STOCK PURCHASE AGREEMENT
AGREEMENT dated as of August 31, 1999 (the "Agreement"), by and among
TAKE-TWO INTERACTIVE SOFTWARE, INC., a Delaware corporation ("Take-Two US");
TAKE-TWO INTERACTIVE SOFTWARE CANADA INC., an Ontario corporation ("Take-Two
Canada" and together with Take-Two US, the "Purchasers"); TRIAD DISTRIBUTORS
INC., an Ontario corporation ("Triad"); GLOBAL STAR SOFTWARE LIMITED, an Ontario
corporation ("Global"); and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇") and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇"), the shareholders of Triad and Global
(collectively, the "Shareholders").
W I T N E S S E T H :
WHEREAS, the Shareholders are the owners of all of the issued and
outstanding capital stock of Triad and Global (the "Triad and Global Shares");
WHEREAS, Triad and Global are in the business of distributing software
games and other items at wholesale (the "Business");
WHEREAS, the Purchasers wish to purchase all of the Triad and Global Shares
from the Shareholders, 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. Purchase and Sale of Triad and Global Shares.
Subject to the terms and conditions set forth in this Agreement and in
reliance upon the representations, warranties, covenants and conditions herein
contained, the Shareholders shall sell, convey, assign, transfer and deliver to
the Purchasers all of the Triad and Global Shares, free and clear of any and all
liens, adverse claims, security interests, pledges, mortgages, charges and
encumbrances of any nature whatsoever as follows: (i) to Take-Two US, 23 shares
in the capital of Triad and 150 shares in the capital of Global and (ii) to
Take-Two Canada, 7 shares in the capital of Triad and 50 shares in the capital
of Global.
2. Purchase Price.
2.1. Consideration. Subject to Section 2.2 below, the purchase price (the
"Purchase Price") for the purchase of the Triad and Global Shares by the
Purchasers shall be an aggregate of (i) 162,500 unregistered shares (the "Stock
Consideration") of the common stock, $.01 par value, of Take-Two US ("Take-Two
Common Stock") payable by Take-Two US, which Stock Consideration shall be issued
ratably among the Shareholders in accordance with Schedule 2.1 hereof, 144,000
shares of which are deliverable upon the execution hereof and the balance of
which are deliverable in accordance with the terms of the Escrow Agreement (as
defined below), and (ii) a cash payment of $500,000 (the "Cash Consideration")
in United States Dollars ("US$") payable by Take-Two Canada, US$250,000 of which
is payable upon the
execution hereof, and the balance of which is payable in accordance with the
escrow agreement (as defined below).
2.2. Purchase Price Adjustment. The Purchasers shall deposit in escrow with
Stikeman, ▇▇▇▇▇▇▇ (the "Escrow Agent") pursuant to the escrow agreement (the
"Escrow Agreement") attached hereto as Exhibit A 18,500 shares of Take-Two
Common Stock and US$250,000 in cash. The Escrow Agreement shall provide that to
the extent that Triad's and Global's combined stockholders' equity on the date
hereof, as determined by an audit undertaken by the Purchasers within SIXTY (60)
days from the date hereof, is less than US$250,000, then the Purchase Price
shall be reduced on a dollar for dollar basis, and to the extent that such
stockholders' equity is negative, the Purchase Price shall be reduced by US$2.00
for every US$1.00 of negative equity. The escrow agreement shall also contain
provisions allowing the shareholders, acting reasonably, to dispute the
determination of the audit, provided that an audit conducted by an independent
third-party shall be binding on the parties. Any calculation of stockholders'
equity shall include any bonus to be made to the employees of Triad and Global.
3. Deliveries. Simultaneous with the execution of this Agreement, the
parties shall deliver the following in accordance with the terms and conditions
of this Agreement:
(a) The Purchasers shall deliver:
(i) to the Shareholders and the Escrow Agent in accordance with
Section 2 hereof, stock certificates, registered in the names of the
Shareholders, representing 162,500 shares of Take-Two Common Stock
against share certificates representing the Triad and Global Shares;
(ii) a cash payment of US$500,000 by certified cheques payable to
the Shareholders and the Escrow Agent in accordance with Section 2
hereof and an aggregate cash payment of US$200,000 by certified cheque
payable to ▇▇▇▇▇ and ▇▇▇▇▇▇ in accordance with the Non-Competition
Agreements (as defined in Section 5.4 hereof);
(iii) the Employment Agreements and Non-Competition Agreements
(as defined in Section 5.4 hereof);
(iv) copies of the resolutions of the Board of Directors of
Take-Two US and the resolutions of the shareholders of Take-Two Canada
authorizing each Purchaser to execute and deliver the documents it is
obligated to deliver pursuant to this Agreement, to perform its
obligations hereunder, duly certified by the Secretary or Assistant
Secretary of the respective Purchaser;
(v) the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP relating to the Stock
Consideration in form and substance attached hereto as Exhibit B-1 and
the opinion of Stikeman, ▇▇▇▇▇▇▇ relating to Take-Two Canada in form
and substance attached hereto as Exhibit B-2; and
(vi) the Escrow Agreement.
