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Exhibit 10.5
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as amended, restated, supplemented, or otherwise
modified, the "Pledge Agreement"), dated as of September 11, 1998, is made by GT
INTERACTIVE SOFTWARE CORP., a corporation organized under the laws of the State
of Delaware (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK, a national
banking association, as Administrative Agent (the "Administrative Agent"), for
the ratable benefit of itself and the financial institutions (the "Lenders")
that are, or may from time to time become, parties to the Credit Agreement
referred to below.
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement of even date herewith (as
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
by and among the Pledgor, as borrower (the "Borrower"), the Lenders who are or
may become party thereto, and the Administrative Agent, the Lenders have agreed
to make certain Extensions of Credit to the Borrower as more particularly
described therein.
The Pledgor is the record and beneficial owner of (a) the shares of
Pledged Stock (as hereinafter defined) issued by certain corporations as
specified on Schedule I attached hereto and incorporated herein by reference
(collectively, the "Issuers"), (b) the Partnership/LLC Interests (as hereinafter
defined) in the partnerships and limited liability companies listed on Schedule
I hereto (collectively, the "Partnerships/LLCs") and (c) any and all funds
maintained in the Investment Account (as hereinafter defined).
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver this Pledge Agreement together
with the Pledged Stock and the Partnership/LLC Interests to the Administrative
Agent, for the ratable benefit of itself and the Lenders.
NOW, THEREFORE, in consideration of the foregoing premises and to
induce the Administrative Agent and the Lenders to enter into and make available
Extensions of Credit pursuant to the Credit Agreement, the Pledgor hereby agrees
with the Administrative Agent, for the ratable benefit of itself and the
Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"Account Collateral" means all present and future assets held
as part of the Investment Account, including, without limitation,
investment securities whether in registered or bearer form, negotiable
instruments, promissory notes, and deposit accounts, certificates of
deposit or other cash equivalents, together with (a) any and all
accessions, renewals, replacements and substitutions, of all or any
part thereof and (b) all cash and non-cash proceeds and products
thereof and such additional
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property receivable or distributable in respect of or in exchange of
all or any of such assets.
"Code" means the Uniform Commercial Code as in effect in the
State of North Carolina; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the security interests in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other
than North Carolina, "Code" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.
"Collateral" means the Stock Collateral, the Partnership/LLC
Collateral and the Account Collateral.
"Investment Account" means the account in which the Excess
Subordinated Debt Proceeds are maintained, as required pursuant to the
Credit Agreement, as further described on Schedule III attached hereto
and incorporated herein by reference.
"Obligations" means the Pledgor's obligations under the Credit
Agreement and each Loan Document to which the Pledgor is a party.
"Partnership/LLC Collateral" means all of the Partnership/LLC
Interests of the Pledgor in the Partnerships/LLCs and all Proceeds
therefrom.
"Partnership/LLC Interests" means the entire partnership or
membership interest of the Pledgor in each Partnership/LLC listed on
Schedule I hereto, including, without limitation, the Pledgor's capital
account, its interest as a partner or member in the net cash flow, net
profit and net loss, and items of income, gain, loss, deduction and
credit of the Partnerships/LLCs, its interest in all distributions made
or to be made by the Partnerships/LLCs to the Pledgor and all of the
other economic rights, titles and interests of the Pledgor as a partner
or member of the Partnerships/LLCs, whether set forth in the
partnership agreement or membership agreement of the Partnerships/LLCs,
by separate agreement or otherwise.
"Pledged Stock" means the shares of capital stock of each
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by such Issuer to the Pledgor while this Pledge
Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock and the Partnership/LLC Interests, collections
thereon, proceeds of sale thereof or distributions with respect
thereto.
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"Stock Collateral" means the Pledged Stock and all Proceeds
therefrom.
2. Pledge and Grant of Security Interest. The Pledgor hereby delivers
to the Administrative Agent, for the ratable benefit of itself and the Lenders,
all the Pledged Stock and hereby grants to the Administrative Agent, for the
ratable benefit of itself and the Lenders, a first priority security interest in
the Pledged Stock and all other Collateral, as collateral security for the
prompt and complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
3. Stock Powers; Register of Pledge. Concurrently with the delivery to
the Administrative Agent of each certificate representing one or more shares of
Pledged Stock (with respect to each Domestic Subsidiary, and, where applicable,
with respect to each Foreign Subsidiary), the Pledgor shall deliver an undated
stock power covering such certificate, duly executed in blank by the Pledgor
with, if the Administrative Agent so requests, signature guaranteed.
4. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Pledgor shall remain liable to perform all of its
duties and obligations as a partner or member of the Partnerships/LLCs to the
same extent as if this Pledge Agreement had not been executed, (b) the exercise
by the Administrative Agent or any Lender of any of its rights hereunder shall
not release the Pledgor from any of its duties or obligations as a partner or
member of the Partnerships/LLCs, and (c) neither the Administrative Agent nor
any Lender shall have any obligation or liability as a partner or member of the
Partnerships/LLCs by reason of this Pledge Agreement.
5. Account Control Agreement. Upon creation of the Investment Account,
as required pursuant to the Credit Agreement, the Pledgor hereby agrees to
deliver to the Administrative Agent an Account Control Agreement, substantially
in the form of Exhibit A attached hereto and incorporated herein by reference,
by and among the transfer agent of such Investment Account (the "Transfer
Agent"), the Pledgor, and the Administrative Agent, for the benefit of itself
and the Lenders.
6. Representations and Warranties. To induce the Administrative Agent
and the Lenders to execute the Credit Agreement and make any Extensions of
Credit and to accept the security contemplated hereby, the Pledgor hereby
represents and warrants to the Administrative Agent and the Lenders that:
(a) the Pledgor has the corporate power and authority to
execute and deliver, to perform its obligations under, and to grant the
Lien on the Collateral pursuant to, this Pledge Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of, and grant of the Lien on the Collateral pursuant to,
this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
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similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) the execution, delivery and performance by the Pledgor of
this Pledge Agreement will not violate any provision of any (i)
Applicable Law relating to the Pledgor or (ii) material contractual
obligation of the Pledgor, the violation of which could reasonably be
expected to have a Material Adverse Effect, and will not result in the
creation or imposition of any Lien on any of the properties or the
revenues of the Pledgor pursuant to any Applicable Law or such
contractual obligation, except as contemplated hereby and by the Credit
Agreement;
(d) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of the Pledgor or any Issuer or any general or
limited partner or member of any Partnership/LLC), is required in
connection with the execution, delivery or performance by, or validity
or enforceability against, the Pledgor of this Pledge Agreement, except
(i) as may be required in connection with the disposition of the
Pledged Stock and the Partnership/LLC Interests by laws affecting the
offering and sale of securities generally, (ii) filings under the
Uniform Commercial Code, and (iii) the consent and acknowledgement of
the Transfer Agent pursuant to the Account Control Agreement referred
to in paragraph 5 above;
(e) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues, in each case with respect to
this Pledge Agreement or any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule I
constitute all of the issued and outstanding shares of all classes of
the capital stock of each Issuer that is a Domestic Subsidiary and
constitute sixty-five percent (65%) of all of the issued and
outstanding shares of all classes of capital stock of each Issuer that
is a Foreign Subsidiary, in each case owned by the Pledgor, and
Schedule I accurately reflects such Pledgor's Partnership/LLC Interest
in each of the Partnerships/LLCs and the Partnership/LLC Interests
pledged by the Pledgor constitute all of the outstanding ownership
interests in which the Pledgor has any right, title or interest in each
Partnership/LLC which is a Domestic Subsidiary and constitutes
sixty-five percent (65%) of the outstanding ownership interests in
which the Pledgor has any right, title and interest in each
Partnership/LLC which is a Foreign Subsidiary;
(g) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable and all of the
Partnership/LLC Interests have been duly and validly issued;
(h) the Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock and Partnership/LLC
Interests listed on Schedule I, free of any and all Liens or options in
favor of, or claims of, any other Person, except the Liens created by
this Pledge Agreement and the other Loan Documents;
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(i) the jurisdiction in which the Pledgor is located for
purposes of Section 9-103 and Section 9-401 of the Code is listed on
Schedule II hereto;
(j) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock and the filing of appropriate
financing statements (or, with respect to any Foreign Subsidiary, any
filing required by the applicable foreign jurisdiction) in the
jurisdictions listed on Schedule II and, with respect to the Investment
Account only, the execution and delivery of the Account Control
Agreement referred to in Paragraph 5 above, the Lien granted pursuant
to this Pledge Agreement will constitute a valid, perfected first
priority Lien on the Collateral, enforceable as such against all
creditors of the Pledgor and any Persons purporting to purchase any of
the Collateral from the Pledgor;
(k) the Pledgor has delivered to the Administrative Agent true
and complete copies of the partnership agreements and operating
agreements, as applicable, for each of the Partnerships/LLCs, which
partnership agreements and operating agreements are currently in full
force and effect and have not been amended or modified except as
disclosed to the Administrative Agent in writing; and
(l) Schedule III contains a true and complete summary of the
Investment Account as of the date of its creation, such Schedule III to
be updated on such date.
