Warrant pursuant to Article 3 and (b) in all
other cases, the average of the daily closing prices for the 20 consecutive
trading days ending on the last full trading day on the exchange or market
specified in the second succeeding sentence prior to such date. The closing
price for any day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case (1) on the principal
national securities exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the Common Stock is not
listed or admitted to trading on a national securities exchange, in the
over-the-counter market as reported by the Nasdaq National Market or any
comparable system or (3) if the Common Stock is not listed on the Nasdaq
National Market or a comparable system, as furnished by two members of the NASD
selected from time to time in good faith by the Board for that purpose. In the
absence of all of the foregoing, or if for any other reason the Current Market
Value per share cannot be determined pursuant to the foregoing provisions of
this Section 4.8, the Current Market Value per share shall be the (x) the fair
market value thereof determined in good faith in the most recently completed
arm's-length transaction between the Company and a person other than an
Affiliate of the Company and the closing of which occurs on such date or shall
have occurred within the three months preceding such date or (y) if no
transaction shall have occurred on such date or within such three-month period,
the fair market value thereof as determined by an investment bank of nationally
recognized standing selected by the Company and acceptable to the Required
Holders. The Company shall pay the fees and expenses of any investment bank
involved in the determination of Current Market Value.
SECTION 4.9 Superseding Adjustment. Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which resulted in the
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (a) the only shares of Common Stock issuable
upon exercise of such rights, options, warrants, conversion or exchange
privileges were the shares of Common Stock, if any, actually issued upon the
exercise of such rights, options, warrants or conversion or exchange privileges
and (b) shares of Common Stock actually issued, if any, were issuable for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange privileges whether or not exercised; provided, however, that no such
readjustment shall (except by reason of an intervening adjustment under Section
4.1) have the effect of decreasing the number of Warrant Shares purchasable
▇▇▇▇▇▇▇▇▇ Page 35 of 80 Pages
upon the exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
SECTION 4.10 Minimum Adjustment. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the number of shares of Common Stock purchasable upon exercise of Warrants
that would otherwise be required shall be made (except in the case of a
subdivision or combination of shares of Common Stock, as provided for in Section
4.1) unless and until such adjustment either by itself or with other adjustments
not previously made increases or decreases by at least 1% the number of shares
of Common Stock purchasable upon exercise of Warrants immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 4 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Article 4, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share.
SECTION 4.11 Notice of Adjustment. Whenever the number of shares of
Common Stock and other property, if any, purchasable upon exercise of Warrants
is adjusted, as herein provided, the Company shall deliver to each Holder a
certificate of a firm of independent accountants (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of any evidences of indebtedness, other securities or
property or warrants or other subscription or purchase rights), and specifying
the number of shares of Common Stock purchasable upon exercise of Warrants after
giving effect to such adjustment.
SECTION 4.12 Notice of Certain Transactions. In the event that the
Company shall propose (a) to pay any dividend payable in securities of any class
to the holders of its Common Stock or to make any other distribution to the
holders of its Common Stock, (b) to offer the holders of its Common Stock rights
to subscribe for or to purchase any securities convertible into shares of Common
Stock or shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) to effect any reclassification of its Common
Stock, spin-off, capital reorganization or Combination or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
or in the event of a tender offer or exchange offer described in Section 4.6,
the Company shall within five Business Days send to each Holder a notice, which
shall specify the record date for the purposes of such dividend, distribution or
rights, or the date such issuance or event is to take place and the date of
participation therein by the holders of Common Stock,
▇▇▇▇▇▇▇▇▇ Page 36 of 80 Pages
if any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, purchasable upon exercise of each Warrant after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be given by the Company as promptly as possible and,
in the case of any action covered by clause (a) or (b) above, at least ten days
prior to the record date for determining holders of the Common Stock for
purposes of such action and, in the case of any other such action, at least 15
Business Days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Common Stock, whichever shall be
the earlier.
SECTION 4.13 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same number of shares of Common Stock as are stated in any Warrant Certificates
issued prior to the adjustment. The Company, however, may at any time in its
sole discretion make any change in the form of Warrant Certificate that it may
deem appropriate to give effect to such adjustments and that does not affect the
substance of the Warrant Certificate, and any Warrant Certificate thereafter
issued, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, may be in the form as so changed.
ARTICLE 5.