(b) Triad and Global and the Shareholders, as the case may be, shall
deliver:
-2-
(i) share certificates representing all of the issued and
outstanding Triad and Global Shares, duly endorsed for transfer by the
Shareholders, together with evidence satisfactory to the Purchasers
that they or their nominees have been entered upon the books of Triad
and Global as the holders of the shares;
(ii) copies of the resolutions of the Board of Directors of Triad
and Global, and the written consent of the Shareholders, authorizing
Triad and Global to execute and deliver the documents it is obligated
to deliver pursuant to this Agreement, to perform its obligations
hereunder, duly certified by the Secretary or Assistant Secretary of
Triad and Global;
(iii) certificates of the Secretary or Assistant Secretary of
Triad and Global certifying as to (i) the charter documents and
by-laws of each of Triad and Global, the incumbency and to the
specimen signatures of the officers of Triad and Global executing the
documents pursuant to this Agreement on behalf of such corporation;
(iv) the legal opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ in form and substance
attached hereto as Exhibit C;
(v) certificate of status, compliance or good standing with
respect to each of Triad and Global of the appropriate authority in
the Province of Ontario and of each jurisdiction in which either Triad
or Global carries on its business;
(vi) the Employment Agreements duly executed by ▇▇▇▇▇ and Damian
and the Non-Competition Agreements duly executed by ▇▇▇▇▇, ▇▇▇▇▇▇ and
Lucy;
(vii) resignations of ▇▇▇▇▇ and ▇▇▇▇▇▇ as directors of Triad and
Global, together with general releases; and
(viii) the Escrow Agreement.
4. Representations and Warranties as to Triad and Global and Shareholders.
Each of the Shareholders hereby, jointly and severally, represents and warrants
to each of the Purchasers as follows:
4.1. Organization, Standing and Power. Each of Triad and Global is a
corporation duly incorporated, organized, validly existing and in good
standing under the laws of the Province of Ontario, with full corporate
power and authority to own, lease and operate its properties and to carry
on the Business, as presently conducted by it. There are no provinces,
states or other jurisdictions in which the character and location of any of
the properties owned or leased by Triad or Global, or the conduct of its
Business, makes it necessary for it to qualify to do business as a foreign
corporation and where it has not so qualified, except for those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Business or operations of Triad or Global. Copies of
the Articles of Incorporation of each of Triad and Global and all
amendments thereto, and of the By-laws of each of Triad and Global, as
amended to date, and each of Triad's and Global's corporate books
(containing original corporate minutes
-3-
and resolutions in Triad's and Global 's possession) have been furnished to the
Purchasers and are complete, correct and accurate.
4.2. Capitalization. The authorized capital of Triad consists of an
unlimited number of common shares, of which 30 shares are issued and
outstanding and held of record as set forth in Schedule 4.2 hereto. The
authorized capital of Global consists of an unlimited number of common
shares, of which 200 shares are issued and outstanding and held of record
as set forth in Schedule 4.2 hereto. There are no outstanding options,
warrants, rights, calls, commitments, conversion rights, puts, plans or
other agreements of any character, whether written or oral, to which either
the Shareholders, Triad or Global is a party or otherwise bound which
provide for the acquisition or disposition of any of the Triad and Global
Shares or any of the securities of Triad or Global. All of the issued and
outstanding shares of Triad and Global have been duly and validly issued
and are fully paid and nonassessable and have not been issued in violation
of any preemptive or similar right or any applicable laws.
4.3. Ownership of Triad and Global Shares. Each of the Shareholders
has good and marketable title to, and owns of record and beneficially, all
of the issued and outstanding Triad and Global Shares held by him or her as
set forth in Schedule 4.2 hereto, free and clear of any and all liens,
adverse claims, security interests, pledges, mortgages, charges and
encumbrances of any nature whatsoever.
4.4. Interests in Other Entities.
(a) Neither Triad nor Global (A) owns, directly or indirectly, of
record or beneficially, any voting shares or other equity securities
of any other entity, (B) has any ownership interest, direct or
indirect, of record or beneficially, in any partnership, joint venture
or other unincorporated entity, or (C) has any obligation, direct or
indirect, present or contingent, (1) to purchase or subscribe for any
interest in, advance or loan monies to, or in any way make investments
in, any person or entity or (2) to share any profits from any entity.