7. Certain Covenants. The Pledgor covenants and agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders, that,
from and after the date of this Pledge Agreement until the Obligations are paid
in full and the Commitments are terminated:
(a) The Pledgor agrees that as a partner or member in the
Partnerships/LLCs it will abide by, perform and discharge each and
every material obligation, covenant and agreement to be abided by,
performed or discharged by the Pledgor as and when required under the
terms of the partnership agreements and operating agreements, as
applicable, of the Partnerships/LLCs, at no cost or expense to the
Administrative Agent and the Lenders.
(b) If the Pledgor shall, as a result of its ownership of the
Collateral, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any of the Collateral, or otherwise in respect thereof,
the Pledgor shall accept the same as the agent of the Administrative
Agent, hold the same in trust for the Administrative Agent and deliver
the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by the Pledgor to the Administrative Agent, if
required, together with an undated stock power covering such
certificate duly executed in blank by the Pledgor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by
the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligations; provided, that at no time
shall the Pledged Stock or Partnership/LLC Interests of any Issuer or
Partnership/LLC that is a Foreign
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Subsidiary exceed sixty-five percent (65%) of the Pledged Stock or
Partnership/LLC Interests of such Subsidiary owned by the Pledgor. In
addition, any sums paid upon or in respect of the Collateral upon the
liquidation or dissolution of any Issuer or Partnership/LLC shall be
held by the Administrative Agent as additional collateral security for
the Obligations.
(c) Without the prior written consent of the Administrative
Agent, the Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer or Partnership/LLC to issue any stock,
partnership interests, limited liability company interests or other
equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any
stock, partnership interests, limited liability company interests or
other equity securities of any nature of such Issuer or
Partnership/LLC, (ii) except as expressly provided to the contrary
herein, consent to any modification, extension or alteration of the
material terms of any partnership agreement or operating agreement of
the Partnerships/LLCs, (iii) accept a surrender of any partnership
agreement or operating agreement of any of the Partnerships/LLCs or
waive any material breach of or default under any partnership agreement
or operating agreement of any of the Partnerships/LLCs by any other
party thereto, (iv) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, except
as permitted by the Loan Documents, or (v) create, incur or permit to
exist any Lien on or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except
for the Liens provided for by this Pledge Agreement and the other Loan
Documents and any Lien specifically permitted pursuant to the Account
Control Agreement. The Pledgor will defend the right, title and
interest of the Administrative Agent in and to the Collateral against
the claims and demands of all Persons whomsoever.
(d) On and after the date of the creation of the Investment
Account, the Pledgor shall (i) not withdraw any of the assets from the
Investment Account; provided, that the Pledgor shall be permitted to
withdraw assets once per calendar month so long as (A) the Pledgor
delivers (I) written notice of such withdrawal and (II) an Officer's
Compliance Certificate demonstrating pro forma compliance with each of
the covenants contained in Article IX of the Credit Agreement (based on
the most recent financial statements required to be delivered pursuant
to the Credit Agreement but adjusted to reflect such withdrawal) both
before and after giving effect to the proposed withdrawal at least one
(1) Business Day prior to such proposed withdrawal and (B) the
Administrative Agent consents to such proposed withdrawal, (ii) not
terminate the custodian/beneficiary relationship with the Transfer
Agent, (iii) not enter into any new agreements or contracts or make any
material modifications or amendments to any existing agreements or
contracts, between the Pledgor and the Transfer Agent with respect to
the possession or management of the Investment Account and (iv) within
thirty (30) days after the last day of each fiscal quarter, provide the
Administrative Agent with a quarterly summary of the market value of
the Investment Account as of the last day of such fiscal quarter,
certified as true and correct by the Transfer Agent.
