SECURITY AGREEMENT
SECURITY AGREEMENT dated October 14, 1997 between TAKE-TWO INTERACTIVE
SOFTWARE, INC. ("Borrower"), a Delaware corporation, and HW PARTNERS, L.P., as
agent for and representative (in such capacity, "Pledgee") of Infinity Investors
Limited, Infinity Emerging Opportunities Limited and Glacier Capital Limited
("Lenders") under the Purchase Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement dated the
date hereof between Borrower and Lenders (as the same may from time to time be
amended, modified or supplemented, the "Purchase Agreement"), Borrower has
issued to Lenders its Convertible Notes dated the date hereof (the "Notes") in
the aggregate principal amount of $4,200,000 payable by Borrower to the order of
Lenders; and
WHEREAS, Lenders are willing to purchase the Notes but only upon the
condition, among others, that Borrower shall have executed and delivered to
Pledgee this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Account Debtor" shall mean any "account debtor," as such term is
defined in Section 9-105 of the UCC.
"Accounts" shall mean any "account," as such term is defined in
Section 9-106 of the UCC, now owned or hereafter acquired by Borrower and,
in any event, shall include, without limitation, all accounts receivable,
book debts and other forms of obligations now owned or hereafter received
or acquired by or belonging or owing to Borrower (including, without
limitation, under any trade names, styles or divisions thereof) whether
arising out of goods sold or services rendered by Borrower or from any
other transaction (including, without limitation, any such obligation which
might be characterized as an account or contract right under the UCC) and
all of Borrower's rights in, to and under all purchase orders or receipts
now owned or hereafter acquired by it for goods, and all of Borrower's
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rights to any goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed
goods), and all moneys due or to become due to Borrower under the Contracts
and all contracts for the sale of goods or the performance of services or
both by Borrower (whether or not yet earned by performance on the part of
Borrower or in connection with any other transaction), now in existence or
hereafter occurring, including, without limitation, the right to receive
the proceeds of said purchase orders and contracts, and all collateral
security and guarantees of any kind given by any Person with respect to any
of the foregoing, to the extent any of the foregoing are related to or
arise out of sales or distribution of Products by Borrower.
"Collateral" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"Contracts" shall mean all contracts, undertakings, or other
agreements in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof, to the extent any of the foregoing are related to or
arise out of sales or distribution of Products by Borrower. As used in this
Security Agreement, "Contracts" shall include, without limitation, the
Letters of Credit.
"Documents" shall mean any "documents" as such term is defined in
Section 9-105 of the UCC, now owned or hereafter acquired by Borrower, to
the extent any of the foregoing are related to or arise out of sales or
distribution of Products by Borrower.
"General Intangibles" shall mean any "general intangibles," as such
term is defined in Section 9-106 of the UCC, now owned or hereafter
acquired by Borrower and, in any event, shall include, without limitation,
all right, title and interest which Borrower may now or hereafter have in
or under any Contract, all customer lists, rights in intellectual property,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether patented or patentable or not) and
technical information, procedures, designs, knowledge, know-how, software,
data bases, data, skill, expertise, experience, processes, models,
drawings, materials and records now owned or hereafter acquired by
Borrower, goodwill and rights of indemnification, to the extent any of the
foregoing are related to or arise out of sales or distribution of Products
by Borrower.
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole (including, without limitation,
any schedules hereto) and not merely to the specific section, paragraph or
clause in which the respective word appears.
"Lockbox Account" shall mean any lockbox account established pursuant
to Section 3.9 of the Purchase Agreement.
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"Letters of Credit" shall mean all letters of credit under which
Borrower is a beneficiary, issued in connection with the sale or
distribution of Products, now existing or hereafter arising, including
without limitation the letters of credit listed on Schedule I hereto, and
all amendments, renewals, modifications, restatements and extensions of
such letters of credit, in an aggregate amount not to exceed the principal
amount due and owing under the Convertible Notes outstanding at any time.