(b) None of the Shareholders (A) owns, directly or indirectly, of
record or beneficially, any voting shares or other equity securities
of, or have any debt outstanding to or from, any other entity engaged
in the same or similar business to the Business (Except for ownership
interests in publicly traded companies not exceeding 10% of the voting
shares thereof set forth on schedule 4.4 (B) hereof), (B) has any
ownership interest, direct or indirect, of record or beneficially, in
any partnership, joint venture or unincorporated entity engaged in the
same or similar business to the Business, or (C) has any obligation,
direct or indirect, present or contingent, (1) to purchase or
subscribe for any interest in, advance or loan monies to, or in any
way make investments in, any person or entity engaged in the same or
similar business to the Business, or (2) to share any profits from any
entity engaged in the same or similar business to the Business,
(Except for ownership interests in publicly traded companies not
exceeding 10% of the voting shares thereof set forth on schedule 4.4
(B)).
4.5. Authority.
(a) The execution and delivery by the Shareholders and Triad and
Global of this Agreement and of all of the agreements to be executed
and delivered by each of
-4-
them pursuant hereto (the " Triad and Global Documents"), the
performance by each of them of their respective obligations hereunder
and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of each of Triad and Global
(including, but not limited to, the consent of the Shareholders and
each of Triad's and Global's Board of Directors) and each of Triad and
Global has all necessary corporate power with respect thereto.
(b) The Shareholders are each individuals having all necessary
capacity, power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement
is, and when executed and delivered by the Shareholders and Triad and
Global (to the extent that they are parties thereto), the Triad and
Global Documents to be delivered by any of them pursuant hereto will
be, the valid and binding obligation of the Shareholders and Triad and
Global (to the extent that they are parties thereto) enforceable
against each of them in accordance with their respective terms.
4.6. Noncontravention. Except as set forth on Schedule 4.6, neither
the execution and delivery by the Shareholders or Triad and Global of this
Agreement or of any agreement to be executed and delivered by the
Shareholders and/or Triad and Global pursuant hereto, nor the consummation
of any of the transactions contemplated hereby or thereby, nor the
performance by the Shareholders or Triad and Global of their respective
obligations, as the case may be, hereunder or thereunder, will (nor with
the giving of notice or the lapse of time or both would) (a) conflict with
or result in a breach of any provision of the Articles of Incorporation or
By-laws of either of Triad or Global, 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 Triad or
Global or under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which it is a party or by which Triad or Global or any of the
Shareholders may be bound or to which Triad or Global or the Business may
be subject , or require any consent, approval or notice under the terms of
any such document or instrument, or (c) violate any order, writ,
injunction, decree, law, statute, rule or regulation of any court or
governmental authority which is applicable to Triad or Global or any
Shareholder, or the Business, or (d) result in the creation or imposition
of any lien, claim, charge, restriction or encumbrance upon any of the
properties or assets of Triad or Global, or (e) interfere with or otherwise
adversely affect the ability of Triad and Global to carry on the Business
on substantially the same basis as is now conducted by Triad and Global.
4.7. Litigation. Except as set forth in Schedule 4.7, there are no
suits or actions, or administrative, arbitration or other proceedings or
governmental investigations, pending or threatened against or relating to
Triad or Global or the Business or any of the Shareholders in their
capacity as shareholders of Triad and Global. There are no judgments,
orders, stipulations, injunctions, decrees or awards in effect which relate
to Triad or Global, the Business or the operation of Triad or Global, the
effect of which is (A) to limit, restrict, regulate, enjoin or prohibit
Triad's or Global 's operation in any area, or the acquisition of any
properties, assets or businesses, or (B) otherwise materially adverse to
the Business or Triad or Global.
4.8. No Violation of Law.
(a) Neither Triad, Global nor any of the Shareholders are
-5-
engaging in any activity or omitting to take any action as a result of
which: (A) they are in violation of any law, rule, regulation, zoning
or other ordinance, municipal by-law, statute, order, injunction,
decision, ruling, award or decree, or any other requirement of any
court or governmental or administrative body or agency, applicable to
Triad and Global or the Business ("Laws"), including, but not limited
to, those relating to: occupational safety and health; business
practices and operations; labor practices; employee benefits; and
zoning and other land use.
(b) Neither Triad, Global nor any of the Shareholders are
engaging in any activity or omitting to take any action as a result of
which they are in violation of any Laws relating to environmental and
ecological protection (e.g., the use, storage, handling, transport or
disposal of pollutants, contaminants or hazardous or toxic materials
or wastes, and the exposure of persons thereto).