Miscellaneous
SECTION 5.1 Representations and Warranties. The Company hereby
represents and warrants to each Holder that (a) the Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, (b) the Company has the corporate power and authority to
execute and deliver this Warrant Agreement and the Warrant Certificates, to
issue Warrants and Warrant Shares and to perform its obligations under this
Warrant Agreement and the Warrant Certificates, (c) the execution, delivery and
performance by the Company of this Warrant Agreement and the Warrant
Certificates, the issuance of the Warrants and the issuance of the Warrant
Shares upon exercise of the Warrants have been duly authorized by all necessary
corporate action and do not and will not violate, or result in a breach of, or
constitute a default under, or require any consent under, or result in the
creation of any lien upon the Company's assets pursuant to, any law, rule,
regulation or contractual obligation binding upon the Company, (d) this Warrant
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid, binding and enforceable obligation of the Company, (e) when the
Warrants and Warrant Certificates have been issued by the Company as
contemplated hereby, such Warrants and Warrant Certificates will constitute
legal, valid, binding and enforceable obligations of the Company and (f) the
Warrant Shares, when issued by the Company upon
▇▇▇▇▇▇▇▇▇ Page 37 of 80 Pages
exercise of the related Warrants in accordance with the terms hereof, will be
duly authorized, validly issued, fully paid and nonassessable shares of the
Common Stock of the Company with no personal liability attaching to the
ownership thereof.
SECTION 5.2 Reports; Rule 144A. (a) The Company shall provide the
Holders with such financial statements and reports as are distributed to holders
of Common Stock generally.
(b) The Company hereby agrees to make available upon request, for so
long as any Warrants or Warrant Shares remain outstanding and during any period
in which the Company is not subject to Section 13 or 15(d) of the Exchange Act,
to any Holder or beneficial owner of Warrants or Warrant Shares in connection
with any sale thereof and any prospective purchaser thereof from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales pursuant to Rule 144A.
SECTION 5.3 Persons Benefitting. Nothing in this Agreement is intended
or shall be construed to confer upon any Person other than the Company and the
Holders any right, remedy or claim under or by reason of this agreement or any
part hereof.
SECTION 5.4 Rights of Holders. Except as otherwise specifically
required herein, holders of unexercised Warrants are not entitled (a) to receive
dividends or other distributions, (b) to receive notice of or vote at any
meeting of the stockholders, (c) to consent to any action of the stockholders,
(d) to receive notice of any other proceedings of the Company or (e) to exercise
any other rights as stockholders of the Company.
SECTION 5.5 Amendment. Any amendment or supplement to this Agreement
(including any Exhibit hereto) shall require the written consent of the Holders
of a majority of the outstanding Warrants (the "Required Holders"). The consent
of each Holder directly affected shall be required for any amendment pursuant to
which the exercisability of any Warrant would be delayed, the Exercise Price
would be increased or the number of Warrant Shares purchasable upon exercise of
Warrants would be decreased (other than pursuant to adjustments provided
herein). In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by the
Company or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded
and deemed not to be outstanding.
SECTION 5.6 Notices.
(a) All notices and communications hereunder shall be in writing. Any
notice shall be effective if delivered by hand delivery or sent via telecopy,
recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be
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received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested.
(b) Notices to any party shall be sent to it at the following
addresses, or any other address as to which the Company or the Holders, as the
case may be, are notified in writing.
If to the Company: GT Interactive Software Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Director of Legal Services
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Holder: To the Address set forth in the Certificate
Register
SECTION 5.7 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
WARRANT CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 5.8 Successors. All agreements of the Company in this Agreement
and the Warrant Certificates shall bind its successors.
SECTION 5.9 Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 5.10 Headings. The headings of the Articles and Sections of
this Agreement have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 5.11 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect
▇▇▇▇▇▇▇▇▇ Page 39 of 80 Pages
such clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
▇▇▇▇▇▇▇▇▇ Page 40 of 80 Pages
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
HOLDERS:
GENERAL ATLANTIC PARTNERS 54, L.P.
By: General Atlantic Partners, LLC, its
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: A General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Page 41 of 80 Pages
EXHIBIT A
TO WARRANT AGREEMENT
[FORM OF FACE OF WARRANT CERTIFICATE]
THE WARRANTS AND THE COMMON STOCK (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER
THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN
OFFSHORE TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. __ Certificate for ___ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
GT INTERACTIVE SOFTWARE CORP.