"Permitted Junior Liens" shall mean the security interests granted by
Borrower to secure payment of the National Bank of Canada Debt and the
Citibank Debt, provided that such security interests have been subordinated
to the security interests granted to Pledgee and Lenders under this
Security Agreement in a manner reasonably satisfactory to Pledgee.
"Proceeds" shall mean "proceeds," (as such term is defined in Section
9-306 of the UCC) and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to Borrower from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or
any part of the Collateral by any governmental body, authority, bureau or
agency (or any person acting under color of governmental authority) and
(iv) any and all other amounts from time to time paid or payable under or
in connection with any of the Collateral.
"Secured Obligations" shall mean (i) all indebtedness, obligations and
liabilities of Borrower to Secured Parties under the Purchase Agreement,
the Notes and the other Financing Documents, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, (ii) all
accrued but unpaid interest on any of the indebtedness described in (i)
above, (iii) all obligations of Borrower to Secured Parties under any
documents evidencing, securing, governing and/or pertaining to all or any
part of the indebtedness described in (i) and (ii) above, (iv) all costs
and expenses incurred by Pledgee or Secured Parties in connection with the
collection and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the protection or
preservation of, or realization upon, the collateral securing all or any
part of such indebtedness and obligations, including without limitation all
reasonable attorneys' fees and (v) all renewals, extensions, modifications
and rearrangements of the indebtedness and obligations described in (i),
(ii), (iii) and (iv) above.
"Secured Parties" means each of the Lenders and any subsequent holders
of the Notes.
"Security Agreement" shall mean this Security Agreement, as the same
may from time to time be amended, modified or supplemented and shall refer
to this Security Agreement as in effect of the date such reference becomes
operative.
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"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Lender's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection
or priority and for purposes of definitions related to such provisions.
2. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and to induce Lenders
to enter into the Purchase Agreement and to purchase the Notes in accordance
with the terms thereof, Borrower hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Pledgee (on behalf of and as agent for Secured
Parties) and Secured Parties, and hereby grants to Pledgee (on behalf of and as
agent for Secured Parties) and Secured Parties a security interest in, all of
Borrower's right, title and interest in, to and under the following (all of
which being hereinafter collectively called the "Collateral"):
(i) all Letters of Credit, including without limitation all Letters
of Credit delivered to Lender pursuant to Section 3.9 of the
Purchase Agreement;
(ii) all Accounts of Borrower;
(iii) all Contracts of Borrower;
(iv) all Documents of Borrower;
(v) all General Intangibles of Borrower;
(vi) all rights of Borrower in and to the Lockbox Account and all
amounts deposited therein; and
(vii) to the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and product of each of the
foregoing.
3. Rights of Pledgee; Limitations on Pledgee's Obligations.
(a) It is expressly agreed by Borrower that, anything herein to the
contrary notwithstanding, Borrower shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and Borrower shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract. Pledgee and Secured Parties shall
not have any obligation or liability under any Contract by reason of or arising
out of this Security Agreement or the granting to
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Pledgee and Secured Parties of a security interest therein or the receipt by
Pledgee or any Secured Party of any payment relating to any Contract pursuant
hereto, nor shall Pledgee or any Secured Party be required or obligated in any
manner to perform or fulfill any of the obligations of Borrower under or
pursuant to any Contract, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract, or to present or file any
claim, or to take any action to collect or enforce any performance or the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
(b) Pledgee authorizes Borrower to collect its Accounts provided that such
collection is performed in a prudent and businesslike manner, and Pledgee may,
after the earlier to occur of (x) January 1, 1998 or (y) the occurrence of an
Event of Default or Lockbox Event which is continuing, without notice, limit or
terminate said authority at any time. After the occurrence of an Event of
Default or Lockbox Event, all Proceeds of such collections, when first collected
by Borrower, received in payment of any Accounts in which Pledgee and Secured
Parties have been granted a security interest herein or on account of any of its
Contracts in which Pledgee and Secured Parties have been granted a security
interest herein, shall be promptly deposited by Borrower in precisely the form
received (with all necessary endorsements) in the Lockbox Account subject to
withdrawal by Pledgee only, as hereinafter provided, and until so turned over
shall be deemed to be held in trust by Borrower for Pledgee and Secured Parties
and shall not be commingled with Borrower's other funds or properties. Such
Proceeds, when deposited, shall continue to be collateral security for all of
the Secured Obligations and shall not constitute payment thereof until applied
as hereinafter provided. Pledgee may at any time apply all or any part of the
funds on deposit in the Lockbox Account to the principal of or interest on or
both in respect of any of the Secured Obligations in accordance with the
provisions of Section 8(d) hereof and any part of such funds which Pledgee
elects not so to apply and deemed not required as collateral security for the
Secured Obligations shall be paid over from time to time by Pledgee to Borrower.
If an Event of Default has occurred and is continuing, at the request of
Pledgee, Borrower shall deliver to Pledgee all original and other documents
evidencing and relating to the performance of labor or service which created
such Accounts, including, without limitation, all original purchase orders,
invoices and shipping receipts; and, prior to the occurrence of an Event of
Default, Borrower shall deliver photocopies thereof to Pledgee at its request.
Borrower shall maintain the Lockbox Account in effect at all times after its
establishment.
(c) Pledgee may at any time, upon the occurrence and during the continuance
of any Event of Default, after first notifying Borrower of its intention to do
so, notify Account Debtors of Borrower and parties to the Contracts of Borrower
that the Accounts and the right, title and interest of Borrower in and under
such Contracts have been assigned to Pledgee and that payments shall be made
directly to Pledgee. Upon the request of Pledgee, Borrower will so notify such
Account Debtors and parties to such Contracts. After the occurrence and during
the continuance of an Event of Default, Pledgee may at any time in its own name
or in the name of others communicate with such Account Debtors and parties to
such Contracts to verify with such Persons to Pledgee's satisfaction the
existence, amount and terms of any such Accounts or Contracts.
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(d) Upon reasonable prior notice to Borrower (unless an Event of Default
has occurred and is continuing, in which case no notice is necessary), Pledgee
shall have the right to make test verifications of the Accounts through any
medium that it considers advisable, and Borrower agrees to furnish all such
assistance and information as Pledgee may reasonably require in connection
therewith. Prior to the occurrence and during the continuation of an Event of
Default, such verification shall be in Borrower's name. Borrower at its expense
will prepare and deliver to Pledgee, upon Pledgee's request made not more often
than monthly, the following reports: (i) a reconciliation of all its Accounts,
(ii) an aging of all its Accounts, (iii) trial balances, and (iv) a test
verification of such Accounts as Pledgee may request.
(e) Pledgee shall at any time (irrespective of the occurrence of any Event
of Default) have the exclusive right to draw under the letters of credit listed
on Schedule I hereto in accordance with their respective terms. At the request
of Pledgee, Borrower shall provide to Pledgee, immediately after the same become
available, any and all invoices, packing lists, bills of lading, certificates,
instruments and other documents necessary in the sole judgment of Pledgee to
permit or facilitate such draws.
4. Representations and Warranties. Borrower hereby represents and warrants
that:
(a) Except for the security interest granted to Pledgee pursuant to this
Security Agreement and Permitted Junior Liens, Borrower is or will be the sole
owner of each item of the Collateral in which it purports to grant a security
interest hereunder, having good and marketable title thereto, free and clear of
any and all liens, security interests or other encumbrances. No amount payable
under or in connection with any of its Accounts or Contracts are evidenced by
instruments which have not been delivered to Pledgee.
(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation agreement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed by Borrower in favor of Pledgee pursuant to this Security
Agreement or filed in connection with Permitted Junior Liens.
(c) Upon the filing of financing statements in the form of Exhibit A hereto
describing the items or types of Collateral as to which security interests may
be perfected by the filing of a financing statement under the UCC in the
jurisdictions listed on Schedule II hereto and the delivery to Pledgee of the
original letters of credit listed on Schedule I hereto, this Security Agreement
shall be effective to create and perfect a valid and continuing lien on and
perfected security interest in such Collateral with respect to which a security
interest may be perfected by filing or the obtaining of possession of the
Collateral pursuant to the UCC in favor of Pledgee, prior to all other security
interests (other than the security interests granted to Pledgee under this
Security Agreement and Permitted Junior Liens), and is enforceable as such as
against creditors of and purchasers from Borrower. All action necessary or
desirable to protect and perfect such security interest in each item of the
Collateral has been duly taken.
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(d) The address of Borrower's principal place of business and the place
where its records concerning the Collateral are kept is set forth on Schedule
III hereto, and Borrower will not change such principal place of business or
remove such records unless it has taken such action as is necessary to cause the
security interest of Pledgee in the Collateral to continue to be perfected.
Borrower will not change its principal place of business or the place where its
records concerning the Collateral is kept without giving 30 days prior written
notice thereof to Pledgee.
(e) The amount represented by Borrower to Pledgee from time to time as
owing by each Account Debtor or by all Account Debtors in respect of the
Accounts will at such time be the correct amount actually and unconditionally
owing by such Account Debtors thereunder.
(f) Each of the letters of credit listed on Schedule I hereto constitutes
the legal, valid and binding obligation of the issuer thereof, enforceable
against it in accordance with its terms. Borrower has taken all actions
necessary to provide for the transfer to Pledgee of all its right, title and
interest in, to and under the letters of credit listed on Schedule I hereto and
Pledgee has the right to draw under such letters of credit in accordance with
their respective terms. Such transfers are enforceable against the issuers of
such letters of credit and creditors of Borrower.
5. Covenants. Borrower covenants and agrees with Pledgee that from and
after the date of this Security Agreement and until the Secured Obligations are
fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from time
to time, upon the written request of Pledgee, and at the sole expense of
Borrower, Borrower will promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Pledgee may
reasonably deem necessary to obtain the full benefits of this Security Agreement
and of the rights and powers herein granted, including, without limitation,
using its best efforts to secure all consents and approvals necessary or
appropriate for the assignment to Pledgee of any Contract held by Borrower or in
which Borrower has any rights not heretofore assigned, the filing of any
financing or continuation statements under the UCC with respect to the liens and
security interests granted hereby and transferring Collateral to Pledgee's
possession (if a security interest in such Collateral can be perfected by
possession). Borrower also hereby authorizes Pledgee to file any such financing
or continuation statement without the signature of Borrower to the extent
permitted by applicable law. A photocopy of this Security Agreement may be filed
as a financing statement. If any amount payable under or in connection with any
of the Collateral shall be or become evidenced by any instrument, such
instrument shall be immediately pledged to Pledgee hereunder, and shall be duly
endorsed in a manner satisfactory to Pledgee and delivered to Pledgee.
(b) Maintenance of Records. Borrower will keep and maintain at its own cost
and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. For
Pledgee's further security, Borrower agrees that Pledgee shall have a special
property interest in all of Borrower's books and records pertaining to the
Collateral and, upon the occurrence and during the continuation of any Event of
Default, Borrower shall deliver
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and turn over any such books and records to Pledgee or to its representatives at
any time on demand of Pledgee. Prior to the occurrence of an Event of Default
and upon reasonable notice from Pledgee, Borrower shall permit any
representative of Pledgee to inspect such books and records upon reasonable
notice and during normal business hours, and will provide photocopies thereof to
Pledgee.
(c) Indemnification. In any suit, proceeding or action brought by Pledgee
or any Secured Party relating to any Account or Contract for any sum owing
thereunder, or to enforce any provision of any Account or Contract, Borrower
will save, indemnify and keep Pledgee and Secured Parties harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Borrower of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from Borrower, and all such
obligations of Borrower shall be and remain enforceable against and only against
Borrower and shall not be enforceable against Pledgee or any Secured Party.
(d) Compliance with Laws, etc. Borrower will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any governmental authority, applicable to the Collateral or any part thereof or
to the operation of Borrower's business; provided, however, that Borrower may
contest any act, regulation, order, decree or direction in any reasonable manner
which shall not, in the reasonable opinion of Pledgee, adversely affect
Pledgee's rights hereunder or adversely affect the first priority of its
security interest in the Collateral.
(e) Payment of Obligations. Borrower will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral.
(f) Compliance with Terms of Accounts, etc. Borrower will perform and
comply with all obligations in respect of Accounts and Contracts and all other
agreements to which it is a party or by which it is bound.
(g) Limitation on Liens on Collateral. Borrower will not create, permit or
suffer to exist, and will defend the Collateral against and take such other
action as is necessary to remove, any lien, security interest or other
encumbrance on the Collateral except for Permitted Liens, and will defend the
right, title and interest of Pledgee in and to any of Borrower's rights under
the Accounts, Contracts, Documents and General Intangibles and to the Proceeds
thereof against the claims and demands of all Persons whomsoever.
(h) Limitations on Modifications of Accounts, etc. Upon the occurrence and
during the continuation of any Event of Default, Borrower will not, without
Pledgee's prior written consent, grant any extension of the time of payment of
any of the Accounts, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
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(i) Limitations on Disposition. Borrower will not sell, lease, transfer or
otherwise dispose of any of the Collateral except, subject to the provisions of
this Agreement, for the performance of Contracts and the collection of its
Accounts in the ordinary course of its business.
(j) Further Identification of Collateral. Borrower will if so requested by
Pledgee furnish to Pledgee, as often as Pledgee reasonably requests, statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Pledgee may reasonably request, all
in reasonable detail.
(k) Notices. Borrower will advise Pledgee promptly, after it learns of
same, in reasonable detail, (i) of any material lien, security interest,
encumbrance or claim made or asserted against any of the Collateral other than
Permitted Liens, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereunder.
(l) Right of Inspection. Upon reasonable notice to Borrower (unless an
Event Default has occurred and is continuing, in which case no notice is
necessary), Pledgee shall at all times have full and free access during normal
business hours and upon reasonable notice to all the books and records and
correspondence of Borrower, and Pledgee or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and Borrower agrees
to render to Pledgee, at Borrower's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
(m) Continuous Perfection. Borrower will not change its name, identity or
corporate structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of Section 9-402 of the UCC (or any other then applicable provision of the UCC)
unless Borrower shall have given Pledgee at least 30 days prior written notice
thereof and shall have taken all action (or made arrangements to take such
action substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or reasonably requested by Pledgee to amend
such financing statement or continuation statement so that it is not seriously
misleading.
6. Pledgee's Appointment as Attorney-in-Fact.
(a) Borrower hereby irrevocably constitutes and appoints Pledgee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in Pledgee's reasonable discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be necessary
or desirable to accomplish the purpose of this Security Agreement and, without
limiting the generality of the
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foregoing, hereby gives Pledgee the power and right, on behalf of Borrower,
without notice to or assent by Borrower to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of Borrower or its own name or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other Instruments for the
payment of monies due under any Collateral, to access all post
office boxes maintained by or for Borrower for the collection of
any of the Collateral, and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed appropriate by Pledgee for the purpose of collecting any
and all such moneys due under any Collateral whenever payable and
to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by
Pledgee for the purpose of collecting any and all such moneys due
under any Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by
the terms of this Security Agreement and to pay all or any part
of the premiums therefor and the costs thereof; and
(iii)(A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to Pledgee or as Pledgee shall
direct; (B) to receive payment of and receipt for any and all
moneys, claims and other amounts due, and to become due at any
time, in respect of or arising out of any Collateral; (C) to sign
and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
accounts and other Documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against Borrower
with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described above and, in
conjunction therewith, to give such discharges or releases as
Pledgee may deem appropriate; (G) generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with
any of the
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Collateral as fully and completely as though Pledgee were the
absolute owner thereof for all purposes, and to do, at Pledgee's
option and Borrower's expense, at any time, or from time to time,
all acts and things which Pledgee reasonably deems necessary to
protect, preserve or realize upon the Collateral and Pledgee's
security interest therein, in order to effect the intent of this
Security Agreement, all as fully and effectively as Borrower
might do.
(b) Pledgee agrees that, except upon the occurrence and during the
continuation of an Event of Default, it will forebear from exercising the power
of attorney or any rights granted to Lender pursuant to this Section 6. Borrower
hereby ratifies, to the extent permitted by law, all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney granted
pursuant to this Section 6 is a power coupled with an interest and shall be
irrevocable until the Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on Pledgee hereunder are solely to protect
Pledgee's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. Pledgee shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be responsible to
Borrower for any act or failure to act, except for its or their own gross
negligence or willful misconduct.
(d) Borrower also authorizes Pledgee, at any time and from time to time
upon the occurrence and during the continuation any Event of Default, (i) to
communicate in its own name with any party to any Contract with regard to the
collateral assignment of the right, title and interest of Borrower in and under
the Contracts hereunder and other matters relating thereto and (ii) to execute,
in connection with the sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral reasonably requested by Pledgee.
7. Performance by Pledgee of Borrower's Obligations. If Borrower fails to
perform or comply with any of its agreements contained herein and Pledgee, as
provided for by the terms of this Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
reasonable expenses of Pledgee or such Secured Party incurred in connection with
such performance or compliance, together with interest thereon at the rate then
in effect under the Notes, shall be payable by Borrower to Pledgee or such
Secured Party on demand and shall constitute Secured Obligations secured hereby.
8. Remedies, Rights Upon Default.
(a) If any or Event of Default shall occur and be continuing, Pledgee may
(on behalf of and as agent for Secured Parties) exercise in addition to all
other rights and remedies granted to it in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under
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SECURITY AGREEMENT - Page 11
(Take-Two Interactive Software, Inc.)
the UCC. Without limiting the generality of the foregoing, Borrower expressly
agrees that in any such event Pledgee, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Borrower or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
at any of Pledgee's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Pledgee shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption Borrower hereby releases. Borrower
further agrees, at Pledgee's request, to assemble the Collateral and make it
available to Pledgee at places which Pledgee shall reasonably select, whether at
Borrower's premises or elsewhere. Pledgee shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, as
provided in Section 8(d) hereof, Borrower remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by Lender of any other amount required by any
provision of law, including Section 9-504 of the UCC, need Lender account for
the surplus, if any, to Borrower. To the maximum extent permitted by applicable
law, Borrower waives all claims, damages, and demands against Pledgee or any
Secured Party arising out of the repossession, retention or sale of the
Collateral except such as arise out of the gross negligence or willful
misconduct of Pledgee. Borrower agrees that the Pledgee need not give more than
ten days' notice (which notification shall be deemed given when mailed or
delivered on an overnight basis, postage prepaid, addressed to Borrower at its
address referred to in Section 12 hereof) of the time and place of any public
sale or of the time after which a private sale may take place and that such
notice is reasonable notification of such matters. Borrower shall remain liable
for any deficiency if the proceeds of any sale or disposition of the Collateral
are insufficient to pay all amounts to which Secured Parties are entitled,
Borrower also being liable for the reasonable fees of any attorneys employed by
Pledgee or any Secured Party to collect such deficiency.
(b) Borrower also agrees to pay all costs of Pledgee and Secured Parties,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
(c) Borrower hereby waives presentment, demand, protest or any notice (to
the maximum extent permitted by applicable law) of any kind in connection with
this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon all or
any part of the Collateral shall be distributed by Pledgee in the following
order of priorities:
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SECURITY AGREEMENT - Page 12
(Take-Two Interactive Software, Inc.)
first, to Pledgee in an amount sufficient to pay in full the expenses of
Pledgee and Secured Parties in connection with such sale, disposition or other
realization, including all reasonable expenses, liabilities and advances
incurred or made by Pledgee in connection therewith, including, without
limitation, reasonable attorney's fees;
second, to Pledgee or Secured Parties in an amount equal to the then unpaid
principal of and accrued interest and prepayment premiums, if any, on the
Secured Obligations;
third, to Pledgee or Secured Parties in an amount equal to any other
Secured Obligations which are then unpaid; and
finally, upon payment in full of all of the Secured Obligations, to pay to
Borrower, or its representatives or as a court of competent jurisdiction may
direct, any surplus then remaining from such Proceeds.