(e) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of the
Pledgor, the Pledgor will promptly and
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duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably
request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note, other instrument
or chattel paper, such note, instrument or chattel paper shall be
immediately delivered to the Administrative Agent, duly endorsed in a
manner reasonably satisfactory to the Administrative Agent, to be held
as Collateral pursuant to this Pledge Agreement.
(f) The Pledgor agrees to pay when due, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying
(except due to any delay caused by the gross negligence or willful
misconduct of the Administrative Agent or any Lender), any and all
applicable stamp, 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 Pledge Agreement.
(g) On or prior to the formation or acquisition of any
Subsidiary of the Pledgor, the Pledgor agrees to execute the Joinder
Agreement, attached to the Credit Agreement (which among other things,
supplements this Pledge Agreement), and such other documents and
instruments as required pursuant to Section 8.12 of the Credit
Agreement.
8. Cash Dividends and Distributions; Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Administrative Agent shall
have given notice to the Pledgor of the Administrative Agent's intent to
exercise its rights pursuant to Xxxxxxxxx 0 xxxxx, (x) the Pledgor shall be
permitted to receive all cash dividends and shareholder, partnership and
membership distributions paid in accordance with the terms of the Credit
Agreement in respect of the Collateral and to exercise all voting and corporate,
partnership or membership rights, as applicable, with respect to the Collateral;
provided, that no vote shall be cast or corporate, partnership or membership
right exercised or other action taken which, in the Administrative Agent's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, any other Loan Document or this Pledge Agreement and (b) the Pledgor
shall be entitled to establish and communicate investment objectives and
policies to the Transfer Agent. The Administrative Agent shall, at the sole cost
and expense of the Pledgor, execute and deliver all proxies and other
instruments as the Pledgor may reasonably request from time to time for the
purpose of enabling the Pledgor to exercise the voting and other rights that it
is entitled to exercise and to receive the dividends and distributions that it
is authorized to receive and retain pursuant to this Paragraph 8.
9. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the Pledgor, (i) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock, partnership and
membership distributions in respect of the Partnership/LLC Interests or any
distributions made in respect of the Account Collateral and make application
thereof to the
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Obligations in the order set forth in Section 4.5 of the Credit Agreement,
(ii) all shares of the Pledged Stock, the Partnership/LLC Interests and, if
applicable, any Account Collateral represented by instruments shall be
registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (A) all voting,
corporate, partnership, membership and other rights pertaining to such
Collateral at any meeting of shareholders, partners or members of the applicable
entity or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
Collateral as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of the applicable entity, or
upon the exercise by the Pledgor or the Administrative Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all of the Collateral with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without liability except to
account for property actually received by it, but the Administrative Agent shall
have no duty to the Pledgor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing and (iii)
the Administrative Agent shall have the right to notify the Transfer Agent of
such Event of Default and to direct the Transfer Agent to immediately cease and
terminate all distributions of the Investment Account (including current and
accrued income) to the Pledgor.
(b) The rights of the Administrative Agent and the Lenders hereunder
shall not be conditioned or contingent upon the pursuit by the Administrative
Agent or any Lender of any right or remedy against the Pledgor or against any
other Person which may be or become liable in respect of all or any part of the
Obligations or against any collateral security therefor, guarantee thereof or
right of offset with respect thereto. Neither the Administrative Agent nor any
Lender shall be liable for any failure to demand, collect or realize upon all or
any part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.
10. Remedies.
(a) If an Event of Default shall occur and be continuing, upon the
request of the Required Lenders, the Administrative Agent shall exercise, on
behalf of itself and the Lenders, all rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, and in addition thereto, all rights and remedies of
a secured party under the Code. Without limiting the generality of the foregoing
with regard to the scope of the Administrative Agent's remedies, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by Applicable Law referred to below) to or upon the Pledgor, any
Issuer, any Partnership/LLC or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent or any
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Lender or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Administrative Agent or any Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by Applicable Law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Pledgor, which right or equity is hereby waived or released.