THIS CERTIFIES THAT ____________, or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant
▇▇▇▇▇▇▇▇▇ Page 42 of 80 Pages
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement referred to below, to
purchase from GT Interactive Software Corp., a Delaware corporation (the
"Company"), one share of Common Stock, $0.01 par value, of the Company (the
"Common Stock") at the per share exercise price of $0.01 (the "Exercise Price"),
or by Cashless Exercise referred to below. This Warrant Certificate shall
terminate and become void as of the close of business on June 29, 2004 (the
"Expiration Date") or upon the exercise hereof as to all the shares of Common
Stock subject hereto. The number of shares purchasable upon exercise of the
Warrants shall be subject to adjustment from time to time as set forth in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of June 29, 1999 (as amended, restated, supplemented
or otherwise modified from time to time, the "Warrant Agreement"), among the
Company and the Holders referred to therein, and is subject to the terms and
provisions contained in the Warrant Agreement. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company and the Holders of
the Warrants. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Warrant Agreement.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by surrender of this Warrant Certificate with
the form of election to purchase Warrant Shares attached hereto duly executed
and with the simultaneous payment of the Exercise Price in cash (subject to
adjustment) to the Company or (ii) by Cashless Exercise. Payment of the Exercise
Price in cash shall be made in cash or by certified or official bank check
payable to the order of the Company or by wire transfer of funds to an account
designated by the Company for such purpose. Payment by Cashless Exercise shall
be made by the surrender of a Warrant or Warrants represented by one or more
Warrant Certificates and without payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price were
being made in cash and (2) the Cashless Exercise Ratio.
The Warrants shall be exercisable from time to time in the discretion
of the Holder on or after June 29, 1999, provided, that in no event shall the
Warrants be exercisable after the Expiration Date.
Upon the occurrence of each of the events set forth on Schedule 1
hereto, on the applicable date with respect to such event, the number of
Warrants shall automatically be increased by the number of additional Warrants
set forth opposite such event on Schedule 1.
In the event the Company enters into a Combination, capital
reorganization or reclassification or the spin-off by the Company of another
Person (each, a "Transaction"),
▇▇▇▇▇▇▇▇▇ Page 43 of 80 Pages
each Warrant evidenced by this Warrant Certificate will be automatically
converted into the right to receive (in the case of a Transaction other than a
spin-off) or shall also be exercisable for (in the case of a Transaction that is
a spin-off) the shares of capital stock or other securities or other property of
such surviving entity upon or as the result of such Transaction that a Holder of
such Warrant would have been entitled to receive had such Warrant been exercised
immediately prior to such Transaction; provided, that in the event that, in
connection with such Transaction, consideration to holders of Common Stock in
exchange for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of the Company, the Holder hereof will be
entitled to receive distributions on an equal basis with the holders of Common
Stock or other securities issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such events, less the Exercise
Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the
Holder hereof a new Warrant Certificate in respect of the shares of Common Stock
as to which the Warrants shall not have been exercised. This Warrant Certificate
may be exchanged by presenting this Warrant Certificate to the Company properly
endorsed with a request to exchange this Warrant Certificate for other Warrant
Certificates evidencing an equal number of Warrants. No fractional Warrant
Shares will be issued upon the exercise of the Warrants, but the Company shall
pay an amount in cash equal to the Current Market Value for one Warrant Share on
the date the Warrant is exercised, multiplied by such fraction, computed to the
nearest whole cent.
▇▇▇▇▇▇▇▇▇ Page 44 of 80 Pages
The Warrants do not entitle any holder hereof to any of the rights of a
stockholder of the Company. All shares of Common Stock issuable by the Company
upon the exercise of the Warrants shall, upon such issuance, be duly and validly
issued and fully paid and non-assessable.
GT INTERACTIVE SOFTWARE CORP.
By:
Title:
[SEAL]
Attest: ___________________________
Secretary
DATED:
▇▇▇▇▇▇▇▇▇ Page 45 of 80 Pages
EXHIBIT B
TO
WARRANT AGREEMENT
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise [ ] Warrants at
an exercise price per Warrant (subject to adjustment) of $.01 to acquire an
equal number of shares of Common Stock of GT Interactive Software Corp., on the
terms and conditions specified in the within Warrant Certificate and the Warrant
Agreement therein referred to, surrenders this Warrant Certificate and all
right, title and interest therein to GT Interactive Software Corp., and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
Date: ________________, ____
----------------------------------
(Signature of Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
▇▇▇▇▇▇▇▇▇ Page 46 of 80 Pages
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
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EXHIBIT C
TO
WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of GT
Interactive Software Corp. (the "Company")
This Certificate relates to __________ Warrants held in definitive form
by _______________ (the "Transferor").