9. Limitation on Pledgee's Duty in Respect of Collateral. Pledgee shall use
reasonable care with respect to the Collateral in its possession or under its
control. Pledgee shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. Upon request of Borrower,
Pledgee shall account for any moneys received by it in respect of any
foreclosure on or disposition of the Collateral.
10. Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Borrower for
liquidation or reorganization, should Borrower become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Borrower's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Secured Obligations, whether as a
"voidable preference," "fraudulent conveyance", or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
11. Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
given as set forth in Section 12.1 of the Purchase Agreement. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
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SECURITY AGREEMENT - Page 13
(Take-Two Interactive Software, Inc.)
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
12. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. Neither Pledgee nor any Secured Party
shall by any act, delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Pledgee, and then only to the extent therein set forth. A
waiver by Pledgee or any Secured Party of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which
Pledgee or any Secured Party would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Pledgee or any
Secured Party, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by Pledgee and,
where applicable, by Borrower.
14. Successors and Assigns; Governing Law.
(a) This Security Agreement and all obligations of Borrower hereunder shall
be binding upon the successors and assigns of Borrower, and shall, together with
the rights and remedies of Pledgee and Secured Parties hereunder, inure to the
benefit of Pledgee and Secured Parties, all future holders of the Notes and
their respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement governing
or instrument evidencing the Secured Obligations or any portion thereof or
interest therein shall in any manner affect the security interest granted to
Pledgee and Secured Parties hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. Further Indemnification. Borrower agrees to pay, and to save Pledgee
and Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Security Agreement.
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SECURITY AGREEMENT - Page 14
(Take-Two Interactive Software, Inc.)
16. Waiver of Jury Trial. BORROWER HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER.
17. Termination. Notwithstanding any other provision of any other Financing
Document, at such time as (i) the entire unpaid principal balance of the Notes
and all accrued interest thereon have been converted in full in accordance with
Article III of the Purchase Agreement or indefeasibly paid in full ("Payment or
Conversion in Full") and (ii) all other payment obligations under the Notes and
the Purchase Agreement due and owing as of the date of such Payment or
Conversion in Full have been indefeasibly paid in full, this Agreement and the
security interests created hereby shall terminate. Upon termination of this
Agreement and Borrower's written request, Pledgee will, at Borrower's sole cost
and expense, return to Borrower such of the Collateral as shall not have been
sold or otherwise disposed of or applied pursuant to the terms hereof and
execute and deliver to Borrower such documents as Borrower shall reasonably
request to evidence such termination.
[SIGNATURE PAGE FOLLOWS]
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SECURITY AGREEMENT - Page 15
(Take-Two Interactive Software, Inc.)
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
------------------------------
Title: CEO
------------------------------
Acknowledged:
HW PARTNERS, L.P., as Purchasers' Representative
By: HW Finance, L.L.C., its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Title: Vice-President
------------------------------
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SECURITY AGREEMENT - Page 16
(Take-Two Interactive Software, Inc.)
SCHEDULE I
LIST OF LETTERS OF CREDIT
-----------------------------------------------------------------------------------------------------------------
Letter of Credit Number Issuing Bank Face Amount
-----------------------------------------------------------------------------------------------------------------
30724824 American National Bank and Trust Company of Chicago $494,274.96
-----------------------------------------------------------------------------------------------------------------
100181521 Bank of New York $230,160.60
-----------------------------------------------------------------------------------------------------------------
100171405 Bank of New York $1,381,973.55
-----------------------------------------------------------------------------------------------------------------
AI1078363 Fleet Bank, N.A. $446,634.00
-----------------------------------------------------------------------------------------------------------------
970917IM1172 Crestar Bank $460,657.48
-----------------------------------------------------------------------------------------------------------------
SCHEDULE II
FILINGS
DEBTOR JURISDICTION FILING OFFICE
------ ------------ -------------
Borrower New York UCC Filing Office
State of New York
Department of State
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Borrower New York New York City Register
Room ▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
SCHEDULE III
LOCATION OF RECORDS
Principal Place of Business and Location of Records
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
EXHIBIT A
Form of Financing Statement