4.9. Financial Statements. Triad and Global have herewith delivered to
the Purchasers combined financial statements consisting of (i) the
unaudited balance sheet at June 30, 1998, and the related statements of
income, stockholders' equity and cash flows for the eleven months then
ended, which have been reviewed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, chartered accountant
and (ii) the unaudited combined balance sheet at March 31, 1999, and the
related statements of income, stockholders' equity and cash flows for the
nine months then ended (collectively, the "Financial Statements"). The
Financial Statements were prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"), consistently applied, and present
fairly the financial position of Triad and Global as at the dates thereof
and the results of operations for the periods and the cash flow indicated.
The books and records of Triad and Global are complete and correct, have
been maintained in accordance with good business practices, and reflect the
basis for the financial condition, results of operations and cash flow of
Triad and Global as set forth in the Financial Statements.
4.10. Guaranties. Schedule 4.10 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 Triad
or Global (collectively, the "Guaranties"), including the name of such
creditor and the amount of the indebtedness, together with any interest and
fees currently outstanding.
4.11. Absence of Undisclosed Liabilities. Neither Triad nor Global has
any 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 Financial Statements, or (b)
incurred in the ordinary course of business since March 31, 1999, or (c) in
the case of other types of liabilities and obligations, described in any of
the Schedules delivered pursuant hereto or omitted from said Schedules in
accordance with the terms of this Agreement, or arising under contracts or
leases listed in such Schedules or other contracts or leases which are
omitted from such Schedules in accordance with the terms of this Agreement,
or (d) incurred, consistent with past practice, in the ordinary course of
business of Triad and Global (in the case of liabilities and obligations of
the type referred to in clause (a) above).
4.12. Accounts Receivable; Inventories. The accounts and notes
receivable which are reflected on the Financial Statements are good and
-6-
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 Triad and Global which were added after
March 31, 1999, are good and collectible in the ordinary course of
business, less the amount of the allowance(s) for doubtful accounts and
notes receivable, if any, reflected thereon (which allowances were
established on a basis consistent with prior practice), and are not subject
to offsets other than in the ordinary course of business. The inventories
reflected on the Financial Statements and thereafter added 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 DO
NOT EXCEED US$50,000 OR have been written down to net realizable value or
adequately reserved against on the books and records of Triad and Global.
All inventories are stated at the lower of cost or market in accordance
with generally accepted accounting principles.
4.13. Absence of Changes. Since March 31, 1999, there has not been (a)
any adverse change (other than as is normal in the ordinary course of
business, e.g., inventory level changes) in the condition (financial or
otherwise), assets, liabilities, business, prospects, results of operations
or cash flows of Triad or Global or the Business (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 Triad or Global of any right, or cancellation of any debt or claim, of
material value, (c) any declarations, set asides or payments of any
dividend or other distributions or payments in respect of the Triad and
Global Shares, or (d) any changes in the accounting principles or methods
which are utilized by Triad or Global.
4.14. Properties. Except as set forth on Schedule 4.14, Triad and
Global has good and valid title to all of the properties and assets,
reflected on the Financial Statements as owned by it or thereafter
acquired, except properties or assets sold or otherwise disposed of in the
ordinary course of business, free and clear of any and all mortgages, liens
(excluding liens for current Taxes, as defined in subparagraph 4.17, (b)
hereof), pledges, claims, charges and encumbrances of any nature
whatsoever. All plants, structures and equipment which are utilized in the
Business, or are material to the condition (financial or otherwise) of
Triad or Global are owned or leased by Triad or Global. Neither Triad nor
Global owns any real property. Neither Triad nor Global is a party to, or
under any agreement to become a party to, any lease with respect to real
property other than the leases listed in Schedule 4.14 (the "Leases"),
copies of which have been provided to the Purchasers. Each Lease is in good
standing, creates a good and valid leasehold estate in the property thereby
demised and is in full force and effect without amendment, except as
disclosed in Schedule 4.14. With respect to each Lease (i) all rents and
additional rents have been paid, (ii) no waiver, indulgence or postponement
of the lessee's obligations has been granted by the lessor, (iii) there
exists no event of default or event, occurrence, condition or act
(including the completion of the transactions contemplated by this
Agreement) which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default under the
Lease, and (iv) to the best knowledge of the Shareholders, all of the
covenants to be performed by any party (other than either Triad or Global)
under the Lease have been fully performed. Schedule 4.14 contains a list of
all of the Leases setting out, in respect of each Lease, a description of
the leased premises (by municipal address and proper legal description),
the term of the Lease, the rental payments under the Lease
-7-
(specifying any breakdown of base rent and additional rents), any rights of
renewal and the term thereof, and any restrictions on assignment or change
of control of Triad or Global, as the case may be.
4.15. Intellectual Property. Schedule 4.15 is a complete and correct
list of all (A) United States, Canadian 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, computer software,
computer programs owned in whole or in part or used in the Business, and
all applications therefor, licenses and other agreements to which either
Triad or Global is a party to or otherwise bound which relates to any of
the foregoing. Except as expressly set forth in Schedule 4.15, (A) Triad
and Global owns or has the right to use all of the foregoing; (B) no
proceedings have been instituted, are pending or threatened, which
challenge the rights of Triad or Global in respect thereto or the validity
thereof; and (C) to the best knowledge of the Shareholders, none of the
aforesaid 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.
4.16. Banks; Powers of Attorney. Schedule 4.16 is a complete and
correct list showing (A) the names of each bank in which Triad and Global
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 Triad and Global or the
Shareholders with respect to the Business.
4.17. Tax Matters.
(a) Each of Triad and Global has filed with the appropriate
governmental agencies (Canadian and other) 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 will be set forth on the
latest balance sheet included in the Financial Statements reflects and
includes adequate provisions for the payment in full of any and all
Taxes for which Triad and Global is or could be liable, whether to any
governmental entity or to other persons (as, for example, under tax
allocation agreements), not yet due for any and all periods up to and
including the date of such balance sheet; and all Taxes for periods
beginning thereafter through the Effective Time have been, or will be,
paid when due or adequately reserved against on the books of Triad and
Global and an amount of cash equal to the amount of such reserve will
have been set aside for the payment of such Taxes. Each of Triad and
Global has duly withheld all payroll taxes and other applicable 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. Neither Triad nor Global has 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 threatened action or proceeding by any governmental
authority for the assessment or collection of Taxes. Except as set
forth in Schedule 4.17, within the past three years, the income tax
returns of Triad and Global have not been reassessed to any material
degree by any taxing authority, nor has any such authority examined
any merchandise, personal property, sales or use tax returns of Triad
or Global. There is no tax lien, whether imposed by any taxing
authority, outstanding against the assets, properties or business of
Triad or Global. Neither Triad
-8-
nor Global has agreed to make or is required to make any adjustment by
reason of a change in accounting method or otherwise. Neither Triad
nor Global is a party to any tax sharing or allocation agreement.
(b) As used herein, the term "Taxes" or "Tax" means all taxes and
governmental assessments, charges and reassessments, including but not
limited to income taxes, capital gains, estimated taxes, withholding
taxes, excise taxes, sales, use, occupancy, real property, goods and
services, 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.
4.18. Certain Business Matters. Except as is set forth in Schedule
4.18, (a) neither Triad nor Global is a party to or bound by any
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) neither Triad nor Global has a 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 (Provided however, that software products
are, by their nature unique, and Take-Two acknowledges that any software
titles which become unavailable, may not be replaced), (c) there are no
pending or 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 Triad or Global, (d) the product and service warranties given
by Triad and Global or by which they are bound (complete and correct copies
or descriptions of which have heretofore been delivered by Triad and Global
to the Purchasers) entail no greater obligations than are customary in the
Business, (e) neither Triad nor Global nor any Shareholder 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 Triad or Global or any of the
Shareholders, and (f) neither Triad nor Global is a party to or bound by
any agreement in which any officer, director or Shareholder of Triad and
Global (or any affiliate of any such person) has, or had when made, a
direct or indirect material interest.
4.19. Certain Contracts. Schedule 4.19 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 either Triad or Global 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 Triad or Global (and will be terminable by Subsidiary)
without liability, expense or other obligation on 30 days' notice or less,
or (B) may be anticipated to involve aggregate payments to or by Triad or
Global of $(US)5,000 (or the equivalent) or less calculated over the full
term thereof, and (C) are not otherwise material to the Business or Triad
or Global. 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 Triad and Global to the
Purchasers. Except as expressly stated on any of such Schedules, (1) each
of THE agreements listed on Schedule 4.19 is in full force and effect, no
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) give rise to a material default
-9-
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; (3) none of them is
materially burdensome to Triad or Global; and (4) 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.
4.20. Customers and Suppliers. Set forth on Schedule 4.20 is a
complete and correct list setting forth, for the twelve months ended
December 31, 1998 and the six months ended June 30, 1999, (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 Triad or Global 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, the
aforesaid suppliers and customers will continue their respective
relationships with the Business on substantially the same basis as now
exists.
4.21. Business Practices and Commitments. Set forth on Schedule 4.21
is a description of (a) Triad's and Global 's rebate and volume discount
practice, and obligations, (b) Triad's and Global 's allowance and customer
return practice and obligations, (c) Triad's and Global 's co-op
advertising and other promotional practices, (d) Triad's and Global 's
warranty practices and obligations, (e) price protection agreements, (f)
return policies and historical return rates, as each of the foregoing
relate to Triad's and Global 's customers and suppliers, and (g) co-op and
rebate and volume discount credits due to customers.
4.22. Approvals/Consents. Except as set forth on Schedule 4.22, each
of Triad and Global 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 to Subsidiary
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
and no such consent or authorization is required and no filing with or
notice to any governmental entity is required as a condition to the lawful
completion of the transactions contemplated by this Agreement. Schedule
4.22 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.
4.23. Nature of Securities. The Shareholders understand that as of the
date hereof (a) the Stock Consideration has not been registered under the
Securities Act of 1933, as amended (the "Act"), based upon an exemption
from such registration requirements; (b) the Stock Consideration to be
received is "restricted securities," as said term is defined in Rule 144 of
the General Rules and Regulations promulgated under the Act; (c) the Stock
Consideration to be received may not be sold or otherwise transferred
unless it has first been registered under the Act and applicable state
securities laws or an exemption from the registration provisions of the Act
and applicable state securities laws are available with respect to the
proposed sale or transfer; (d)
-10-
the certificates evidencing the Stock Consideration will bear a legend to
the effect that the transfer thereof is restricted; and (e) stop transfer
instructions will be placed with the transfer agent for the Stock
Consideration. Each Stockholder represents that he or she is taking the
Stock Consideration for investment purposes only and not with a view toward
the distribution thereof and AS an "accredited investor" as defined under
the Act.
4.24. Insurance. Schedule 4.24 is a complete and correct list and
summary description of all contracts and policies of insurance relating to
the Business. Such policies are in full force and effect, all premiums due
and payable have been paid and no notice of cancellation has been received
by Triad or Global.
4.25. Employee Arrangements. Schedule 4.25 is a complete and correct
list and summary description of all compensation plans, agreements and
arrangements providing for benefits to Triad's and Global's employees and a
list of names and compensation of all employees of Triad and Global whose
earnings exceeded $(US)15,000 during the current fiscal year. Neither Triad
nor Global is a party to any collective bargaining agreement.
4.26. Residence. Each of the Shareholders is a resident of Canada
within the meaning of the Income Tax Act (Canada).
4.27. Year 2000. The Company's computer systems and products are Year
2000 compliant (in all material respects).
4.28. Information as to Triad and Global and the Shareholders. None of
the representations or warranties made by Triad and Global or the
Shareholders in this Agreement or in any agreement executed and delivered
by or on behalf of any of them pursuant hereto are false or misleading with
respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading.
5. Representations and Warranties as to the Purchasers. The Purchasers
hereby represent and warrant to the Shareholders as follows:
5.1. Organization, Standing and Power.
(a) Take-Two US is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it.
Take-Two Canada is a corporation duly organized, validly existing and
in good standing under the laws of the province of Ontario, with full
corporate power and authority to own, lease and operate its properties
and to carry on its business as presently conducted by it.
(b) Take-Two US has filed all forms, reports, statements and
documents required to be filed with the Securities and Exchange
Commission ("SEC") since April 14, 1997, (collectively, the "SEC
Reports"), each of which has complied in all material respects with
the applicable requirements of the Act or the Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable, each as in effect on the
date so filed. Take-Two US has made available to the Shareholders, in
the form filed with the SEC (including any amendments thereto), (A)
its most recent Quarterly Report on Form 10-Q for the three months
ended April 30, 1999
-11-
and (B) its Prospectus dated May 5, 1999 . None of such forms, reports
or documents filed by Take-Two US, when filed (except to the extent
revised or superseded by a subsequent filing with the SEC) contained
any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
financial statements included in such forms were prepared in
accordance with generally accepted accounting principles consistently
applied, and fairly present the financial position of Take-Two US as
at the dates thereof and its results of operations for the periods
indicated, except that any unaudited financial statements are subject
to normal reoccurring adjustments which might be required as a result
of year-end audits.
5.2. Authority. The execution and delivery by each of the Purchasers
of this Agreement and of each agreement, document and instrument to be
executed and delivered by them pursuant hereto (the "Take-Two Documents"),
the compliance by the Purchasers with the provisions hereof and thereof,
and the transactions contemplated hereby and thereby, have been duly and
validly authorized by all necessary corporate actions on the part of each
of the Purchasers, as applicable, and each of the Purchasers has all
necessary corporate powers with respect thereto.
5.3. Capitalization. The authorized capital stock of Take-Two US
consists of 55,000,000 shares of Take-Two Stock and 5,000,000 shares of
Preferred Stock, par value $.01 per share. As of the date hereof
immediately prior to the issuance of the Stock Consideration, 22,874,154
shares of Take-Two Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable.
5.4. Stock Consideration. The Stock Consideration, when issued, will
be (A) duly authorized and validly issued, fully paid and non-assessable,
(B) delivered hereunder free and clear of any security interests, pledges,
mortgages, claims, liens and encumbrances of any kind whatsoever except
that the Take-Two Stock will be "restricted securities" as such term is
defined in the rules and regulations of the SEC and will be subject to
restrictions on transfers pursuant to such rules and regulations and State
laws. Take-Two US shall file an Additional Listing Application with Nasdaq
for the Stock Consideration.
5.5. Information as to Take-Two. None of the representations or
warranties made by either of the Purchasers in this Agreement or in any
agreement executed and delivered by or on behalf of either or both of them
pursuant hereto are false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the
statements therein contained not misleading.
6. Indemnification.
6.1. Indemnification by the Shareholders. Subject to Section 6.4
below, each of the Shareholders hereby indemnifies and agrees to defend and
hold harmless the Purchasers and each of their officers, directors,
shareholders, employees and agents from and against any and all losses,
obligations, deficiencies, liabilities, damages, costs and expenses
(including, without limitation, the amount of any settlement entered into
pursuant hereto, and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of any matter
indemnified pursuant hereto) which any of them may sustain, suffer or incur
-12-
and which arise out of, are caused by, relate to, or result or occur from
or in connection with any breach by Triad or Global or any of the
Shareholders of any representation, warranty, agreement or covenant made by
any one or all of them, in this Agreement or the Triad and Global
Documents, as applicable. The foregoing indemnification shall also apply to
direct claims by the Purchasers against the Shareholders.
6.2. Indemnification by the Purchasers. The Purchasers indemnify and
agree to defend and hold harmless the Shareholders from and against any and
all losses, obligations, deficiencies, liabilities, damages, costs and
expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution or defense of
any matter indemnified pursuant hereto), which it or he may sustain, suffer
or incur and which arise out of, are caused by, relate to, or result or
occur from or in connection with (i) any breach by either of the Purchasers
of any representation, warranty, agreement or covenant made in this
Agreement or any Take-Two Document or (ii) the guarantees by Damian and
▇▇▇▇▇ in favour of the Business Development Bank of Canada dated September
8, 1995 and September 5, 1997. The indemnification provisions herein shall
also apply to direct claims by the Shareholders against the Purchasers.
6.3. 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 6.1 or 6.2, the party or parties seeking such indemnification
shall promptly notify the indemnifying party or parties, in writing, of
such claim, providing such details of the claim (including the claimed
amount) as are then known; provided, however, that the failure to give such
notice shall not affect the rights of the indemnified party or parties
hereunder except to the extent that such failure materially and adversely
affects the indemnifying party or parties due to the inability to timely
defend such action. The indemnifying party or parties shall have 10
business days after said notice is given to elect, by written notice given
to the indemnified party or parties, to undertake, conduct and control,
through counsel of their own choosing (subject to the consent of the
indemnified party or parties, such consent not to be unreasonably withheld)
and at their sole risk and expense, the good faith settlement or defense of
such claim, and the indemnified party or parties shall cooperate with the
indemnifying parties in connection therewith; provided: (a) all settlements
require the prior reasonable consultation with the indemnified party and
the prior written consent of the indemnified party, which consent shall not
be unreasonably withheld, and (b) the indemnified party or parties shall be
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
-13-
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. 6.4
Limitation. In no event shall the maximum liability of each of the
Shareholders for indemnification exceed their pro rata portion of the
Purchase Price, provided that this limitation shall not apply to
third-party claims.
6.5. 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.
7. Covenants
7.1. Consummation of Transaction. Each of the parties hereto hereby
agrees to use all reasonable efforts to cause all conditions precedent to
his or its obligations (and to the obligations of the other parties hereto
to consummate the transactions contemplated hereby) to be satisfied,
including, but not limited to, using all reasonable efforts to obtain all
required (if so required by this Agreement) consents, waivers, amendments,
modifications, approvals, authorizations, novations and licenses (including
the any required consents listed on Schedule 4.19, 7.1 or other Schedule);
provided, however, that nothing herein contained shall be deemed to modify
any of the absolute obligations imposed upon or rights of any of the
parties hereto under this Agreement or any agreement executed and delivered
pursuant hereto.
7.2. Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees to fully cooperate
with the other parties hereto in preparing and filing any notices,
applications, reports and other instruments and documents which are
required by, or which are desirable in the reasonable opinion of any
of the parties hereto, or their respective legal counsel, in respect
of, any statute, rule, regulation or order of any governmental or
administrative body in connection with the transactions contemplated
by this Agreement. The legal, administrative costs and disbursements
incurred providing this cooperation shall be borne by the party who
seeks such cooperation.
(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record, or cause such other parties
to the extent permitted by law to execute, acknowledge, deliver, file
and/or record such other documents as may be required by this
Agreement and as the Purchasers, on the one hand, and/or Triad and
Global 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. The legal,
administrative costs and disbursements incurred by the party of whom
the request is being made shall be borne by the party who sought such
request.
7.3. Broker. Each of the parties hereto represents and warrants to the
other parties that no broker or finder was engaged in connection with the
transaction contemplated by this Agreement with whom the indemnifying party
has dealt, and each of the parties shall indemnify and hold the other
harmless from and against any and all claims or liabilities asserted by or
on behalf of any alleged broker or finder for broker's fees, finder's fees,
-14-
commissions or like payments, without regard to the indemnification
limitations contained in this Agreement.
7.4. Employment Agreements and Non Competition Agreements.
Simultaneous with the execution of this Agreement, each of ▇▇▇▇▇ and Damian
will enter into an employment agreement with Triad in the form of Exhibit D
hereto (the "Employment Agreement") and each of ▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇
shall enter into a Non-Competition Agreement in the form of Exhibit E
hereto.
7.5. Stock Options. Simultaneously with the execution of this
Agreement, Take-Two US shall grant five-year options to purchase an
aggregate of 30,000 shares of Take-Two Stock, at an exercise price per
share equal to the closing price of Take-Two US's common stock on the date
hereof, to the designees of the Shareholders as set forth on Schedule 7.5.
7.6. Indebtedness. On or prior to the execution hereof, Triad and
Global shall cause Royal Bank of Canada and Business Development Bank of
Canada (the "Banks"), to enter into agreements with the TRIAD AND/OR GLOBAL
whereby the Banks will continue to provide credit to TRIAD AND/OR GLOBAL
upon terms and conditions mutually satisfactory to the parties thereto, and
arrangements satisfactory to the Purchasers shall have been made to
continue or satisfy indebtedness owed to MC Capital Corporation and Beacon
Lane Holdings Inc. other parties. Within two (2) business days after
Closing, Take-Two Canada shall make a loan of US$500,000 to Triad and
Global, evidenced by a promissory note substantially in the form attached
hereto as Exhibit 7.6 (the "Note"). The proceeds of the Note shall be used
by Triad and Global to repay the outstanding balance owed by Triad and
Global pursuant to the promissory notes held by MC Capital Corp., dated
June 9, 1999, and Beacon Lane Holdings, Inc., dated June 30, 1999 (the "MC
Capital and Beacon Notes"). Within two (2) business days after repayment of
the MC Capital and Beacon Notes, Triad and Global shall enter into a new
loan agreement with the Royal Bank of Canada and the personal guarantees to
Royal Bank of Canada by the Shareholders shall be released. Within two (2)
business days after the new loan agreement with the Royal Bank of Canada
has been entered into, Triad and Global shall repay the outstanding balance
of $1,500 owed to ▇▇▇▇▇ and $24,500 owed to Damian.
7.7. Non-Compete. The provisions contained in the Non-Competition
Agreement have been specifically negotiated and the consideration therefor
is the execution and delivery of this Agreement.
8. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that all representations and
warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto shall survive the closing of
the transactions contemplated hereby for a period of one (1) year.
9. General Provisions.
9.1. Fees and Expenses. The Purchasers, on the one hand, and the
-15-
Shareholders, on the other hand, shall be responsible for and shall, prior
to the date hereof pay the fees and expenses incurred by (i) the Purchasers
and (ii) Triad and Global and the Shareholders, respectively, in connection
with the transactions contemplated by this Agreement.
9.2. Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
9.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be delivered personally by
registered or certified mail (postage prepaid, return receipt requested) or
recognized overnight courier and shall be deemed to have been duly given or
made as of the date of actual delivery, at the following addresses (or at
such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
If to the Purchasers:
Take-Two Interactive Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, CEO
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to Shareholders:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ M2M 453
Damian and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇
National Bank Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 14th Floor
Toronto, Ontario, Canada M5H 3E5
ATT: M. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-16-
9.4. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the greatest extent possible.
9.5. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement, and supersede all prior agreements,
representations and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof, including the
letter of intent dated July 6, 1999.
9.6. No Assignment. This Agreement shall not be assigned by operation
of law or otherwise, and any assignment shall be null and void.
9.7. 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 the Shareholders hereby agree that any
action or proceeding based on or arising out of this Agreement shall be
brought in the courts of the State of New York (New York County), United
States of America or in the courts of the United States of America for the
Southern District of New York and each of the Shareholders hereby accepts
(exclusively and unconditionally) the jurisdiction of the New York courts.
9.8. 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 the parties hereto, have caused this Agreement
to be executed as of the date first written above.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇, CEO
TAKE-TWO INTERACTIVE SOFTWARE CANADA
INC.
By:
---------------------------------
-17-
▇▇▇▇▇ ▇▇▇▇▇▇, President
TRIAD DISTRIBUTORS INC.
By:
---------------------------------
GLOBAL STAR SOFTWARE LIMITED
By:
---------------------------------
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-18-