The Transferor has requested the Company by written order to exchange
or register the transfer of a Warrant or Warrants. In connection with such
request and in respect of each such Warrant, the Transferor does hereby certify
that the Transferor is familiar with the Warrant Agreement relating to the above
captioned Warrants and that the transfer of this Warrant does not require
registration under the Securities Act of 1933 (the "Securities Act"), because1:
o Such Warrant is being acquired for the Transferor's own account
without transfer.
o Such Warrant is being transferred to the Company.
o Such Warrant is being transferred in a transaction meeting the
requirements of Rule 144 under the Securities Act.
o Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
o Such Warrant is being transferred pursuant to an offshore transaction
in accordance with Rule 904 under the Securities Act.
o Such Warrant is being transferred pursuant to another available
exemption from the registration requirements under the Securities Act.
▇▇▇▇▇▇▇▇▇ Page 48 of 80 Pages
The Company is entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
By________________________
Title:
Date:
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Schedule 1
Upon the occurrence of each of the Events set forth below, the Company
shall issue to each Holder on the applicable Trigger Date additional Warrants in
the numbers set forth opposite such Event:
Number of
Event Trigger Date Additional Warrants
----- ------------ -------------------
A Holder makes any Subordinated July 30, 1999 The product of (a)
Loans pursuant to the Commitment 1,500,000 multiplied
Letter. by (b) a fraction,
the numerator of
which is the amount
of the Subordinated
Loans made by such
Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
▇▇▇▇▇▇▇▇▇ Page 50 of 80 Pages
The Company has not executed on or November 1, 1999 The product of (a)
prior to October 31, 1999 an 2,500,000 multiplied
agreement relating to a by (b) a fraction,
recapitalization, reorganization, the numerator of
merger, sale (including, without which is the amount
limitation, a sale of all or of the Subordinated
substantially all of the assets of Loans made by such
the Company (which shall include a Holder to the
sale of the Humongous business)) Company pursuant to
or other business combination the Commitment
transaction after the consummation Letter and the
of which the stockholders of denominator of
the Company prior to such which is the
transaction do not hold at least aggregate amount of
a majority of the voting power all Subordinated
of the surviving Person (the Loans made by all
foregoing, "a Change of Control Holders pursuant
Transaction"). to the Commitment
Letter, subject to
any agreement among
the Holders.
The Company executes on or date of termination The product of (a)
prior to October 31, 1999 of Sale Agreement 2,500,000 multiplied
an agreement relating to a by (b) a fraction,
Change of Control Transaction the numerator of
(a "Sale Agreement"), but such which is the amount
agreement terminates for any of the Subordinated
reason after such date. Loans made by such
Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
▇▇▇▇▇▇▇▇▇ Page 51 of 80 Pages
The Company has not closed February 29, 2000 The product of (a)
the transactions contemplated 3,000,000 multiplied
by the Sale Agreement on or by (b) a fraction,
prior to February 28, 2000 the numerator of
and repaid in full to the Holders the which is the amount
aggregate amount of the Subordinated of the Subordinated
Loans made by the Holders pursuant Loans made by such
to the Commitment Letter. Holder to the
Company pursuant to
the Commitment
Letter and the
denominator of which
is the aggregate
amount of all
Subordinated Loans
made by all Holders
pursuant to the
Commitment Letter,
subject to any
agreement among the
Holders.
On the last day of each fiscal June 30, 2000 and The product of (a)
quarter of the Company, the last day of each 3,000,000 multiplied
commencing with the fiscal fiscal quarter by (b) a fraction,
quarter ending June 30, 2000 and thereafter until the the numerator of
ending on the date that the Company date of repayment of which is the amount
repays in full the aggregate amount the Subordinated of the Subordinated
of the Subordinated Loans, if the Loans Loans made by such
Company has not repaid in full to Holder to the
the Holders the aggregate amount Company pursuant to
of the Subordinated Loans made by the Commitment
the Holders pursuant to the Letter and the
Commitment Letter during such denominator of
quarter. which is the
aggregate amount of
all Subordinated
Loans made by all
Holders pursuant to
the Commitment
Letter, subject to
any agreement among
the Holders.