The Administrative Agent shall apply any Proceeds from time to time held by it
and the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel thereto, to the payment
in whole or in part of the Obligations then outstanding, in the order set forth
in Section 4.5 of the Credit Agreement, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of Applicable Law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Pledgor. To the extent permitted by Applicable Law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
Written notice of a proposed sale or other disposition of Collateral shall be
given to the Pledgor at least ten (10) Business Days before such sale or other
disposition and shall be deemed reasonable and proper if so given. To the extent
permitted by applicable law, the Pledgor further waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the Code.
Nothing in this Section 10 or otherwise in this Pledge Agreement shall be
construed to require the Administrative Agent to give any notice of an action
not otherwise required by Applicable Law and the express provision of the Pledge
Agreement, the Credit Agreement or any other Loan Document.
(b) Effective upon the occurrence and during the continuance of an
Event of Default, the Pledgor hereby constitutes and appoints the Administrative
Agent as its true and lawful attorney-in-fact, with full power of substitution
and full power to do any and all things which the Administrative Agent deems
advisable or necessary to be done hereunder, or with respect to the Investment
Account, as fully and effectively as the Pledgor might or could do but for this
appointment and hereby ratifies all that said attorney-in-fact shall lawfully do
or cause to be done by virtue hereof. Neither the Administrative Agent nor any
of its agents shall be liable for any acts or omissions or for any error in
judgment or mistake of fact or law in its capacity as such attorney-in-fact,
except due to its gross negligence or willful misconduct. This power of attorney
is coupled with an interest and shall be irrevocable so long as any part of the
Extensions of Credit shall remain outstanding.
11. Indemnity and Expenses. The Pledgor will upon demand pay to the
Administrative Agent the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Administrative Agent may incur in connection with
(i) the administration of this Pledge Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, the
Investment Account or the Collateral, (iii) the exercise or enforcement of any
of the
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rights of the Lenders hereunder or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
12. Registration Rights; Private Sales.
(a) If the Administrative Agent shall determine to exercise its right
to sell any or all of the Pledged Stock pursuant to Paragraph 9 hereof, and if
in the opinion of the Administrative Agent it is necessary or advisable to have
the Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will use its best efforts to cause the applicable Issuer to (i) execute
and deliver, and cause the directors and officers of the applicable Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the reasonable opinion of the
Administrative Agent, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) to use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged Stock, or that portion
thereof to be sold, or until all such Pledged Stock is sold and (iii) to make
all amendments thereto and/or to the related prospectus which, in the reasonable
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to use its best efforts to cause the applicable Issuer to comply
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the applicable Issuer to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if the applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Paragraph 11 valid and
binding and in compliance with any and all other Applicable Laws. The Pledgor
further agrees that a breach of any of the covenants contained in this Paragraph
11 will cause irreparable injury to the Administrative Agent and the Lenders not
compensable in damages, that the Administrative Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Xxxxxxxxx 00
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xxxxx xx specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred and is continuing under the Credit Agreement.
13. Amendments, etc. With Respect to the Obligations. The Pledgor shall
remain obligated hereunder, and the Collateral shall remain subject to the Lien
granted hereby, notwithstanding that, without any reservation of rights against
the Pledgor, and without notice to or further assent by the Pledgor, any demand
for payment of any of the Obligations made by the Administrative Agent or any
Lender may be rescinded by the Administrative Agent or such Lender, and any of
the Obligations continued, and the Obligations, or the liability of the Pledgor
or any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Administrative Agent or any
Lender, and the Credit Agreement, the Notes, any other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Lenders (or the
Required Lenders, as the case may be) may deem advisable from time to time, and
any guarantee, right of offset or other collateral security at any time held by
the Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any other Lien at any time held by it as security for the Obligations or
any property subject thereto. The Pledgor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative Agent or any Lender upon this Pledge
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Pledge
Agreement; and all dealings between the Pledgor, on the one hand, and the
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. To the extent permitted by Applicable Law, the Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Pledgor with respect to the Obligations.
14. No Subrogation. Notwithstanding any payment or payments made by the
Pledgor hereunder, or any setoff or application of funds of the Pledgor by the
Administrative Agent, or the receipt of any amounts by the Administrative Agent
with respect to any of the Collateral, the Pledgor shall not be entitled to be
subrogated to any of the rights of the Administrative Agent against any
guarantor or against any other collateral security held by the Administrative
Agent for the payment of the Obligations, nor shall the Pledgor seek any
reimbursement from any guarantor in respect of payments made by the Pledgor in
connection with the Collateral, or amounts realized by the Administrative Agent
in connection with the Collateral, until all amounts owing to the Administrative
Agent and the Lenders on account of the Obligations are paid in full and the
Credit Agreement is terminated. If any amount shall be paid to the Pledgor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the Pledgor in trust
for the Administrative Agent, segregated from other funds of the Pledgor, and
shall, forthwith upon receipt by the Pledgor, be turned over to the
Administrative Agent in the exact form received by the Pledgor (duly endorsed by
the Pledgor, if required) to be
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applied against the Obligations, whether matured or unmatured, in such order as
set forth in Section 4.5 of the Credit Agreement.
15. Limitation on Duties Regarding Collateral. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. Neither the Administrative Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or otherwise.
16. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral constitute irrevocable powers
coupled with an interest.
17. Severability. Any provision of this Pledge 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.
18. Paragraph Headings. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
19. No Waiver; Cumulative Remedies. Neither the Administrative Agent
nor any Lender shall by any act (except by a written instrument pursuant to
Paragraph 20 hereof) be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
20. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Pledge Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Pledgor and
the Administrative Agent; provided that any consent by the Administrative Agent
to any waiver, amendment, supplement or modification hereto shall be subject to
approval thereof by the Lenders or Required Lenders, as applicable, in
accordance with Section 13.11 of the Credit Agreement. This Pledge Agreement
shall be binding upon the successors and assigns of the Pledgor and shall inure
to the benefit of the Administrative Agent, the Lenders and their respective
permitted successors and assigns. This
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Pledge Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of North Carolina.
21. Notices. All notices and communications hereunder shall be given to
the addresses and otherwise in accordance with Section 13.1 of the Credit
Agreement.
22. Control Agreement; Acknowledgement by Issuers and Partnership/LLC.
(a) The Pledgor hereby authorizes and instructs each Issuer and Partnership/LLC
to comply, and each Issuer and Partnership/LLC hereby agrees to so comply, with
any instruction received thereby from the Administrative Agent in accordance
with the terms of this Pledge Agreement with respect to the Collateral, without
any consent or further instructions from the Pledgor (or other registered
owner), and the Pledgor agrees that such Issuer and Partnership/LLC shall be
fully protected in so complying. Each Partnership/LLC agrees that its agreement
set forth in the preceding sentence shall be sufficient to create in favor of
the Administrative Agent, for the benefit of the Lenders, "control" of the
Partnership/LLC Interests within the meaning of such term under Section 8-106(c)
of the Code. (Notwithstanding the foregoing, nothing in this Pledge Agreement is
intended or shall be construed to mean or imply that the Partnership/LLC
Interests constitute "securities" within the meaning of such term under Section
8-102(a)(15) of the Code or otherwise to limit or modify the application of
Section 8-103(c) of the Code. Rather, the Administrative Agent has requested
that this provision be included in this Pledge Agreement solely out of an
abundance of caution in the event the Partnership/LLC Interests are,
nevertheless, deemed to constitute "securities" under the Code.)
(b) Each Issuer and Partnership/LLC acknowledges receipt of a copy of
this Pledge Agreement and agrees to be bound thereby and to comply with the
terms thereof insofar as such terms are applicable to it. Each Issuer and
Partnership/LLC agrees to notify the Administrative Agent promptly in writing of
the occurrence of any of the events described in Section 7(c) of this Pledge
Agreement. Each Issuer and Partnership/LLC further agrees that the terms of
Section 11 of this Pledge Agreement shall apply to it with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 10 of this Pledge Agreement.
23. Authority of Administrative Agent. The Pledgor acknowledges that
the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
itself and the Lenders with full and valid authority so to act or refrain from
acting, and neither the Pledgor nor any Issuer or Partnership/LLC shall be under
any obligation, or entitlement, to make any inquiry respecting such authority.
24. Consent to Jurisdiction. The Pledgor hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina, in any action, claim or other proceeding arising out of
or any dispute in connection with this Pledge
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Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations. The Pledgor hereby irrevocably consents to the service
of a summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this Pledge
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the manner
provided in Section 13.1 of the Credit Agreement. Nothing in this Paragraph 24
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.
25. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any claim or controversy
arising out of, or relating to this Pledge Agreement or any other Loan Document
(a "Dispute") between or among the parties to this Pledge Agreement or any other
Loan Document shall be resolved by binding arbitration conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and the
Federal Arbitration Act. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, or claims arising from documents executed in the
future. A judgment upon the award may be entered in any court having
jurisdiction.
(b) Special Rules. All arbitration hearings shall be conducted in
Charlotte, North Carolina. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall be concluded within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties hereto do not waive applicable Federal or state substantive
law except as provided herein.
(c) Preservation and Limitation of Remedies.
(i) Notwithstanding the preceding binding arbitration
provisions, the parties hereto agree to preserve, without diminution, certain
remedies that any such Persons may exercise before or after an arbitration
proceeding is brought. Each such Person shall have the right to proceed in any
court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute.
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(ii) Each party hereto agrees that it shall not have a remedy
of punitive or exemplary damages against any other party hereto or any other
Loan Document in any Dispute and hereby waives any right or claim to punitive or
exemplary damages such party has now or which may arise in the future in
connection with any Dispute, whether the Dispute is resolved by arbitration or
judicially.
(d) JURY TRIAL. THE PARTIES HERETO ACKNOWLEDGE THAT BY AGREEING TO
BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO A
JURY TRIAL WITH REGARD TO A DISPUTE.
26. Entire Agreement. This Pledge Agreement, together with the other
Loan Documents, constitutes the entire agreement with respect to the subject
matter hereof and supersedes all prior agreements with respect to the subject
matter hereof.
27. Release and Termination. (a) Upon any sale, lease, transfer or
other disposition of any item of Collateral permitted in accordance with the
terms of the Loan Documents, the Administrative Agent will, at the Pledgor's
expense, execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted hereby.
(b) This Pledge Agreement shall remain in effect from the Closing Date
through and including the date upon which all Obligations shall have been
indefeasibly and irrevocably paid and satisfied in full and the Commitments
terminated and upon such date the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the Pledgor. Upon any
such termination, (i) the Administrative Agent shall promptly assign, release,
transfer and deliver to the Pledgor the Collateral pledged by it hereunder, all
instruments of assignment executed in connection therewith, and all stock
certificates or other certificates or instruments held by the Administrative
Agent in connection therewith, together with all monies held by the
Administrative Agent or any of its agents hereunder, free and clear of the Liens
hereof and (ii) the Administrative Agent and the Lenders will promptly execute
and deliver to the Pledgor such documents and instruments (including but not
limited to appropriate UCC termination statements) as the Pledgor shall
reasonably request to evidence such termination in each such case at the cost
and expense of the Pledgor.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
[CORPORATE SEAL] GT INTERACTIVE SOFTWARE CORP.
By: /s/ XXXXXX XXXXXX
-----------------------------
Name:
Title:
Acknowledged and Agreed to:
[CORPORATE SEAL] HUMONGOUS ENTERTAINMENT, INC.
By: /s/ XXXX XXXX
-----------------------------
Name:
Title:
[CORPORATE SEAL] WIZARDWORKS GROUP, INC.
By: /s/ XXXX XXXX
-----------------------------
Name:
Title:
[CORPORATE SEAL] SINGLETRAC ENTERTAINMENT
TECHNOLOGIES, INC.
By: /s/ XXXX XXXX
-----------------------------
Name:
Title:
[CORPORATE SEAL] SWAN ACQUISITION CORP.
By: /s/ XXXX XXXX
-----------------------------
Name:
Title:
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[CORPORATE SEAL] CANDEL INC.
By: /s/ XXXX XXXX
----------------------------
Name:
Title:
