Tender-Offer Statement — Third-Party Tender Offer — Schedule 14D-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D1 Tender-Offer Statement -- Third-Party Tender Offer 8 37K
2: EX-99.A.1 Offer to Purchase, Dated August 14, 1998 41 232K
3: EX-99.A.2 Letter of Transmittal 11 63K
4: EX-99.A.3 Notice of Guaranteed Delivery 2 16K
5: EX-99.A.4 Letter to Brokers, Dealers, Etc. 2 15K
6: EX-99.A.5 Letter to Clients 2 15K
7: EX-99.A.6 Guidelines for Certification 4± 17K
8: EX-99.A.7 Press Release of Parent Dated August 12, 1998 4 16K
9: EX-99.A.8 Press Release of Parent Dated August 14, 1998 1 10K
10: EX-99.A.9 Summary Advertisement 4 21K
11: EX-99.C.1 Agreement and Plan of Merger 74 231K
12: EX-99.C.2 Stock Option Agreement 13 43K
13: EX-99.C.3 Software Distribution Agreement 97 242K
14: EX-99.C.4 Confidentiality Agreement 5 23K
SOFTWARE DISTRIBUTION AND LOAN AGREEMENT
SOFTWARE DISTRIBUTION AND LOAN AGREEMENT, dated as of August 11, 1998, by
and between HASBRO INTERACTIVE, INC., a Delaware corporation ("Distributor"),
and MICROPROSE, INC., a Delaware corporation ("Publisher").
WHEREAS, Publisher designs, develops, manufactures and markets computer
software products in various formats and for various platforms;
WHEREAS, Distributor has various distribution and marketing channels which
Publisher desires to be used in the sale and distribution of its computer
software products;
WHEREAS, the parties hereto desire that Distributor be the exclusive
distributor of Publisher's computer software products in the United States and
Canada, and that Publisher provide manufacturing and marketing services and
promotion for such computer software products, subject to the terms and
conditions set forth in this Agreement; and
WHEREAS, as a financial accommodation to Publisher, Distributor has agreed
to make available certain loans to Publisher, subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, terms, covenants and conditions set forth herein, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement:
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time, and any successor statute or
statutes.
"Bundling" means combining the Products with any hardware equipment,
including, without limitation, any computer system or any multimedia upgrade
kit.
"Business Day" shall mean any day excluding Saturday, Sunday and any day
which shall be in New York a legal holiday or a day on which banking
institutions in New York are authorized or required by law or other government
actions to close.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a more than 35% of the fair market value of the
assets of Publisher, on a consolidated basis, in one transaction or a series of
related transactions, (ii) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner" (as such term is used in Rule
13d-3 promulgated pursuant to the Exchange Act), directly or indirectly, of more
than 35% of the equity of Publisher then outstanding normally entitled to vote
in elections of directors, or (iii) Publisher enters into, or Publisher's Board
of Directors approves, any agreement, arrangement or letter of intent with
respect to the foregoing, other than as provided by written notice from
Publisher to Distributor prior to the execution hereof on the date hereof.
"Collateral Account" shall have the meaning set forth in Article I of the
Security Agreement.
"Dealer-Reseller" shall mean any dealer, reseller or other third party
intermediary which purchases Software Copies from Distributor for resale solely
to End-Users and retailers hereunder, and not for further resale.
"Default" shall mean any event, act or condition which would become an
Event of Default with the giving of notice, the lapse of time, or both.
"Documentation" shall mean any instruction manuals or documentation
provided by Publisher with the Products.
"End-User" shall mean an end-user customer located within the Licensed
Territory who is licensed to use a Software Copy for its internal purposes, and
not for resale, redistribution, or any other purpose.
"End-User License Agreement" shall mean an End-User license agreement
pursuant to which the Distributor licenses End-Users to use a Software Copy,
which shall be in a form approved by Publisher that is at least as protective of
the Software Copy under applicable local law as Publisher's then-current
standard End-User license agreement.
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"Event of Default" shall have the meaning set forth in Section 6.7 hereof.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder and (iv) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed.
"Intellectual Property Security Agreement" shall have the meaning set
forth in Section 6.5(a)(ii) of this Agreement.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Loan Documents" shall mean this Agreement, the Note, the Security
Agreement, the Intellectual Property Security Agreement, and any other
agreement, instrument or document executed and delivered by Publisher or any of
its subsidiaries in connection herewith, including, without limitation, those
executed and delivered after the Effective Date under Article VI.
"Notice of Borrowing" shall have the meaning set forth in Section 6.5(f).
"OEM" means original equipment manufacturer.
"Obligations" shall mean all obligations, liabilities and indebtedness of
every nature of Publisher from time to time owing to Distributor under or in
connection with this Agreement.
"Permitted Lien" shall have the meaning set forth in Section 6.6(c) of
this Agreement.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, limited liability company or partnership,
association, trust or other enterprise or any government or political
subdivision or agency, department or instrumentality thereof.
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"Products" shall have the meaning set forth in Section 2.2 hereof.
"Publisher Trademarks" means trademarks, trade names, service marks,
service names, logos and other similar proprietary rights owned, controlled or
licensed by Publisher from time to time with respect to the Products.
"Sale" or "selling" of the Products or Software Copies shall mean the sale
of a license to use such Products or Software Copies. All references in this
Agreement to the purchase, sale or distribution of Software or Software Copies
shall mean the purchase, sale or distribution of a license to use such Software
or Software Copy.
"Software Copy" or "Software Copies" shall mean an object code
(machine-readable) copy or copies of the Products, together with a copy or
copies of any accompanying Documentation redistributing thereto that is
designated by Publisher for distribution to End-Users. All such copies shall be
fixed on CD-ROM, diskette or other tangible media.
"Territory" means the United States, Canada and any and all United States
possessions, territories and military bases.
ARTICLE II
APPOINTMENT OF DISTRIBUTOR
Section 2.1. Appointment and Authority of Distributor.
(a) Appointment of Distributor. Subject to the terms and
conditions set forth herein, Publisher hereby appoints Distributor to advertise,
promote, resell and distribute ("Distribute") Software Copies of the Products in
the Territory, and Distributor hereby accepts such appointment. Such appointment
shall be on an exclusive basis during the Term. Distributor's sole remuneration
for the Distribution of the Products shall be the fee set forth in Section 5.1
hereof. As a Distributor, Distributor shall have the right to obtain Software
Copies from Publisher and to market and resell such Software Copies to End-Users
both directly and indirectly.
(b) Territorial and Other Resale Restrictions. All Dealer-
Resellers shall have a ship-to address within the Territory and the End-User
License Agreement shall limit use of the Products to within the Licensed
Territory. The Distributor's marketing rights are expressly limited to the
marketing of the Products
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under approved Publisher Trademarks pursuant to Article 7 below. The foregoing
license is further limited to distribution of Software Copies in tangible
packaged goods media, in the format provided by Publisher, which may include
CD-ROM or diskette, and no right or license is granted to distribute copies via
the Internet or any wide area network (WAN) or otherwise in electronic media. In
addition, the Distributor may not distribute the Products on an OEM, Bundled or
value-added basis, or through original equipment manufacturers, and may not
bundle the Products with the software of a third party, without the prior
written consent of Publisher. The Distributor shall use all commercially
reasonable efforts to realize the maximum sales potential for the Software
Copies in the Territory. The Distributor shall not advertise, market,
distribute, sell, or ship the Software Copies outside the Territory, or sell to
any party reasonably expected to engage in any of the foregoing acts outside the
Territory. The Distributor shall not sell or distribute, or permit the sale or
distribution by any party, of the Products in any scheme being a lottery, as
premiums, give-aways, discounts, as Bundled merchandise, or in conjunction with
any co-branded or other marketing arrangement not approved by Publisher, or for
any other purposes not expressly contemplated and permitted by this Agreement.
(c) Additional Restrictions on the Products. The Software
Copies may not be reproduced, duplicated, copied, modified, translated or
otherwise altered by the Distributor. The Distributor agrees that it will not
itself, or through any Subsidiary, affiliate or other third party: (i) lease,
timeshare, or encumber the Products; (ii) attempt to decompile, disassemble or
reverse engineer the Products in whole or in part, or otherwise attempt to
derive the source code of the Publisher Product, or take any other action in
derogation of Publisher's or its suppliers' intellectual property rights; or
(iii) market, distribute, sell, develop or cause to be developed any derivative
software or any other software program based upon Publisher trade secrets or
Confidential Information of Publisher.
(d) Reservation of Rights. All rights not expressly granted
hereunder are reserved by Publisher. This Agreement does not authorize or imply
any rights other than as expressly set forth herein. Without limiting the
foregoing, Publisher reserves the right under all of its intellectual property
rights to make, have made, develop, market, license, sell and distribute within
the Territory any software products other than the Products licensed for resale
hereunder, to distribute the Products in the Territory on a Bundled or original
equipment manufacturer basis, and to distribute the Products in the Territory
via the Internet or any wide area network (WAN) or otherwise in electronic
media.
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(e) Ownership. Publisher retains ownership of the Products and
all right, title and interest therein, provided, however, that nothing contained
herein shall be construed to limit, restrict or abrogate any grant of a security
interest under the Security Agreement or the Intellectual Property Security
Agreement of the Publisher. The Distributor acknowledges and agrees that it is
acquiring a limited right to resell certain Software Copies of the Products and
a license to use the Publisher Trademarks as specified hereunder. All patents,
copyrights, trade secrets and other intellectual property rights in and to the
Products shall remain the exclusive property of Publisher or its suppliers.
Distributor agrees that, as between Distributor and Publisher, Publisher owns
all right, title, and interest in the Products and in all of Publisher's
patents, trademarks, trade names, inventions, copyrights, know-how, and trade
secrets relating to the design, manufacture, operation or service of the
Products. The use by Distributor of any of these property rights is authorized
only for the purposes herein set forth or in the Other Loan Documents, and,
except as otherwise provided herein or in the Other Loan Documents, upon
termination of this Agreement for any reason such authorization shall cease. The
Software Copies are offered for sale and are sold by Publisher subject in every
case to the condition that such sale does not convey any license, expressly or
by implication, to manufacture, duplicate or otherwise copy or reproduce any of
the Software Copies, except as expressly set forth herein.
(f) Notification of Unauthorized Use. The Distributor shall
promptly notify Publisher in writing upon its discovery of any unauthorized use
or infringement of the Products or Publisher's patent, copyright, trademark or
other intellectual property rights with respect thereto. Publisher shall have
the sole and exclusive right in its sole discretion to bring an infringement
action or proceeding for its own account against a third party, and, in the
event that Publisher brings such an action or proceeding, the Distributor shall
cooperate and provide reasonable information and assistance to Publisher and its
counsel in connection with any such action or proceeding.
Section 2.2. Products. For purposes of this Agreement, "Products" includes
all computer software and hardware and related products manufactured or marketed
by Publisher prior to and during the term of this Agreement. The term "Products"
does not include, however, those computer software and hardware and related
products for which Publisher does not have the right, pursuant to agreements
that are in force on the date hereof and listed on Exhibit A hereto ("Excluded
Products"), to grant to Distributor the rights described herein, except that,
with respect to such Excluded Products, Distributor shall have the rights
described herein
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to the extent permissible under such existing agreements. In addition, Publisher
shall use commercially reasonable efforts to (i) obtain for Distributor the full
rights hereunder to the Excluded Products and (ii) make available to Distributor
any comparable distribution rights which become available during the term of
this Agreement in the Territory, as such rights become available. Upon such
termination, such computer software and hardware and related products shall be
deemed "Products" for purposes of this Agreement.
Section 2.3. Consents. Publisher has secured or will use all commercially
reasonable efforts to secure for the Products and the Publisher Trademarks all
necessary licenses and consents required pursuant to all applicable copyright
and other intellectual property laws and waivers of any and all moral rights
free of royalty and fees to the relevant parties for Distributor to exercise its
rights under this Agreement with respect to the Publisher Trademarks and the
Products. Any and all expenses incurred by Publisher to obtain such licenses and
consents from third parties shall be borne by Publisher.
Section 2.4. Right of First Offer. If Publisher desires to grant a third
party license to develop, manufacture or market conversions of any Products in
formats or on platforms other than as manufactured or marketed by Publisher,
Publisher and Distributor shall enter into good faith negotiations to reach an
agreement with respect to such other formats or platforms. In the event that
Publisher and Distributor are unable to reach an agreement within 60 days after
commencing such negotiations, and at such time or thereafter Publisher is
considering entering into an agreement or arrangement with a third party,
Publisher shall first give written notice of its intention to enter into such
agreement or arrangement to Distributor, specifying the material terms thereof,
and Distributor shall have 20 days from the receipt of such notice to enter into
such agreement or arrangement with Publisher on the same terms as specified in
such notice. If Distributor does not exercise such right by the end of such 20
day term, Publisher may enter into such agreement or arrangement with such third
party on terms identical to those specified in its notice to Distributor.
Notwithstanding the foregoing, nothing herein shall be deemed to restrict
Publisher's right to manufacture or market any Products in formats or on
platforms other than those existing on the date hereof if such manufacturing or
marketing activities are carried out by Publisher, and not by a third party.
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ARTICLE III
TERM
Section 3.1. Initial Term. This Agreement is effective as of the date
hereof (the "Effective Date") and, subject to extension or earlier termination
as provided for herein, shall terminate on March 31, 2001 (the "Initial Term").
Distributor's right to Distribute the Products is effective as soon as is
reasonably practicable after the date hereof, in Distributor's sole discretion.
Section 3.2. Renewal. Distributor and Publisher, in their sole discretion,
may mutually agree to renew this Agreement at the end of the Initial Term or any
subsequent renewal thereof for a period of one (1) year from such date (a
"Renewal Term"). Prior to the end of the Initial Term or any Renewal Term the
parties shall conduct good faith discussions regarding the renewal of such term,
provided, however, that neither party shall be obligated to renew such term.
Unless otherwise provided, the Initial Term and all Renewal Terms shall be
referred to as the "Term."
ARTICLE IV
DISTRIBUTION, MARKETING AND SUPPORT OF THE PRODUCTS
Section 4.1. Creation and Delivery of Products. Publisher shall be
responsible for, and shall bear the costs associated with, creating the
Products, including, without limitation, research and development and preparing,
producing, manufacturing, developing and packaging the Products and the
associated documentation and inserts. Publisher shall manufacture the Products
to be final Products, containing, at a minimum, final software and instruction
manuals consistent with Publisher's existing practices. Publisher shall use
commercially reasonable efforts to meet the reasonable delivery dates and
reasonable quantities set forth on Distributor's orders. At the request of
either party, the parties shall consult in good faith with respect to inventory
held by Publisher and/or Distributor and forecasts of future orders. Products
ordered by Distributor hereunder shall be shipped to such location as designated
by Distributor, freight prepaid by Publisher, on a consignment basis, for sale
and shipment by Distributor to its customers. Distributor may request from time
to time for Publisher to ship products directly to Distributor's customers, and
such shipments shall be treated under this Agreement as a sale and shipment by
Distributor, as if such Products had been shipped to Distributor by Publisher
and then sold and shipped by Distributor to Distributor's customers. Any
shipments by
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Distributor to its customers, or by Publisher to Distributor's customers at
Distributor's request, shall be at Distributor's sole expense.
Section 4.2. Quality and Support. Publisher agrees that the Products shall
conform to the standards of quality consistent with Publisher's prior products
in the same price classification. Publisher shall maintain reasonable and
adequate quality assurance for the Products as is customary in the industry.
Publisher shall be also responsible for, and provide, consumer technical support
for the Products consistent with its current practice, and in no event less than
a level of support that is customary in the industry.
Section 4.3. Risk of Loss. Distributor shall bear the risk of loss for all
Products after such Products are received by Distributor in accordance with
orders placed by Distributor pursuant to Section 4.1 above. Risk of loss shall
pass to Publisher upon receipt by Publisher of any Products returned by
Distributor pursuant to Section 4.6.
Section 4.4. Sales Literature. Publisher agrees to provide at Publisher's
cost to Distributor such quantities of specification sheets, catalogs and other
printed sales materials relating to the Products that Publisher prepares for the
marketing and promotion of the Products as may be reasonably requested by
Distributor in sufficient time before the release of the Products and continuing
for the life of the Products.
Section 4.5. Marketing Support. Publisher agrees to use commercially
reasonable efforts to provide at its expense advertising and public relations
support in order to facilitate the marketing of the Products by Distributor in
the Territory. Prior to and throughout the Term of this Agreement, Publisher
agrees to consult with Distributor on the nature and extent of its market
support activities. Publisher agrees to provide Distributor with a reasonable
number of free trade and press samples of the Products as requested from time to
time by Distributor. A representative of Publisher reasonably satisfactory to
Distributor shall, at Publisher's or Distributor's reasonable request, accompany
Distributor on sales calls and at meetings with Distributor's customers, at
Publisher's expense. Distributor shall manage co-op marketing and advertising
with respect to Products Distributed by Distributor and Publisher shall bear the
expense thereof up to an amount equal to 5.5% of Distributor's gross sales in
each fiscal year of Distributor or a greater amount that is mutually agreed upon
by the parties. Credits or refunds for co-op marketing granted by Distributor
may be deducted by Distributor from payments due Publisher hereunder.
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Section 4.6. Consignment and Return. All Products ordered by Distributor
and delivered by Publisher shall be held for the benefit of Publisher until
shipped to Distributor's customers and at no time shall title of Products
ordered by or delivered to Distributor pass to Distributor. Products shall be
shipped by Distributor to its customers F.O.B. point of shipment. Costs of
freight shall be the responsibility of such customer or Distributor, as agreed
upon by Distributor and its customers in accordance with current trade
practices. Distributor's return policy shall provide that customers may return
Products as defective or for stock balancing with approval of Distributor and an
authorized return merchandise authorization number ("RMA"). Distributor shall
have the right to return to Publisher any and all Products (i) not manufactured
to the quality standards of products customarily distributed by Distributor;
(ii) not delivered in accordance with the order placed by Distributor or the
terms and conditions of this Agreement; (iii) that are defective in operation or
packaging; (iv) returned by Distributor's customers or end-users; or (v) which
Distributor does not Distribute. Distributor shall request from Publisher a RMA
for returns by a Distributor customer in excess of one thousand (1,000) units,
and Publisher shall issue such RMA number to Distributor unless such customer
does not return such units. Distributor and Publisher shall consult with respect
to the actions to be taken with respect to requests by Distributor customers to
return units of the Products in excess of one thousand (1,000) units.
Distributor shall be responsible for costs of freight and insurance for all
Products returned to Publisher, except for returns pursuant to items (i), (ii)
or (iii) of this Section or in the event that Distributor terminates this
Agreement pursuant to Sections 11.2(a) or 11.2(b). Following the termination of
this Agreement, Publisher shall be responsible for all requests for returns of
Products from Distributor's customers, including credits or refunds with respect
thereto, and Distributor shall have no responsibility or liability of any kind
with respect thereto, except as set forth in this paragraph below. For each unit
of a Product returned to Publisher following the termination of this Agreement,
by a customer who acquired such Product from Distributor, in excess of the
aggregate units of such Product Distributed to such customer following such
termination, Distributor shall pay to Publisher the lesser of fifteen percent
(15%) of the amount Publisher actually refunds or credits such customer for such
returned unit or the amount received by Distributor pursuant to Section 5.1 for
the Distribution of such returned unit. Distributor shall pay such amount to
Publisher within sixty (60) days of receipt of an invoice detailing the customer
returning the Products, the number of units of the Products returned, the number
of units of the Products Distributed to such customer following termination of
this Agreement and the amount of the refund or credit with respect to such
returns actually granted by Publisher. Notwithstanding
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the foregoing, except for returns pursuant to items (i), (ii), and (iii) of this
Section, Distributor may not return more than 18% of all Products Distributed
during any year or 25% of a single identified Product.
Section 4.7. General. Subject to Section 4.8 below and the other terms of
this Agreement, all aspects of Distributor's exercise of any and/or all of the
rights herein granted by Publisher with respect to the Distribution of the
Products during the Term shall be undertaken in Distributor's sole discretion,
including without limitation, returns policies, terms and conditions of sale,
compilation of customer names and use of warranty and end-user registration
information. Distributor agrees that it shall disclose to Publisher and
Publisher agrees that it shall disclose to Distributor, following the other
party's written request, any warranty or end-user registration information with
respect to the Products previously Distributed by Distributor. Publisher shall
be solely liable and responsible for any uses it makes of such information.
Section 4.8. Pricing. Publisher shall, after consultation with
Distributor, develop a price list with respect to the Products, which may
include different prices for Products Distributed in Canada. Such price list
shall set forth the price Distributor shall charge its customers for the
Products, prior to any customary trade discounts, rebates, promotional
allowances or fees, and commission splits Distributor may offer customers for
the Products. Such price list may also set forth the guidelines for co-op
advertising, price protection, allowances for defective Products, shipping
charges and promotional incentives as such policies are set forth in this
Agreement. Distributor may Distribute Products without consulting Publisher as
long as prices are consistent with the price list. Distributor shall consult
with Publisher regarding any price protections or price reductions.
Section 4.9. Warranty Obligation. Publisher shall be fully responsible for
providing a warranty to End-Users, to the extent determined by Publisher, for
the Products. Distributor shall pass on to End-Users Publisher's standard
limited warranty and other terms contained in the End-User License Agreement
included with each Software Copy but Distributor shall have no warranty
obligation to End-Users.
Section 4.10. Consumer Adviser Rating Compliance. Publisher agrees that,
if so required by Distributor and/or any governmental entity, it shall submit
each Product or materials associated with such Product to such third party as is
designated by Distributor and/or the governmental entity for the purpose of
obtaining consumer
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advisory rating code(s) for each Product. Any and all costs and expenses
incurred in connection with the procurement of such consumer advisory rating
code(s) shall be borne solely by Publisher.
ARTICLE V
TERMS OF PAYMENT WITH RESPECT TO DISTRIBUTION
Section 5.1. Service Fees. Distributor shall be entitled to receive
payment of, and to deduct and retain a monthly service fee (the "Service Fee")
equal to, 17.5% of Net Receipts for each fiscal month of Distributor or, in the
case of the first month, the number of days in which this Agreement is in
effect, in consideration of Distributor's Distribution of the Products. Payment
of the Service Fee shall have priority over all payments to Publisher and other
deductions by Distributor under this Agreement. For the purposes of this
Agreement, "Net Receipts" shall mean, for any period, monies received by
Distributor from customers in respect of sales of the Products less customary
trade discounts, price protection and monies credited to customers' accounts for
sales returns, in each case during such period.
Section 5.2. Uncollectible Accounts. Distributor shall manage the
invoicing and collection of amounts due Distributor for its Distribution of
Products. Distributor shall take such steps as it deems reasonable and
appropriate to collect any such amount which is overdue. Distributor shall
determine in its sole discretion exercised in good faith (but in any event no
later than six (6) months after such amount was due) when an amount may be
deemed uncollectible. In the event that all or any portion of an amount deemed
uncollectible is later collected, Distributor shall remit such amount in
conjunction with the statements and payments to be made pursuant to Paragraph
5.3(a) below.
Section 5.3. Statements and Payment Terms.
(a) Within ten (10) days following the end of each fiscal
month of Distributor (each, a "Payment Date") during the Term, Distributor shall
provide Publisher with a written statement specifying for each Product: (i) the
total number of Products Distributed during such month; (ii) the Net Receipts
collected during such month for the Distribution of the Products; (iii) the
deductions pursuant to Sections 4.5, 5.1, 6.3 and 6.4 for such month; (iv) any
required tax deductions; (v) any other deductions for money owed Distributor
hereunder, including, without limitation, pursuant to Article VI hereof; and
(vi) the balance of the Net Receipts due Publisher in respect of such month.
With such statement and subject to the
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provisions of this Agreement, including the foregoing deductions, Distributor
shall pay Publisher the consideration due Publisher in respect of that month.
Until the Loans (as defined in Section 6.1 hereof) shall be paid in full, the
set-offs permitted by Sections 6.3(b) and 6.4(b) shall remain in effect.
Distributor's payment terms with its customers shall not exceed 60 days from the
date of shipment by Distributor without the prior written consent of Publisher.
Section 5.4. Books and Records. Distributor shall maintain, at its
offices, books of account and records concerning the calculation of Net
Receipts. An independent certified public accountant or representative of
Publisher (who shall have signed a confidentiality agreement with Distributor in
customary form) appointed by Publisher may examine Distributor's books and
records solely for the purpose of verifying the accuracy thereof and of the
invoice payment statements and royalties provided hereunder, only during
Distributor's normal business hours and upon not less than fourteen (14) days
prior written notice and not more than once in any calender year; provided
however, that Distributor's books and records shall be deemed conclusive and no
examination shall be permitted with respect to such books and records that
Publisher has not examined pursuant to this Section 5.4 within two years after
the date of such books and records. Any such audit shall be at Publisher's sole
expense unless such inspection uncovers a shortfall of at least 10% of the
amounts due to Publisher for such period, in which case Distributor shall
reimburse Publisher for the reasonable cost of such audit. The rights
hereinabove granted to Publisher party constitute Publisher's sole and exclusive
rights to examine the Distributor's books and records.
Section 5.5. Minimum Biannual Payment Obligations. (a) Distributor and
Publisher shall jointly determine and agree upon the expected minimum amounts
payable pursuant to the terms of this Agreement (after giving effect to
deductions for the Service Fee, satisfaction of principal on and interest on the
Loans and other appropriate set-offs or deductions) during each six-month period
commencing April 1, 1999 (the "Minimum Obligations") as determined in meetings
to be held between Publisher and Distributor prior to the beginning of each
Six-Month Period at which Publisher and Distributor shall use reasonable good
faith efforts to determine such Minimum Obligations. As used herein, "Six-Month
Period" means the six (6) month period following April 1, 1999, and each
subsequent six-month period thereafter and continuing until the expiration of
the Term. In the event that Distributor fails to pay the Publisher the Minimum
Obligation for any Six-Month Period, Publisher, by providing written notice
(setting forth payments received and any claimed shortfall) to Distributor
within thirty (30) days of the last Payment Date of such Six-Month
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Period, may terminate this Agreement upon the expiration of next Six-Month
Period, which termination shall be Publisher's sole and exclusive remedy for
Distributor's failure to meet the Minimum Obligation. If Publisher provides
Distributor with such notice, Distributor shall have thirty (30) days in which
to cure such breach by payment of the amount by which Distributor's payments to
Publisher for such Six-Month Period fell below 75% of the Minimum Obligation for
such period.
(b) In the event that Publisher and Distributor are unable to
agree on the Minimum Obligations by the commencement of any Six-Month Period
pursuant to the first sentence of Section 5.5(a), after using reasonable good
faith efforts to do so, such disagreement shall be finally settled by
arbitration conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA") in effect as of the date of the
arbitration, except as they may be modified herein or by mutual agreement of
Parent and Publisher. The parties shall use reasonable best efforts to complete
the arbitration within 90 days after such disagreement is submitted to
arbitration. The arbitration shall be conducted by three arbitrators, each
having substantial experience in, or knowledge of, the interactive computer
software industry, selected within thirty days following the submission of a
dispute to arbitration as follows: (i) one arbitrator shall be selected by
Distributor; (ii) one arbitrator shall be selected by Publisher; and (iii) one
arbitrator shall be selected from a list of five names submitted by the AAA as
follows: starting with Distributor, Distributor and Publisher shall alternately
have four days beginning with the transmittal date of the list in which to
strike one name from the list until only one name, that of the third arbitrator,
remains. If either Distributor or Publisher does not strike a name from the list
within the four day period, the other shall have the right to select the third
arbitrator from the names remaining on the list. Any arbitration conducted
pursuant to this Section 5.5(b) shall be decided by the vote of at least two of
the three arbitrators, and the final decision shall be in the form of a
reasoned, written statement of the amount of the Minimum Obligation for the
Six-Month Period for which the parties are unable to agree. Each of Distributor
and Publisher stipulates that the provisions hereof, and the decision of the
arbitrators with respect to disagreement with respect to the amount of the
Minimum Obligation, shall be final and binding upon the parties and shall be the
sole and exclusive remedy for such disagreement. Each Distributor and Publisher
hereby acknowledges that since arbitration is the exclusive remedy, neither
Distributor nor Publisher has the right to resort to any federal, state or local
court or administrative agency concerning any dispute, controversy or claim
with respect to the parties inability to agree on the amount of the Minimum
Obligation and that the decision of the arbitrators shall be a complete defense
to any suit, action or proceed-
14
ing instituted in any federal, state or local court or before any administrative
agency with respect to the parties inability to agree on the amount of the
Minimum Obligation; provided that the decision of the arbitrators is subject to
vacation by a court of competent jurisdiction pursuant to the terms of the
Federal Arbitration Act. It is the intention of the parties that the arbitration
decision will be final and binding. The arbitration shall be held in the City,
County and State of New York.
ARTICLE VI
LOANS BY DISTRIBUTOR
Section 6.1. Loans. (a) Subject to and upon the terms and conditions
hereof, Distributor agrees at any time and from time to time after the date
hereof and prior to October 15, 1998 (the "Borrowing Expiration Date") to make
loans (collectively, the "Loans") to Publisher, in an amount not to exceed
$5,500,000 in the aggregate (the "Maximum Loan Commitment") and, in any event,
not to exceed, in the aggregate, the lesser of $1,500,000 or the Maximum Loan
Commitment as reduced pursuant to clause (b) of this Section 6.1, as of August
21, 1998; the lesser of $3,500,000 or the Maximum Loan Commitment as reduced
pursuant to clause (b) of this Section 6.1, as of September 4, 1998; the lesser
of 5,000,000 or the Maximum Loan Commitment as reduced pursuant to clause (b) of
this Section 6.1, as of September 18, 1998; and the lesser of $5,500,000 or the
Maximum Loan Commitment as reduced pursuant to clause (b) of this Section 6.1,
as of October 14, 1998; and at all times thereafter. Publisher agrees,
covenants, represents and warrants that such Loans shall be used only for
operating working capital needs of the Publisher consistent with past practice.
(b) Once prepaid or repaid, the Loans may not be reborrowed.
Each prepayment of the Loans shall, to the extent of the principal amount so
prepaid, permanently reduce the Maximum Loan Commitment by such amount. The
Loans shall, to the extent not prepaid in full, mature and be due and payable on
the six-month anniversary of the Effective Date (the "Maturity Date"), without
further action on the part of Distributor.
Section 6.2. Notes; Recordation. (a) Publisher's obligation to pay the
principal of and interest on the Loans shall be evidenced by a promissory note
duly executed and delivered by Publisher, substantially in the form of Exhibit B
hereto (the "Note"). Publisher shall be obligated from time to time to pay, on
the terms set forth herein and in the Note, the lesser of the face amount of the
Note and the actual aggregate principal amount outstanding.
15
(b) Distributor is hereby authorized to record the date and
amount of each Loan and each principal and interest payment in respect thereof
in its books and records or on the Note. Such books and records or Note shall
constitute prima facie evidence of the accuracy of the information contained
therein.
Section 6.3. Interest. (a) Publisher agrees to pay interest in respect of
the unpaid principal amount of the Loans from the Drawdown Date (as defined in
the relevant Notice of Borrowing) until the Loans shall be paid in full at a per
annum rate of 12%, or such lesser amount as will not violate applicable law.
Such interest shall be computed on the basis of a 365-day year, and paid for the
number of days elapsed.
(b) Interest on the Loans shall accrue from and including the
relevant Drawdown Date to but excluding the date of any repayment thereof and
shall be payable in arrears on each Payment Date, the date of any principal
repayment or prepayment (whether mandatory or voluntary), at maturity (whether
by acceleration or on the Maturity Date) and, after such maturity, on demand.
Each payment of interest required to be made in connection with a mandatory
prepayment on each Payment Date shall be deducted, pursuant to Section 5.3(a)(v)
hereof, from the amount otherwise payable to the Publisher pursuant to Section
5.3 and may, in the Distributor's sole discretion, be set off against amounts
otherwise payable to Publisher under Section 5.3(a). Each such deduction and
application shall be made second in order of priority, following deduction of
the Service Fee then payable, provided, however, that nothing contained herein
shall limit, extinguish or reduce the Publisher's unconditional, general
obligation to repay all amounts owing from time to time hereunder or under the
other Loan Documents, and provided further, that in the event that Net Receipts
for the months of August and September, 1998 are insufficient to pay all
interest then accrued and owing on the Loans, any such shortfall shall not be
payable until the first Payment Date occurring after October 15, 1998.
(c) In the event that, and for so long as, an Event of Default
under Section 6.7 shall have occurred and be continuing, the outstanding
principal amount of the Loans and, to the extent permitted by law, overdue
interest in respect of the Loans, shall bear interest at a rate per annum equal
to 2% per annum in excess of the highest legal amount applicable under clause
(a) above, such interest to be computed on the basis of a 365-day year, and paid
for the number of days elapsed.
16
Section 6.4. Prepayments, Payments. (a) Publisher shall have the right
voluntarily to prepay the Loans in whole or in part from time to time without
premium or penalty, but together with all interest owing on the amount being
prepaid, in principal amounts not less than $250,000, provided that Publisher
shall give Distributor written notice (or telephonic notice promptly confirmed
in writing), of its intent to prepay all or part of the Loans, at least one
Business Day prior to such prepayment, which notice shall specify the amount of
such prepayment.
(b) On each Payment Date, Publisher shall be required to make
a principal prepayment on the Loans in an amount equal to 32.5% of Net Receipts
for the previous fiscal month of Distributor. Each mandatory prepayment of
principal required to be made on each Payment Date shall be deducted, pursuant
to Section 5.3(a)(v) hereof, from the amount otherwise payable to the Publisher
pursuant to Section 5.3, and may, in the Distributor's sole discretion, be set
off against amounts otherwise payable to Publisher under Section 5.3(a). Each
such deduction and application shall be made third in order of priority,
following deduction of the Service Fee and accrued interest then payable;
provided, however, that nothing contained herein shall limit, extinguish or
reduce the Publisher's unconditional, general obligation to repay all amounts
owing from time to time hereunder or under the other Loan Documents.
(c) All payments to be made to Distributor by Publisher under
this Agreement (including, without limitation, under this Article VI), shall be
made by Publisher without set-off, counterclaim or any other deduction by
Publisher. Notwithstanding any other provision of this Agreement, all amounts
payable by customers or any other Person in connection with Distribution of the
Products shall be payable directly to Distributor for deposit to the Collateral
Account (as defined in the Security Agreement of Publisher), for distribution in
accordance with the terms hereof and thereof, and to the extent of any
inconsistency between any Security Agreement and this Agreement, the terms of
the relevant Security Agreement shall govern and control. All payments shall be
made in lawful money of the United States of America in immediately available
funds to such account as may be specified from time to time in writing to
Publisher.
Section 6.5. Conditions Precedent to Loans. The obligation of Distributor
to make each Loan is subject to the satisfaction of the following conditions
precedent:
(a) Loan Documents.
17
(i) Note. Publisher shall have executed and delivered to
Distributor the Note in the amount and as otherwise provided herein.
(ii) Collateral Security Agreements. Each of Publisher
and each of its subsidiaries (other than non-U.S. subsidiaries) shall
have executed and delivered to Distributor a security agreement
substantially in the form set forth as Exhibit C-1 hereto (collectively,
as amended, modified or supplemented from time to time, the "Security
Agreement") and intellectual property security agreements substantially in
the forms set forth as Exhibits C-2-A and C-2-B hereto (collectively, as
amended, modified or supplemented from time to time, the "Intellectual
Property Security Agreement").
(b) UCC-1 Financing Statements. Distributor shall have
received UCC-1 financing statements signed by Publisher and each of its active
subsidiaries (other than non-U.S. subsidiaries) as debtor, naming Distributor as
secured party with respect to all assets and properties of Publisher and its
subsidiaries (other than non-U.S. subsidiaries) and that are otherwise in
appropriate form for filing in the filing offices set forth in Schedule I of the
Security Agreement and Distributor shall have filed such UCC-1 financing
statements in the applicable jurisdictions, which Distributor shall do promptly
after receipt thereof.
(c) Trademark and Copyright Assignments. Each of Publisher and
its subsidiaries requested by Distributor to do so shall file such trademark and
copyright assignment agreements and such other documents as are reasonably
requested by Distributor.
(d) Additional Matters. Distributor shall have received such
other certificates, opinions, documents and instruments relating to the
transactions contemplated hereby as may have been reasonably requested by
Distributor, and all corporate and other proceedings and all other documents
(including, without limitation, all documents referred to herein and not
appearing as exhibits hereto) and all legal matters in connection with such
transactions shall be satisfactory in form and substance to Distributor.
18
(e) Use of Proceeds. The proceeds of such Loans shall be used
to fund Publisher's operating working capital needs consistent with past
practice.
(f) Notice of Borrowing. Distributor shall have received a
duly executed and completed a notice of borrowing in respect of such Loan, in
substantially the form of Exhibit D (a "Notice of Borrowing"), at least three
Business Days prior to the desired date for the making of such Loan.
(g) Representations and Warranties. The representations and
warranties contained herein and in the other Loan Documents shall be true and
correct in all material respects on such date.
(h) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date.
(i) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any governmental authority shall have
been issued, and no litigation shall be pending or threatened, which in the
judgment of Distributor would enjoin, prohibit or restrain, or impose or result
in the imposition of any material adverse condition upon, the making or
repayment of such Loan.
Section 6.6. Covenants. The Publisher covenants that from the date of this
Agreement and thereafter so long as the Note is outstanding:
(a) Accounting; Financial Statements and Other Information.
The Publisher will maintain a system of accounting established and administered
in accordance with GAAP. The Publisher will deliver to Distributor: (i) within
45 days after the end of each of the first three quarterly fiscal periods in
each fiscal year of the Publisher, consolidated and consolidating balance sheets
of the Publisher and its subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income, stockholders'
equity and changes in financial position of the Publisher and its subsidiaries
for such period, certified by the principal financial officer of the Publisher
as presenting fairly the information contained therein, subject to normal
year-end audit adjustments; (ii) within 90 days after the end of each fiscal
year of the Publisher, consolidated and consolidating balance sheets of the
Publisher and its subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, stockholders' equity and
changes in financial position of the Publisher and its subsidiaries for such
fiscal year,
19
setting forth in each case in comparative form the consolidated and
consolidating figures for the previous fiscal year, certified by independent
public accountants of recognized national standing selected by the Publisher,
which shall state that such consolidated financial statements present fairly the
financial position of the Publisher and its subsidiaries as at the dates
indicated and the results of their operations and changes in their financial
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years and that the audit by such accountants in connection
with such consolidated financial statements has been made in accordance with
GAAP; (3) together with each delivery of financial statements pursuant to clause
(1) or (2) hereof, an officer's certificate as to no Event of Default or
Default; and (4) immediately upon any officer of the Publisher obtaining
knowledge of any condition or event which constitutes an Event of Default, an
officer's certificate describing the same and the period of existence thereof
and what action the Publisher has taken, is taking and proposes to take with
respect thereto;
(b) Inspection. The Publisher will permit any authorized
representatives of Distributor to visit and inspect any of the properties of the
Publisher or any of its subsidiaries, including its and their books of account,
and to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants (and by this provision the Publisher authorizes such
accountants to discuss with such representatives the affairs, finances and
accounts of the Publisher and its subsidiaries, provided, that the Publisher is
present), all at such reasonable times and as often as may be reasonably
requested, at Publisher's expense.
(c) Liens, etc. The Publisher will not, and will not permit
any subsidiary of the Publisher to, directly or indirectly create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of the
Publisher or any subsidiary of the Publisher, whether now owned or held or
hereafter acquired, or any income or profits therefrom (whether or not provision
is made for the equal and ratable securing of the Notes in accordance with the
last sentence of this Section), except for the following (collectively,
"Permitted Liens"):
(i) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or the payment of which is not at the time
required;
20
(iii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure (or to obtain letters of credit or surety, appeal
or performance bonds which secure) the performance of bids, tenders,
statutory obligations, leases, purchase, construction or sales contracts
and other similar obligations, in each case not incurred in connection
with the borrowing of money, the obtaining of advances or the payment of
the deferred purchase price of property;
(iv) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances, in
each case incidental to, and not interfering with, the ordinary conduct of
the business of the Publisher or any of its subsidiaries;
(v) Liens granted in connection with that certain facility
agreement, dated as of July 28, 1998, between Barclays Bank PLC, as
secured party and MicroProse Limited, as debtor;
(vi) a Lien in favor of Sony Signatures, as agent for Tristar
Pictures, on the "Starship Troopers" trademark, copyrights and related
assets;
(vii) Liens granted under that certain mortgage on certain German
real property of the Company, dated March 19, 1994 in favor of WestLB
Bank, as secured party;
(viii) Liens granted in connection with that certain factoring
agreement, dated as of July 13, 1998, between Aerofund Financial Inc., as
secured party and MicroProse, Inc., as debtor (the "Aerofund Agreement");
(ix) Liens in favor of Oracle Credit Corporation under an Agreement
dated May 30, 1997, on certain accounting software equipment;
(x) equipment Liens on office equipment, arising in the ordinary
course and consistent with past practices; and
(xi) those Liens existing on the Effective Date, as to which the
representation and warranty set forth in Section 9.1(h) is true
(collectively, the "Scheduled Liens"), provided that the Publisher
covenants and agrees
21
within 45 days following the Effective Date, to use reasonable best
efforts to obtain releases and UCC termination statements of all Scheduled
Liens from the relevant secured parties, and to use reasonable best
efforts to obtain releases and UCC termination statements in connection
with Aerofund Agreement, and to deliver same to Distributor for filing or
recordation wherever appropriate.
(d) Investments, Borrowings, Guaranties, etc. The Publisher
will not, and will not permit any of its subsidiaries to, directly or indirectly
(i) make or own any investment other than those existing on the date hereof, or
(ii) to make any borrowings under the Aerofund Agreement, and will use its
reasonable best efforts to terminate such factoring arrangement, or (iii) create
or become or be liable with respect to any guaranty.
(e) Restricted Payments. The Publisher will not directly or
indirectly declare, order, pay, make or set apart any sum for any payment of
dividends.
(f) Transactions with Affiliates. The Publisher will not, and
will not permit any of its subsidiaries to, directly or indirectly, engage in
any transaction, including, without limitation, the purchase, sale or exchange
of assets or the rendering of any service, with any affiliate of the Publisher,
except in the ordinary course of and pursuant to the reasonable requirements of
the Publisher's or such Subsidiary's business and upon fair and reasonable
terms.
(g) Consolidation, Merger, Sale of Assets, etc. The Publisher
will not, and will not permit any of its subsidiaries to, directly or
indirectly, consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it, or sell, lease, abandon or
otherwise dispose of all or substantially all or any substantial part its
assets in one or a series of transactions.
(h) Corporate Existence, etc. The Publisher will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
subsidiaries.
(i) Payment of Taxes and Claims. The Publisher will, and will
cause each of its subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues
22
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or might become a Lien upon any of its properties or assets.
(j) Insurance, etc. The Publisher will maintain or cause to be
maintained in good repair, working order and condition all properties used or
useful in the business of the Publisher and its subsidiaries and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Publisher will maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its and
its subsidiaries' properties and businesses against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar business and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations.
(k) Conditions Subsequent to Initial Loan. Publisher covenants
and agrees, forthwith upon demand by Distributor, (i) to cause each of its
non-U.S. subsidiaries, to execute, deliver and perform a Security Agreement, and
in the case of each such subsidiary owning or having any rights in or to any
intellectual property, each relevant Intellectual Property Security Agreement
(to the extent, in the case of non-U.S. subsidiaries, permitted by applicable
foreign law), (ii) to execute and deliver stock pledge agreements covering the
capital stock of each of its subsidiaries (to the extent, in the case of
non-U.S. subsidiaries, permitted by applicable foreign law), and in connection
therewith to deliver all certificates evidencing any capital stock of its
subsidiaries, (iii) to remove the Scheduled Liens in accordance with Section
6.6(c)(xi) hereof, and (iv) to take all other reasonable actions requested by
Distributor in connection with the foregoing to create, preserve and protect the
security interest intended to be granted to Distributor hereunder.
Without prejudice to any other provision of any Loan Document,
Publisher covenants and agrees that it will not permit any subsidiary to create
or suffer to exist any Lien upon any of such Subsidiary's properties or assets,
other than Permitted Liens and the Liens in favor of the Secured Parties under
the Loan Documents.
Section 6.7. Events of Default. Each of the following events, acts,
occurrences or conditions shall constitute an "Event of Default" under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of
23
compliance by any Person with any judgment, decree, order, rule or regulation of
any court or administrative or governmental body:
(a) Failure to Make Payments. Publisher shall default for 10
days in the payment when due of any principal of or interest on any Loan or any
other Obligations.
(b) Breach of Representation or Warranty. Any representation
or warranty made by Publisher herein or in any other Loan Document or any
certificate or statement delivered pursuant hereto or thereto shall prove to be
false or misleading in any material respect on the date as of which made or
deemed made.
(c) Breach of Covenants. Publisher shall fail to perform or
observe any agreement, covenant or obligation under this Agreement or any other
Loan Document not otherwise specifically covered by this Section 6.7 and such
failure shall continue unremedied for 30 or more days after Publisher has
received notice thereof.
(d) Termination of Agreement. This Agreement shall have been
terminated.
(e) Change of Control. There shall have occurred a Change in
Control.
(f) Bankruptcy, etc. (i) Publisher or any subsidiary shall
commence a voluntary case concerning itself under the Bankruptcy Code; or (ii)
an involuntary case is commenced against Publisher or any subsidiary and the
petition is not dismissed within sixty (60) days after commencement of the case;
or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of Publisher or any
subsidiary or Publisher or any subsidiary commences any other proceedings under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Publisher or any subsidiary or
there is commenced against Publisher or any subsidiary any such proceeding which
remains undismissed for a period of sixty (60) days; or (iv) any order of relief
or other order approving any such case or proceeding is entered; or (v)
Publisher or any subsidiary is adjudicated insolvent or bankrupt; or (vi)
Publisher or any subsidiary allows any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for
24
a period of sixty (60) days; or (vii) Publisher or any subsidiary makes a
general assignment for the benefit of creditors; or (viii) Publisher or any
subsidiary shall fail to pay, or shall state that it is unable to pay, its debts
generally as they become due; or (ix) Publisher or any subsidiary shall call a
meeting of its creditors with a view to arranging a composition or adjustment of
its debts; or (x) Publisher or any subsidiary shall by any act or failure to act
consent to, approve of or acquiesce in any of the foregoing; or (xi) any action
is taken by Publisher or any subsidiary for the purpose of effecting any of the
foregoing.
(g) Default Under Other Agreements. Publisher shall default in
the payment when due (whether by scheduled maturity, required prepayment,
acceleration, or otherwise) of any amount owing in respect of any Indebtedness
(other than the Obligations) in excess of $50,000 in the aggregate; or Publisher
shall default in the performance or observance of any obligation or condition
with respect to any such Indebtedness or any other event shall occur or
condition shall exist, if the effect of such default, event or condition is to
accelerate the maturity of any such Indebtedness or to permit the holder or
holders thereof, or any trustee or agent for such holders, to accelerate the
maturity of any such Indebtedness, or any such Indebtedness shall become or be
declared to be due and payable prior to its stated maturity other than as a
result of a regularly scheduled payment.
Section 6.8. Rights and Remedies. Upon the occurrence of any Event of
Default described in Section 6.7(f) hereof, the then unpaid principal amount of,
and any and all accrued interest on, the Loans shall automatically become
immediately due and payable, with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Publisher; and upon the occurrence and during the continuance of any other Event
of Default, Distributor may in its sole discretion declare the unpaid principal
amount of, and any and all accrued and unpaid interest on, the Loans to be, and
the same shall thereupon be, immediately due and payable with all additional
interest from time to time accrued thereon and without presentation, demand, or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and notice of acceleration), all of which are hereby expressly
waived by Publisher.
25
Section 6.9. Set-off, etc. Distributor shall have the right, without prior
notice to Publisher, any such notice being expressly waived by Publisher to the
fullest extent permitted by applicable law, to set-off or recoup and apply
against any Obligation hereunder any and all credits, obligations or claims,
whether direct or indirect, absolute or contingent, matured or unmatured, at any
time held or owing by Distributor to or for the credit or the account of
Publisher, howsoever arising, in addition to all other rights and remedies of
Distributor at law, in equity or under any Loan Document.
ARTICLE VII
TRADEMARKS
Section 7.1. Right to Use. During the term of this Agreement, the
Distributor shall have the right and shall be required to indicate to the public
within the Licensed Territory that it is an authorized Distributor of the
Products and shall be required to market and advertise the Products under the
Publisher Trademarks. Notwithstanding the foregoing, any use of Publisher's
Trademarks on Web sites or other postings on the Internet or in other electronic
transmissions via computer networks shall be subject to the prior written
approval of Publisher (which shall not be unreasonably withheld). The
Distributor shall not use Publisher's Trademarks, or any other copyright,
trademark, logo or other right of Publisher in any manner contrary to public
morals, in any manner which is deceptive or misleading, which is derogatory to
Publisher's Trademarks, or which compromises or reflects unfavorably upon the
goodwill, good name, reputation or image of Publisher or Publisher's Trademarks,
or which might jeopardize or limit Publisher's proprietary interest in
Publisher's Trademarks. Nothing herein shall grant to the Distributor any right,
title or interest in Publisher's Trademarks. All uses of Publisher's Trademarks
hereunder by the Distributor shall inure solely to the benefit of Publisher. At
no time during or after the term of this Agreement shall the Distributor
challenge or assist other to challenge Publisher's Trademarks or the
registration thereof or attempt to register any trademarks, marks or trade names
confusingly similar to those of Publisher.
Section 7.2. Approval of Representations. All representations of
Publisher's Trademarks that the Distributor intends to use shall first be
submitted to Publisher for approval in writing (which shall not be unreasonably
withheld). The Distributor shall not use any of Publisher's Trademarks in
conjunction with another trademark on or in relation to any other software
without Publisher's prior written approval. All uses shall be subject to
approval by Publisher to ensure that the Publisher's Trademarks are not used by
the Distributor in a manner that is unautho-
26
rized by Publisher. In the event Publisher does not approve a use by
Distributor, it shall promptly provide Distributor with a written report
detailing the reasons for rejection of such use. In the event Publisher shall
fail to object to a use provided for its review within fourteen (14) business
days after delivery, Publisher shall be deemed to have approved such use.
ARTICLE VIII
CONFIDENTIALITY
Section 8.1. Proprietary Information. Each party acknowledges and agrees
that certain information which it may receive from the other party will be
Proprietary Information to the disclosing party. Proprietary Information shall
mean: (i) the fact that the disclosing party intends to develop or have
developed any particular software or other product; (ii) any confidential
information concerning or related to the Products; (iii) any non-public
information concerning the terms and conditions of this Agreement, except that
Distributor may disclose such terms and conditions as it reasonably deems
appropriate for the Distribution of the Products; (iv) nonpublic information
concerning the business or finances of the disclosing party, including, but not
limited to, trade secrets of the disclosing party; and (v) any other information
which if disclosed to a third party could adversely affect a competitive
advantage of the disclosing party.
Section 8.2. Protection. Each party agrees, both during and after the Term
of this Agreement, to use the Proprietary Information of the other party only in
connection with its rights and obligations under this Agreement, and not to,
directly or indirectly, reproduce such Proprietary Information or distribute or
disclose such Proprietary Information, except to employees who have a need to
know such Proprietary Information in connection with the performance of the
obligations and the exercise of the rights under this Agreement, and to hold in
confidence all Proprietary Information of the other party and to use its best
efforts to prevent the unauthorized copying, use and/or disclosure of the other
party's Proprietary Information.
Section 8.3. No Nondisclosure Obligation. Each party's respective
obligation to hold the other party's Proprietary Information in strict
confidence shall not apply to any information that: (i) becomes known to the
general public without a breach of the nondisclosure obligations of this
Agreement; (ii) is disclosed by the owner of the Proprietary Information to
others without restriction on disclosure; (iii) is obtained from a third party
without breach of a non-disclosure obligation; (iv) was
27
in the possession of the nondisclosing party prior to disclosure by the
disclosing party; or (v) was independently developed by the nondisclosing party
without use of or reference to the other party's Proprietary Information. A
party may disclose Proprietary Information if so required in connection with
any suit, action or required to be disclosed by law, provided that such party
provide the disclosing party with advance notice to allow the disclosing party
to seek a protective order, and provided further that such party takes any
available, reasonable steps to protect the Proprietary Information.
Section 8.4. Irreparable Harm. Each party agrees that the unauthorized use
or disclosure of the disclosing party's Proprietary Information may cause
irreparable injury to the disclosing party. Accordingly, both parties agree that
the remedy at law for any breach of this Section may be inadequate and, in
recognition thereof, agree that the party suffering from the unauthorized use or
disclosure shall be entitled to seek injunctive relief to prevent any such
breach or the threat of such a breach.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1. Publisher Representations, Warranties and Covenants.
Publisher represents, warrants and covenants that:
(a) Publisher has the requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Publisher and the
consummation by Publisher of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Publisher. This
Agreement has been duly executed and delivered by Publisher and, assuming this
Agreement constitutes the valid and binding obligation of the Distributor,
constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) Exhibit A hereto sets forth a true, complete and accurate
list of any and all agreements or arrangements that in any way would limit or
restrict the ability of Distributor to exclusively Distribute the Products in
the Territory.
28
(c) Publisher has and shall have all requisite ownership,
licenses and consents to grant to Distributor all the rights with respect to the
Products and Publisher Trademarks. The Publisher Trademarks and the grant of the
right to Distribute the Products do not violate or infringe any rights
(including without limitation intellectual property or other proprietary rights)
of any third party.
(d) There are no restrictions which would or could prevent
Distributor from Distributing the Products by any media or by means for which
rights are granted to Distributor hereunder and there are not and will not be
any payments (out of any part of any revenues from the Distribution or
exploitation of the Products or otherwise) which must be made by Distributor to
any actors, musicians, directors, writers or to other persons who participated
in the Products, or to any union, guild or other labor organization, for any
right to Distribute the Products or as compensation for any other use of the
Products as contemplated hereunder.
(e) The Products manufactured by Publisher are and shall be of
high quality customary in the industry, and the media upon which the Product is
recorded shall be free from defects in materials and workmanship for a period of
one hundred eighty (180) days from the date of sale to the End-User.
(f) Neither the execution, delivery or performance by
Publisher of this Agreement, nor compliance by it with the terms and provisions
hereof, nor the consummation of the transactions contemplated hereby, (i) will
contravene any applicable provision of any law, statute, rule, regulation, order
or injunction of any court or governmental instrumentality, or (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of Publisher pursuant to the terms of
any indenture, mortgage, deed of trust, agreement or other instrument to which
Publisher is a party or by which it or any of its property or assets is bound or
to which it may be subject.
(g) Publisher shall use the proceeds of the Loans in
accordance with Section 6.1(a). Neither the making of the Loan nor the use of
the proceeds thereof will violate or be inconsistent with the provisions of
Regulations T, U or X of the Federal Reserve Board.
29
(h) There are no obligations outstanding to any Person in
whose favor a Scheduled Lien exists, and there are no commitments to lend money
or otherwise incur any obligation in favor of any such Person.
Section 9.2. Distributor Representations, Warranties and Covenants.
Distributor represents, warrants and covenants that:
(a) Distributor has the requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Distributor
and the consummation by Distributor of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Distributor. This Agreement has been duly executed and delivered by Distributor
and, assuming this Agreement constitutes the valid and binding obligation of
Publisher, constitutes a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(b) Standard of Business Practices. Distributor shall comply
in all material respects with all laws and regulations relating or pertaining to
the distribution, sale, advertising or use of the Products in the Licensed
Territory, and shall comply in all material respects with the regulations and
directives of any regulatory agencies which shall have jurisdiction over the
Products.
Section 9.3. No Representation Regarding Revenues. Distributor neither
makes nor has made any express or implied representation or warranty as to the
amount of receipts which shall be derived from the Distribution of the Products,
or that there will be any receipts or other sums payable to Publisher.
Section 9.4. Limitation of Liability. EXCEPT AS OTHERWISE PROVIDED
HEREIN, THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES AND
CONDITIONS BY EITHER PARTY. ANY IMPLIED WARRANTIES BY EITHER PARTY, INCLUDING
WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ARE EXPRESSLY EXCLUDED. EXCEPT WITH RESPECT TO THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN ARTICLE X OF
30
THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
RELIANCE DAMAGES, HOW EVER CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR
UNDER ANY OTHER LEGAL THEORY, WHETHER FORESEEABLE OR NOT AND WHETHER OR NOT
PUBLISHER OR DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
Section 9.5. Survival. The representations, warranties, limitations on
liability and indemnification rights set forth in Articles IX and X of this
Agreement shall survive the termination of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification of Distributor. Publisher agrees to
indemnify and hold Distributor, its parent, affiliates, officers, directors,
representatives, employees, contractors, agents, subcontractors, customers,
licensees and assigns harmless against any and all actions, claims, losses,
liabilities, costs, damages and expenses (including any legal costs or expenses
incurred, expert witness' fees and any compensation, costs or disbursements
paid to compromise or settle any action or claim) (collectively, "Claims")
suffered or incurred by Distributor or such other persons or entities and
arising from a breach of any representation, warranty, term or provision of this
Agreement by Publisher and its consequences, including, without limitation, any
claim that the exercise of any of Distributor's rights under this Agreement
infringes the copyright, trademark or any other intellectual property or other
rights of any third party, any negligence by Publisher or its agents or
representatives, any claim of defect or error in the manufactured units of the
Products, and any gross negligence or willful misconduct resulting in a virus,
worm, time bomb, booby trap or other programming designed to interfere with the
normal functioning of the Products or the End-User's equipment, programs or data
(collectively, a "Virus").
Section 10.2. Indemnification by the Distributor. Except for Publisher's
indemnification obligations set forth above, the Distributor will indemnify,
defend and hold harmless Publisher, its parents, subsidiaries, affiliates, and
each of their respective successors and permitted assigns, directors, officers,
employees, represen-
31
tatives, agents, consultants, and contractors in respect of any and all losses,
claims, suits, proceedings, liabilities, causes of action, damages, costs,
expenses (including reason able attorneys' fees and expenses) arising out of or
relating to the breach or inaccuracy of, or failure to comply with, any of the
representations, warranties, covenants, agreements, terms or conditions made by
the Distributor hereunder, the actions or omissions, including negligence, of
the Distributor's employees or officers.
Section 10.3. Procedure. Any party entitled to indemnification hereunder
(the "Indemnified Party") shall give prompt written notice of the assertion of
any such Claim to the indemnifying party (the "Indemnifying Party") and the
Indemnified Party shall have the right to select counsel (as reasonably approved
by the Indemnifying Party) and control the defense and settlement thereof,
subject to the right of the Indemnifying Party to participate in any such action
or to proceed at its own expense with counsel of its own choosing. The
Indemnified Party shall have the right to withhold payment of sums due to the
Indemnifying Party pursuant to this Agreement if, and to the extent that, and
for the period during which the Indemnified Party reasonably believes that such
withholding is necessary to maintain a reasonable reserve against any Claims
actually asserted, and also the right to offset against payments due to the
Indemnifying Party for indemnification obligations due the Indemnified Party by
the Indemnifying Party hereunder. If the Indemnifying Party shall fail to
promptly act, the Indemnified Party shall have the right and is hereby
authorized and empowered by the Indemnifying Party to appear by its attorneys in
any such action, to adjust, settle, compromise, litigate, contest, satisfy
judgments and take any other action necessary or desirable for the disposition
of such claim, demand or action; in any such case the Indemnifying Party within
fifteen (15) days after demand therefor by the Indemnified Party, shall fully
reimburse the Indemnified Party for all such payments and expenses, including
attorneys' fees; if the Indemnifying Party shall fail so to reimburse the
Indemnified Party then, without waiving its right otherwise to enforce such
reimbursement, the Indemnified Party shall have the right to deduct the said
amount of such payments and expenses, or any part thereof, from any sums
accruing, to or for the account of the Indemnifying Party under this or any
agreement.
ARTICLE XI
TERMINATION AND REMEDIES
32
Section 11.1. Term and Termination. Unless sooner terminated in accordance
with the procedures specified in this Article XI, this Agreement shall terminate
according to the procedures set out in Article III of this Agreement.
Section 11.2. Termination Upon Event of Default. Distributor shall have
the right, at its option, to terminate this Agreement by giving written notice
to Publisher in the manner provided in Section 13.4 below, effective immediately
upon the receipt of such notice, upon the occurrence of any Event of Default.
Publisher shall have the right, at its option, to terminate this Agreement by
giving written notice to Distributor in the manner provided in Section 12.4
below, effective immediately upon the receipt of such notice, upon the
occurrence of any of the following events:
(a) In the event that Distributor shall be adjudicated
bankrupt or shall petition for or consent to any relief under any bankruptcy,
reorganization, receivership, liquidation, compromise, or any moratorium
statute, whether now or hereafter in effect, or shall make an assignment for the
benefit of its creditors, or shall petition for the appointment of a receiver,
liquidator, trustee, or custodian of all or a substantial part of its assets, or
if a receiver, liquidator, trustee or custodian is appointed for all or a
substantial part of its assets and is not discharged within thirty (30) days
after the date of such appointment.
(b) Upon any default in the performance of or breach of any
material agreement, covenant, obligation or undertaking of Distributor made
hereunder, if such default or breach shall not be remedied within thirty (30)
days of delivery of notice of such default or breach. Any such notice shall
state the grounds upon which such claim of default or breach is based, and the
steps required to remedy such default or breach. Notwithstanding anything in
this Agreement to the contrary, neither party shall be deemed to be in breach of
this Agreement if a failure to comply with its terms is directly caused by Force
Majeure or the action or inaction of the other party.
ARTICLE XII
EFFECT OF TERMINATION
Section 12.1. Outstanding Orders. Upon termination of this Agreement,
Publisher shall remain obligated to deliver Products to Distributor or to
Distributor's customers, to fill all outstanding orders placed by Distributor
with Publisher and accepted by Publisher, unless expressly canceled by both
parties, and both parties
33
shall remain obligated to perform any other acts which are necessary or
appropriate to the orderly winding up of the dealings between the parties
hereunder.
Section 12.2. No Sell-Off. (a) Upon termination of this Agreement,
Distributor shall timely return to Publisher, pursuant to Section 4.6 above, all
finished units of the Products in Distributor's possession or control which have
not been Distributed.
(b) All trademarks, trade names, patents, copyrights, designs,
drawings, or other data, photographs, samples, and literature relating to the
Products shall be and remain the property of Publisher. Within thirty (30) days
after the expiration or termination of this Agreement, Distributor shall prepare
all such items in its possession for shipment, as Publisher may direct, at
Publisher's expense. Distributor shall not make or retain any copies of any
confidential items or information which may have been entrusted to it. Effective
upon the termination of this Agreement, Distributor shall cease to use all
trademarks, marks, and trade names of Publisher. Notwithstanding the foregoing,
Distributor shall continue to have such rights in all trademarks, trade names,
patents, copyrights, designs, drawings or other data, photographs, samples and
literature relating to the Products as are necessary to fulfill its outstanding
orders as of the date of the expiration or termination of this Agreement.
Section 12.3. Remaining Payments. Upon termination of this Agreement,
Distributor shall, subject to the provisions of this Agreement, be liable to
Publisher for any consideration due and unpaid, if any, up to the date of such
termination and for any further consideration that may become due and payable to
Publisher pursuant to Section 12.1.
Section 12.4. Remedies. Notwithstanding anything herein to the contrary,
in addition to and not in lieu of its rights to terminate this Agreement upon a
material breach by a party, the non-breaching party shall have the right to
pursue any remedies available to it at law or in equity, including without
limitation the repayment of such sums as have been previously provided by one
party to the other.
Section 12.5. Survival. Any termination of this Agreement (however
occasioned) shall not affect 4.6 and Articles V, VI, VII, VIII, IX, X, XI, XII
and XIII, which shall continue in full force and effect.
34
Section 12.6. Limitation on Termination Liability. Neither party shall
incur any liability whatsoever for any damage, loss or expenses of any kind
suffered or incurred by the other, arising from or incident to any termination
of this Agreement by such party which complies with the terms of this Agreement,
whether or not the terminating party is aware of any such damage, loss or
expense, provided, however, that Publisher shall be and remain liable for all
principal of and interest on the Loans.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Entire Agreement. This Agreement, including the Exhibits
hereto, (i) sets forth the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior negotiations, understandings
and agreements between the parties hereto concerning the subject matter hereof,
whether express or implied, written or oral and no addition to or modification
of any provision of this Agreement shall be binding upon the parties unless made
by written instrument signed by a duly authorized representative of each of
Publisher and Distributor and (ii) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 13.2. No Assignment. No assignment or transfer of this Agreement
or any right or privilege granted hereunder, including any assignment by
operation of law pursuant to a merger, liquidation, foreclosure, or involuntary
sale in bankruptcy, shall be permitted by either party without the other party's
prior written consent; provided, however, that either party may transfer, assign
or sublicense all or any part of this Agreement without the other party's
consent provided such parties are contractually obligated to comply with this
Agreement if the transferring, assigning or sublicensing party remains primarily
liable and such transfer, assignment or sublicense is (i) to a direct or
indirect parent or subsidiary of such party or a direct or indirect parent or
subsidiary of such parent or subsidiary, or (ii) to a purchaser of all or
substantially all of such party's assets or outstanding capital stock, whether
by merger, consolidation or otherwise. Any attempted assignment or transfer
contrary to the terms of this Section 13.2 shall be null and void. The
appointment by Distributor of any nonexclusive sub-representative, agent,
sub-distributor, reseller or dealer shall not constitute an assignment or
transfer of any part of, or any right or privilege under, this Agreement.
Subject to the foregoing limitations, this Agreement shall inure to the benefit
of and be binding upon the parties hereto, their successors, and assigns.
35
Section 13.3. Execution of Documents. Each party shall cooperate with the
other party to execute all such documents and do all such acts as may be
reasonably required to enable each party to effectively exercise the rights
granted to it under this Agreement.
Section 13.4. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt, and shall be given
to the parties at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to Distributor, to:
Hasbro Interactive, Inc.
50 Dunham Road
Beverly, MA 01915
Attention: Thomas Dusenberry, President
Telecopy: (978) 921-3710
with a copy to:
Hasbro, Inc.
32 W. 23rd Street
New York, New York 10010
Attention: Phillip H. Waldoks
Senior Vice President-Corporate
Legal Affairs and Secretary
Telecopy: (212) 741-0663
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Howard L. Ellin, Esq.
Telecopy: 212-735-2000
36
(b) if to Publisher, to:
MicroProse, Inc.
2490 Mariner Loop
Suite 100
Alameda, California 94501
Attention: Stephen M. Race
Chief Executive Officer
Telecopy: (510) 864-4607
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David Drummond, Esq.
Telecopy: (650) 493-6811
Section 13.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Any action or
proceeding brought to enforce the terms of this Agreement shall be brought in
the State of New York and each agrees to waive any objections to personal
jurisdiction, service of process and venue in any court of the United States
located in the State of New York or in New York state court.
Section 13.6. Independent Contractors. The relationship of Publisher and
the Distributor established by this Agreement is that of independent
contractors, and nothing contained in this Agreement shall be construed to (i)
give either party the power to direct and control the day-to-day activities of
the other, (ii) constitute the parties as partners, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow the Distributor to
create or assume any obligation on behalf of Publisher for any purpose
whatsoever. All financial obligations associated with the Distributor's business
are the sole responsibility of the Distributor. Distributor shall have no
responsibility or liability of any kind to any subcontractors or third parties
providing services to or for the benefit of Publisher. Distributor shall be free
to manage and control its business as it sees fit, without the management,
control or assistance of Publisher, except as otherwise prescribed herein.
37
Section 13.7. Severability; Headings. Should any provision of this
Agreement be held to be void, invalid, or inoperative, the remaining provisions
shall not be affected and shall continue in effect as though such unenforceable
provision had been deleted herefrom. The name of this Agreement and the headings
of the Articles and Sections of this Agreement are inserted merely for
convenience of reference and shall not be used or relied upon in connection with
the construction or interpretation of this Agreement.
Section 13.8. No Waiver. No failure or delay by either party in exercising
any right, power, or remedy hereunder shall operate as a waiver of any
subsequent exercise of such right, power, or remedy. It is agreed that any
remedies provided in this Agreement shall be cumulative and shall not be
exclusive of any other remedies available hereunder, or at law or in equity. No
amendment, waiver or modification of any provision of this Agreement shall be
effective unless in writing and signed by the party against whom such amendment,
waiver or modification is sought to been forced.
Section 13.9. Force Majeure. If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strike or labor dispute, war or other
violence, any law, order, proclamation, regulation, ordinance, demand or
requirement of any government agency, or any other act or condition beyond the
reasonable control of the parties hereto ("Force Majeure"), the party so
affected upon giving prompt notice to the other parties will be excused from
such performance during such prevention, restriction or interference.
Section 13.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument, but this Agreement
shall not be binding upon the parties until it has been signed by both parties.
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
HASBRO INTERACTIVE, INC. MICROPROSE, INC.
/s/ Thomas R. Dusenberry /s/ Stephen M. Race
----------------------------- ------------------------------
Authorized signature Authorized signature
Thomas R. Dusenberry Stephen M. Race
----------------------------- ------------------------------
Printed name Printed name
President Chief Executive Officer
----------------------------- ------------------------------
Title Title
Exhibit A
EXCLUDED PRODUCTS
EXHIBIT A
EXISTING PRODUCT RESTRICTIONS
1. Restrictions under Agreement with Activision for North American
distribution of Sony PSX version of CIVILIZATION II.
2. Restrictions under Agreement with GT Interactive for budget deal on
back-catalog products.
3. Restrictions under Agreement with GT Interactive (WizardWorks) for
publishing of Macintosh versions of products.
4. Restrictions under Agreements with Imagineer for worldwide distribution of
Sega Saturn versions of TRANSPORT TYCOON and CIVILIZATION II.
5. Restrictions under Agreement with Majesco for budget deal on back-catalog
products to Kaybee Toys channel only.
6. Restrictions under License-In Agreements (see list previously provided)
relating to terms of licenses governing individual products or
intellectual properties licensed from third parties. Distributor will be
required to familiarize itself with such requirements and abide by
approval procedures, etc.
7. The parties should consult regarding expeditious transfer of existing
distribution account to Distributor, in light of Publisher's current
accounts receivable and field inventory.
A-1
Exhibit B
NOTE
$5,500,000 New York, New York
August 11, 1998
FOR VALUE RECEIVED, the undersigned, MICROPROSE, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Maturity Date (as
defined in the hereinafter described Software Distribution and Loan Agreement)
to the order of Hasbro Interactive, Inc., a Delaware corporation (the "Lender"),
in lawful money of the United States of America in immediately available funds,
to such account as may be specified from time to time in writing to the Borrower
by the Lender, the principal amount of FIVE MILLION FIVE HUNDRED THOUSAND UNITED
STATES DOLLARS ($5,500,000) or, if less, the then aggregate unpaid principal
amount of Loans (as defined in the hereinafter described Software Distribution
and Loan Agreement) made by the Lender under such Software Distribution and Loan
Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount of each Loan in like money to said account from the date of the making of
such Loan until the principal amount thereof is paid in full, at the rates and
times, and computed in the manner, provided in the Agreement.
This Note (as amended, supplemented or otherwise modified from time
to time, this "Note") is the Note referred to in the Software Distribution and
Loan Agreement dated as of August 11, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Agreement") between the Borrower and
the Lender, and is entitled to the benefits thereof and shall be subject to the
provisions thereof. This Note is secured pursuant to various agreements (as
described in the Agreement).
As provided in the Agreement, this Note is subject to mandatory and
voluntary prepayments, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the then unpaid principal amount of, and accrued
interest on, this
B-1
Note shall become, or may be declared to be, as applicable, immediately due and
payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives to the extent permitted by applicable law
presentment, demand, protest or notice of any kind in connection with this Note.
No failure or delay on the part of the Lender in exercising any right, power or
privilege hereunder or under the other Loan Documents (as defined in the
Agreement) and no course of dealing between the Borrower and the Lender shall
operate as a waiver of any such right, power or privilege; nor shall any single
or partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies provided herein and in the other Loan
Documents are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have.
This Note may not be assigned or otherwise transferred by the Lender
without the prior written consent of the Borrower. The Borrower may not assign
or otherwise transfer any of its rights or obligations under this Note without
the prior written consent of the Lender.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND THE
LENDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.
MICROPROSE, INC.
By:_____________________
Name:
Title:
B-2
Exhibit C-1
SECURITY AGREEMENT
Exhibit C-1
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 11, 1998 (as the same may
from time to time be amended, supplemented or otherwise modified, this "Security
Agreement"), among Hasbro, Inc., a Rhode Island corporation ("Parent"), Hasbro
Interactive, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Distributor" and, together with Parent, the "Secured Parties" and as
agent under certain provisions of this Agreement for the ratable benefit of
itself and Parent, the "Agent"), a Delaware corporation, and [Company], a
__________ corporation (the "Debtor").
W I T N E S S E T H:
WHEREAS, the Borrower and Distributor have entered into the Software
Distribution and Loan Agreement dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Distributor has agreed (i) to distribute software products of
Borrower and (ii) to make certain loans to the Borrower, in each case subject to
and upon the terms and conditions set forth therein;
WHEREAS, the Borrower, Parent and New HIAC Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent, have entered into an
Agreement and Plan of Merger (the "Merger Agreement") and the Borrower and
Parent have entered into a Stock Option Agreement (the "Option Agreement," and
together with the Merger Agreement, the "Merger Documents"), each dated as of
the date hereof; and
WHEREAS, it is required by the Merger Documents and it is a
condition precedent to the obligation of the Secured Party to make the loans
contemplated by the Loan Agreement, that the Debtor enter into this Security
Agreement and grant the Secured Parties the security interests set forth herein;
C-1-1
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms shall
have the meanings set forth below:
"Account Debtor" shall mean the person who is obligated on a
Receivable.
"Accounts" shall mean "accounts" as such term is defined in Section
9-106 of the UCC.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Borrower" means MicroProse, Inc., a Delaware corporation.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government actions to
close.
"Chattel Paper" shall mean "chattel paper" as such term is defined
in Section 9-105(b) of the UCC.
"Collateral" shall have the meaning assigned to it in Section 2
hereof.
"Collateral Account" shall mean the account (which may be a
securities account) maintained pursuant to this Security Agreement by the
Secured Parties, entitled "MicroProse, Inc. Collateral Account, Hasbro
Interactive, Inc. and Hasbro, Inc., secured parties", and all funds and
instruments or other items from time to time credited to such account and all
interest thereon.
"Collateral Records" shall mean books, records, computer software,
computer printouts, customer lists, blueprints, technical specifications,
manuals, and similar items which relate to any Collateral.
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"Contracts" shall mean all contracts, agreements, licenses, and
other writings to which the Debtor is a party as any of the same may from time
to time be amended, supplemented or otherwise modified.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Deposit Accounts" shall mean the Collateral Account and any deposit
account, including without limitation, "deposit accounts" as such term is
defined in Section 9-105(e) of the UCC and any other deposit or securities
account (general or special), together with any funds, instruments or other
items credited to any such account from time to time, and all interest thereon.
"Documents" shall mean "documents" as such term is defined in
Section 9-105(f) of the UCC.
"Equipment" shall mean "equipment" as such term is defined in
Section 9-109(2) of the UCC, including, without limitation, machinery,
manufacturing equipment, data processing equipment, computers, office equipment,
furniture, appliances and tools.
"Event of Acceleration" shall mean an Event of Default or any
failure by the Borrower to pay any amount then due and owing under the Merger
Documents.
"Event of Default" shall have the meaning set forth in the Loan
Agreement.
"Fixtures" shall mean "fixtures" as such term is defined in Section
9-313 of the UCC.
"General Intangibles" shall mean "general intangibles" as such term
is defined in Section 9-106 of the UCC, including, without limitation, rights to
the payment of money (other than Receivables), trademarks, copyrights, patents,
and contracts, licenses and franchises, limited and general partnership
interests and joint venture interests, federal income tax refunds, trade names,
to the extent classified as a "general intangible" under the UCC under any
applicable law, distributions on certificated securities (as defined in ss.
8-102(1)(a) of the UCC and uncertificated securities (as defined in ss.
8-102(1)(b) of the UCC, computer programs and other
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computer software, inventions, designs, trade secrets, goodwill, proprietary
rights, customer lists, supplier contracts, sale orders, correspondence,
advertising materials, payments due in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property, reversionary
interests in pension and profit-sharing plans and reversionary, beneficial and
residual interests in trusts, credits with and other claims against any Person,
together with any collateral for any of the foregoing and the rights under any
security agreement granting a security interest in such collateral.
"Hedging Agreements" shall mean interest rate or currency protection
or hedging arrangements, including without limitation, caps, collars, floors,
forwards and any other similar or dissimilar interest rate or currency exchange
agreements or other interest rate or currency hedging arrangements.
"Instruments" shall mean "instruments" as such term is defined in
Section 9-105(1)(i) of the UCC.
"Insurance Policies" shall mean all insurance policies as in effect
from time to time covering the Debtor or any Collateral.
"Inventory" shall mean "inventory" as such term is defined in ss.
9-109(4) of the UCC, including without limitation, all goods (whether such goods
are in the possession of the Debtor or of a bailee or other Person for sale,
lease, storage, transit, processing, use or otherwise and whether consisting of
whole goods, spare parts, components, supplies, materials or consigned or
returned or repossessed goods), including without limitation, all such goods
which are held for sale or lease or are to be furnished (or which have been
furnished) under any contract of service or which are raw materials or work in
progress or materials used or consumed in the Debtor's business.
"Lien" shall mean with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Loan Agreement" shall mean that certain Software Distribution and
Loan Agreement, dated as of the date hereof, between Interactive and the
Borrower, as amended or modified from time to time in accordance with its terms.
Money" shall mean "money" as such term is defined in Section
1-201(24) of the UCC.
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"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, if title thereto is governed by a certificate of title
ownership.
"Permitted Liens" shall have the meaning set forth in the Loan Agree
ment.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proceeds" shall mean "proceeds" as such term is defined in Section
9-306(1) of the UCC.
"Receivables" shall mean all rights to payment for goods sold or
leased or services rendered, whether or not earned by performance and all rights
in respect of an Account Debtor, including without limitation, all such rights
in which the Debtor has any right, title or interest by reason of the purchase
thereof by the Debtor, and including without limitation all such rights
constituting or evidenced by any Account, Chattel Paper, Instrument, General
Intangible, note, contract, invoice, purchase order, draft, acceptance,
intercompany account, security agreement, or other evidence of indebtedness or
security, together with (a) any collateral assigned, hypothecated or held to
secure any of the foregoing and the rights under any security agreement granting
a security interest in such collateral, (b) all goods, the sale of which gave
rise to any of the foregoing, including, without limitation, all rights in any
returned or repossessed goods and unpaid seller's rights, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, and (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith.
"Receivables Records" shall mean (a) all original copies of all
documents, instruments or other writings evidencing the Receivables, (b) all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including without limitation
all tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems and other papers and documents relating to the Receivables, whether in
the possession or under the control of the Debtor or any computer bureau or
agent from time to time acting for the Debtor or otherwise, (c) all evidences of
the filing of financing statements and the registration of other instruments in
connection therewith and amendments, supplements or other modifications
thereto, notices to other creditors or secured
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parties, and certificates, acknowledgments, or other writings, including without
limitation lien search reports, from filing or other registration officers, (d)
all credit information, reports and memoranda relating thereto, and (e) all
other written or non-written forms of information related in any way to the
foregoing or any Receivable.
"Security Agreement" shall mean this Security Agreement, as the same
may from time to time be amended, supplemented or otherwise modified.
"Secured Obligations" shall mean all "Obligations" as such term is
defined in Article I of the Loan Agreement, together with all other obligations
from time to time owing by the Borrower, the Debtor or any affiliate of either
of them under or in connection with the Loan Documents and the Immediately
Payable Termination Fee and the Immediately Payable Cash-Out Right (each as
defined in the applicable Merger Document) payable under the Merger Documents.
"UCC" shall mean the Uniform Commercial Code as in effect from time
to time in the State of New York or in any other applicable jurisdiction.
ARTICLE II
GRANT OF SECURITY INTERESTS
As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing Lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located (all of which being
hereinafter collectively called the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) the Collateral Account;
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(v) all Collateral Records;
(vi) all Deposit Accounts;
(vii) all Documents;
(viii) all Equipment;
(ix) all Fixtures;
(x) all General Intangibles;
(xi) all Hedging Agreements;
(xii) all Instruments;
(xiii) all Insurance Policies;
(xiv) all Inventory;
(xv) all Money;
(xvi) all Motor Vehicles;
(xvii) all Receivables;
(xviii) all Receivables Records;
(xix) all other tangible and intangible personal
property;
(xx) all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing;
provided, however, that there is expressly excluded from the grant of a
security interest contained in this Article II each and every property or asset
which,
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by its terms may not be assigned or encumbered, or as to which disclosure
of same is not permitted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Parties,
which representations and warranties shall survive execution and delivery of
this Security Agreement, as follows:
3.1 Validity, Perfection and Priority. (a) The security interests in
the Collateral granted to the Secured Parties hereunder constitute valid and
continuing security interests in the Collateral; and
(b) (i) upon filing of financing statements naming the Debtor
as "debtor" and each Secured Party as "secured party" in the filing offices set
forth on Schedule I hereto, the security interests in the Collateral (other than
Instruments and Chattel Paper) granted to the Secured Parties hereunder will
constitute perfected security interests therein superior and prior to all Liens,
rights or claims of all other Persons (other than Permitted Liens); and (ii)
upon the delivery to the Agent of such items of the Collateral that constitute
Instruments or Chattel Paper, the security interests in such items of collateral
granted to the Secured Parties hereunder will constitute perfected security
interests therein superior and prior to all Liens, rights or claims of all other
Persons (other than Permitted Liens).
3.2 No Liens; Other Financing Statements. (a) Except for the Lien
granted to the Secured Parties hereunder, the Debtor owns and, as to all
Collateral whether now existing or hereafter acquired, will continue to own,
each item of the Collateral free and clear of any and all Liens, rights or
claims of all other Persons other than Permitted Liens, and the Debtor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Secured Parties.
(b) No financing statement or other evidence of any Lien
covering or purporting to cover any of the Collateral is on file in any public
office other than (i) financing statements filed or to be filed in connection
with the security interests granted to the Secured Parties hereunder, and (ii)
financing statements filed in connection with Permitted Liens.
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3.3 Chief Executive Office. The chief executive office of the Debtor
is located at ________________________________________.
3.4 Location of Inventory and Equipment. All inventory and equipment
now or from time to time included in the Collateral will be located at the
respective addresses set forth in Schedule II hereto.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Parties that from
and after the date of this Security Agreement:
4.1 Further Assurances.
(a) The Debtor will from time to time at the expense of the
Debtor, promptly execute, deliver, file and record all further instruments,
indorsements and other documents, and take such further action as either Secured
Party may deem reasonably necessary or desirable in obtaining the full benefits
of this Security Agreement and of the rights, remedies and powers herein
granted, including, without limitation, the following:
(i) the filing of any financing statements, in form
acceptable to the Secured Parties under the UCC in effect in any
jurisdiction with respect to the liens and security interests granted
hereby;
(ii) the delivery to the Agent of all items of
Collateral constituting Instruments (including, without limitation,
certificated securities) or Chattel Paper, together with undated
instruments of transfer executed by the Debtor in blank that are in form
and substance acceptable to the Agent and such certificates and other
documents as the Agent may reasonably request with respect thereto; and
(iii) furnish to the Secured Parties from time to time
statements and schedules further identifying and describing
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the Collateral and such other reports in connection with the Collateral as
either Secured Party may reasonably request, all in reasonable detail and
in form satisfactory to such Secured Party.
(b) The Debtor hereby authorizes each Secured Party to file
any financing statement without the signature of the Debtor to the extent
permitted by applicable law. A photocopy or other reproduction of this Security
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law. The Debtor will pay
or reimburse the Secured Parties for all filing fees and related expenses
incurred by either Secured Party in connection therewith.
4.2 Change of Name; Identity; Corporate Structure; or Chief
Executive Office Location of Inventory and Equipment. The Debtor will not change
its name, identity, corporate structure or the location of its chief executive
office or locations of its inventory or equipment specified in Schedule II
without (i) giving the Secured Parties at least ten (10) days' prior written
notice clearly describing such new name, identity, corporate structure or new
location and providing such other information in connection therewith as the
Secured Parties may reasonably request, and (ii) taking all action satisfactory
to the Secured Parties as either Secured Party may reasonably request to
maintain the security interest of the Secured Parties in the Collateral intended
to be granted hereby at all times fully perfected with the same or better
priority and in full force and effect.
4.3 Maintain Records. The Debtor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
4.4 Right of Inspection. Upon reasonable prior notice, the Secured
Parties shall at all times have full and free access during normal business
hours to all the books, correspondence and records of the Debtor, and the
Secured Parties and their representatives may examine the same, take extracts
therefrom and make photo copies thereof, and the Debtor agrees to render the
Secured Parties at the Debtor's cost and expense, such clerical and other
assistance as may be reasonable requested with regard thereto. Upon reasonable
prior notice, the Secured Parties and their representatives shall at all times
also have the right to enter into and upon any premises where any of the
inventory or equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
C-1-10
4.5 Insurance. The Debtor will maintain, with financially sound and
reputable insurers acceptable to the Secured Parties and licensed to do business
in each state in which any of the Collateral covered by any policy is located,
insurance with respect to the Collateral and its use, against loss or damage of
the kinds customarily insured against by reputable companies in the same or
similar businesses, similarly situated, such insurance to be of such types and
in such amounts (with such deductible amounts) as is customary for such
companies under the same or similar circumstances, similarly situated.
4.6 Payment of Obligations. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials, supplies and services) against or with respect to
the Collateral.
4.7 Negative Pledge. The Debtor will not create, incur or permit to
exist, will defend the Collateral against, and will take such other action as is
necessary to remove, any Lien or claim on or to the Collateral, other than the
Liens created hereby and Permitted Liens.
4.8 Limitations on Dispositions of Collateral. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so except in the ordinary course of its business.
4.9 Performance by the Secured Parties of the Debtor's Obligations;
Reimbursement. If the Debtor fails to perform or comply with any of its
agreements contained herein, either Secured Party may, without notice to or
consent by the Debtor, perform or comply or cause performance or compliance
therewith and the expenses of such Secured Party incurred in connection with
such performance or compliance, together with interest thereon at the rate of
interest then applicable to the Loans, shall be payable by the Debtor to such
Secured Party on demand and such reimbursement obligation shall be secured
hereby.
4.10 Maintaining the Collateral Account. So long as any of the
Secured Obligations shall remain unpaid: it shall be a term and condition of the
Collateral Account that the Secured Parties, and each of them acting alone,
shall have the sole right to withdraw funds or hold any funds in the Collateral
Account, and the Debtor hereby agrees and acknowledges that the Secured Parties
and each of them shall have exclusive dominion and control of the Collateral
Account, and that the Secured Parties, or either of them shall be the sole
Person entitled to give
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instructions to release, withdraw or transfer funds in the Collateral Account.
Neither Secured Party shall have any obligation to invest any funds from time to
time in the Collateral Account in any interest-bearing investment.
ARTICLE V
POWER OF ATTORNEY
The Debtor hereby irrevocably constitutes and appoints each Secured
Party 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 the Debtor and in the name of the Debtor or in its own
name, from time to time in each Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to, at any time that an
Event of Acceleration has occurred and is continuing, take any and all
appropriate action and execute any and all documents and instruments which in
any such case may be necessary or desirable in the reasonable judgment of either
Secured Party to accomplish the purposes of this Security Agreement.
The Debtor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 Rights and Remedies Generally. If an Event of Acceleration shall
occur and be continuing, then and in every such case, the Secured Parties shall
have all the rights of a secured party under the UCC, shall have all rights now
or hereafter existing under all other applicable laws, and, subject to any
mandatory requirements of applicable law then in effect, shall have all the
rights set forth in this Security Agreement and all the rights set forth with
respect to the Collateral or this Security Agreement in any other security
agreement between the parties.
6.2 Assembly of Collateral. If an Event of Acceleration shall occur
and be continuing, upon five days notice to the Debtor, the Debtor shall, at its
own expense, assemble the Collateral (or from time to time any portion thereof)
and
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make it available to the Secured Parties at any place or places designated by
the Secured Parties which is reasonably convenient to the parties.
6.3 Disposition of Collateral. The Secured Parties will give the
Debtor reasonable notice of the time and place of any public sale of the
Collateral or any part thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to it shall be met if such notice is mailed,
postage prepaid to its address specified in Section 3.3 of this Security
Agreement (or such other address that the Debtor may provide to the Secured
Parties in writing) at least five (5) days before the time of any public sale or
after which any private sale may be made.
6.4 Recourse. The Debtor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to satisfy the Secured Obligations. The Debtor shall also be liable for all
expenses of the Secured Parties incurred in connection with collecting such
deficiency, including, without limitation, the reasonable fees and disbursements
of any attorneys employed by the Secured Parties to collect such deficiency.
6.5 Expenses; Attorneys Fees. The Debtor shall reimburse the Secured
Parties for all of their expenses in connection with the exercise of their
rights hereunder, including, without limitation, all reasonable attorneys' fees
and legal expenses incurred by either Secured Party. Expenses of retaking,
holding, preparing for sale, selling or the like shall include the reasonable
attorneys' fees and legal expenses of the Secured Parties. All such expenses
shall be secured hereby.
6.6 Limitation on Duties Regarding Preservation of Collateral. Each
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as such Secured Party
deals with similar property for its own account.
(a) The Secured Parties shall have no obligation to take any
steps to preserve rights against prior parties to any Collateral.
(b) Neither the Secured Parties nor any of their directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under
C-1-13
any obligation to sell or otherwise dispose of any Collateral upon the request
of the Debtor or otherwise.
6.7 Application of Proceeds. The Secured Parties hereby agree that
all proceeds received on account of any sale or other disposition of any
Collateral, and all Collateral applied directly in satisfaction of any Secured
Obligations, shall be applied as follows: first, to the payment of all expenses
incurred under section 6.5 hereof, second, to the payment of all interest
accrued and owing on the Loans under the Loan Agreement until paid in full,
third, to the payment of all principal due and owing on the Loans under the Loan
Agreement, until paid in full, fourth, to the payment of any expenses relating
to or other amounts arising under the Loan Agreement not covered by clause the
"first" hereof, and fifth, to the payment of Secured Obligations due and owing
under the Merger Documents until paid in full.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnity. The Debtor agrees to indemnify, reimburse and hold
the Secured Parties and their officers, directors, employees, representatives
and agents ("Indemnitees") harmless from any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs or expenses
or disbursements (including reasonable attorneys' fees and expenses) for
whatsoever kind or nature which may be imposed on, asserted against or incurred
by any of the Indemnitees in any way relating to or arising out of this Security
Agreement or the transactions contemplated hereby. The obligations of the Debtor
under this Section shall be secured hereby and shall survive payment and
performance or discharge of the Obligations and the termination of this Security
Agreement.
7.2 Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
7.3 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of
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telex notice, when sent, answer-back received, or in the case of telecopy
notice, when sent, or in the case of a nationally recognized overnight courier
service, one Business Day after delivery to such courier service, addressed, in
the case of each party hereto, at its address specified on the signature pages
hereof or to such other address as may be designated by any party in a written
notice to the other party hereto.
7.4 Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the Debtor, the Secured Parties, all future
holders of the Secured Obligations and their respective successors and assigns,
except that neither party may assign or transfer any of its rights or
obligations under this Security Agreement without the prior written consent of
the other party.
7.5 Waivers and Amendments. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought. In the case of any waiver, the Debtor and the Secured Parties shall be
restored to their former position and rights hereunder and under the outstanding
Secured Obligations, and any Event of Acceleration waived shall be deemed to be
cured and not continuing, but no such waiver shall extend to any subsequent or
other Event of Acceleration, or impair any right consequent thereon.
7.6 No Waiver; Remedies Cumulative. No failure or delay on the part
of either Secured Party in exercising any right, power or privilege hereunder
and no course of dealing between the Debtor and the Secured Parties shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by a
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 such Secured Party would
otherwise have on any future occasion. The rights and remedies expressly
provided herein and in the other Loan Documents and Merger Documents are
cumulative and may be exercised singly or concurrently and as often and in such
order as the Secured Parties deem expedient and are not exclusive of any rights
or remedies which the Secured Parties would otherwise have whether by security
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Parties to any other or future action in any
circumstances without notice or demand.
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7.7 Termination; Release. When the Secured Obligations have been
paid in full this Security Agreement shall terminate, and the Secured Parties,
at the request and sole expense of the Debtor, will execute and deliver to the
Debtor the proper instruments (including UCC termination statements)
acknowledging the termination of this Security Agreement, and will duly assign,
transfer and deliver to the Debtor, without recourse, representation or warranty
of any kind whatsoever, such of the Collateral as may be in possession of the
Secured Parties and has not theretofore been disposed of, applied or released.
7.8 Headings Descriptive. The headings of the several Sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
7.9 Severability. In case any provision in or obligation under this
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the Debtor and the Secured Parties have caused
this Security Agreement to be duly executed and delivered as of the date first
above written.
HASBRO, INC.
By:
------------------------------
Name:
Title:
HASBRO INTERACTIVE, INC.
By:
------------------------------
Name:
Title:
[DEBTOR]
By:
------------------------------
Name:
Title:
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Schedule I
Filing Offices
C-1-18
Schedule II
Location of Inventory and Equipment
C-1-18
Exhibit C-2-A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
TRADEMARK SECURITY AGREEMENT
TRADEMARK SECURITY AGREEMENT (the "Trademark Agreement") dated as of
August __, 1998, between ____________, a ___________ corporation (the "Debtor"),
Hasbro, Inc., a Rhode Island corporation ("Hasbro"), and Hasbro Interactive,
Inc., a Delaware corporation (together with Hasbro, the "Secured Parties")
WHEREAS, the Debtor and Hasbro are parties to a Loan and Distribution
Agreement, dated as of August __, 1998, (as amended and in effect from time to
time, the "Agreement"), between the Debtor and Hasbro,
WHEREAS, the Debtor has executed and delivered to the Secured Parties a
Security Agreement, dated August __, 1998 (the "Security Agreement"), pursuant
to which the Debtor has granted to the Secured Parties a security interest in
certain of the Debtor's property, including without limitation all trademarks,
service marks, trademark and service mark registrations, and trademark and
service mark registration applications listed on Schedule A attached hereto, all
to secure the payment and performance of the Secured Obligations (as defined in
the Security Agreement);
WHEREAS, this Trademark Agreement is supplemental to the provisions
contained in the Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ss.1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings provided therefor in the Security
Agreement.
ss.2. Grant of Security Interest.
(1) As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located: (a) any and all trademarks,
trade names, corporate names, business names, trade styles, service marks,
logos, other source or business identifiers, designs and general intangibles of
like nature, and all registrations, applications, and recordings thereof,
including, without limitation, registrations, recordings, and applications in
the United States Patent and Trademark Office (the "PTO") or any similar office
or agency of the United States, any State thereof or any other country or any
political subdivision thereof including, but not limited to those U.S. and
foreign registered trademarks and applications on Schedule A hereto (the
"Trademarks") and (b) any reissues, extensions or renewals thereof and (c) all
goodwill of the Debtor and its business, products and services appurtenant to,
associated with or symbolized by the Trademarks and (d) the proceeds thereof
including (i) any and all accounts, chattel paper, instruments, other forms of
money or currency or other proceeds payable to Debtor from time to time in
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respect of the Trademarks, (ii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with respect
to any of the Trademarks, (iii) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Trademarks any governmental authority (or any person or entity
acting under color of governmental authority), (iv) any claim of Debtor against
third parties for past, present, or future infringement or dilution of any
Trademark or any injury to the goodwill associated with any Trademark, and (v)
any and all other amounts from time to time paid or payable under or in
connection with any of the Trademarks
(2) The Debtor has executed in blank and delivered to the Secured Parties
an assignment of registered trademarks in substantially the form of Exhibit 1
hereto (the "Assignment of Marks"). The Debtor hereby authorizes each Secured
Party to complete as Secured Party and record with the PTO the Assignment of
Marks attached hereto as Exhibit 1 solely upon the occurrence and during the
continuance of an Event of Default and the exercise of the Secured Parties'
remedies under this Trademark Agreement and the Security Agreement.
(3) Pursuant to the Security Agreement, the Debtor has granted to the
Secured Parties a security interest in the Collateral (including the
Trademarks). The Security Agreement, and all rights and interests of the Secured
Parties in and to the Collateral (including the Trademarks) thereunder are
hereby ratified and confirmed in all respects. In no event shall this Trademark
Agreement, the grant, assignment, conveyance, mortgage, pledge, hypothecation,
and transfer of a security interest in the Trademarks hereunder, or the
recordation of this Trademark Agreement (or any document hereunder) with the PTO
or any state or foreign trademark registry adversely affect or impair the
Security Agreement, the security interest of the Secured Parties in the
Collateral (including the Trademarks) pursuant to the Security Agreement, the
attachment and perfection of such security interest in the Collateral (including
the security interest in the Trademarks), under the Uniform Commercial Code, or
any present or future rights and interests of the Secured Parties in and to the
Collateral under or in connection with the Security Agreement, this Trademark
Agreement, or the Uniform Commercial Code. Any and all rights and interests of
the Secured Parties in and to the Trademarks (and any and all obligations of the
Debtor with respect to the Trademarks) provided herein, or arising hereunder or
in connection herewith, shall only supplement and be cumulative and in addition
to the rights and interests of the Secured Parties (and the obligations of the
Debtor) in, to or with respect to the Collateral (including the Trademarks)
provided in or arising under or in connection with the Security Agreement and
shall not be in derogation thereof. In the event of any irreconcilable conflict
between the provisions of this Trademark Agreement and the Agreement, or between
this Trademark Agreement and the Security Agreement, the provisions of the
Agreement or the Security Agreement, as the case may be, shall control.
ss.3. Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants that, except as previously or concurrently disclosed in
writing by Debtor to Secured Parties:
(a) Schedule A hereto sets forth a true and complete list of all
registered Trademarks and Trademark applications owned by Debtor;
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(b) The Trademarks are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Trademarks;
(c) To the best of the Debtor's knowledge, each of the Trademarks is valid
and enforceable;
(d) To the best of the Debtor's knowledge, there is no infringement by
others of the Trademarks;
(e) No claim has been made that the use of any of the Trademarks violates
the rights of any third person and, to the best of the Debtor's knowledge, there
is no infringement by the Debtor of the trademark rights of others;
(f) The Debtor is the sole and exclusive owner of the entire and
unencumbered right, title, and interest in and to each of the Trademarks, free
and clear of any liens, charges, encumbrances, and adverse claims, and other
than the security interest and assignment created by the Security Agreement and
this Trademark Agreement, and free and clear of all licenses and registered user
agreements and covenants by Debtor not to sue third persons, except as
previously disclosed to the Secured Parties in writing by the Debtor;
(g) The Debtor has the unqualified right to enter into this Trademark
Agreement and to perform its terms and has entered and will enter into written
agreements with each of its present and future employees, agents, consultants,
licensors and licensees that will enable them to comply with the covenants
herein contained;
(h) The Debtor has used, and will continue to use, proper statutory and
other appropriate proprietary notices in connection with its use of the
Trademarks;
(i) The Debtor has used, and will continue to use, consistent standards of
quality in its manufacture and provision of products and services sold or
provided under the Trademarks;
(j) This Trademark Agreement, together with the Security Agreement, will
create in favor of the Secured Parties perfected security interests in the
Trademarks protected under the laws of the United States or any State thereof
superior and prior to all liens, rights or claims of all other persons, (other
than Permitted Liens, as described in the Security Agreement), upon making the
filings and recordations referred to in clause (k) of this ss.3; and
(k) Except for the filing of financing statements with the Secretary of
State of the State of California under the Uniform Commercial Code and the
recording of this Trademark Agreement with the PTO, no authorization, approval
or other action by, and no notice to or filing with, any governmental or
regulatory authority, agency or office is required either (i) for the grant by
the Debtor or the effectiveness of the security interest and assignment granted
hereby or for the execution, delivery and performance of this Trademark
Agreement by the Debtor, or (ii) for the perfection of or the exercise by the
Secured Parties of any of their rights and remedies hereunder.
ss.4. Inspection Rights. The Debtor hereby grants to the Secured Parties
and their employees and agents the right to visit the Debtor's plants and
facilities that manufacture, inspect, or store
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products sold under any of the Trademarks, and to inspect the products and
quality control records relating thereto at reasonable times during regular
business hours and upon reasonable notice.
ss.5. No Transfer or Inconsistent Agreements. Without the Secured Parties'
prior written consent and except for licenses of the Trademarks in the ordinary
course of the Debtor's business consistent with its past practices, the Debtor
will not (a) transfer, license, or otherwise dispose or alienate any of its
rights in the Trademarks, or (b) enter into any agreement that is inconsistent
with the Debtor's obligations under this Trademark Agreement or the Security
Agreement.
ss.6. After-acquired Trademarks.
(a) If, before the Secured Obligations shall have been finally paid and
satisfied in full, the Debtor shall obtain any right, title or interest in or to
any other or new Trademarks, then the provisions of this Trademark Agreement
shall automatically apply thereto and, upon the acquisition of any rights in any
Trademark registration or application not identified on Schedule A hereto,
Debtor shall promptly (and in no event longer than 30 days following the
acquisition of rights in such Trademark registration or application) provide to
the Secured Parties notice thereof in writing and execute and deliver to the
Secured Parties such documents or instruments as the Secured Parties may
reasonably request further to implement, preserve or evidence the Secured
Parties' interest therein.
(b) The Debtor authorizes the Secured Parties to modify this Trademark
Agreement and the Assignment of Marks, without the necessity of the Debtor's
further approval or signature, by amending Schedule A hereto and the Annex to
the Assignment of Marks to include any other or new Trademarks.
ss.7. Trademark Prosecution.
(a) The Debtor shall assume full and complete responsibility for the
prosecution, defense, enforcement or any other necessary or desirable actions in
connection with the Trademarks and shall hold the Secured Parties harmless from
any and all costs, damages, liabilities and expenses that may be incurred by the
Secured Parties in connection with the Secured Parties' interest in the
Trademarks or any action or failure to act by Debtor in connection with this
Trademark Agreement or the transactions contemplated hereby.
(b) With respect to all Trademarks which are material to the Debtor's
business, the Debtor shall have the right and the duty, through trademark
counsel acceptable to the Secured Parties, to (i) prosecute diligently any
applications to register such Trademarks pending as of the date of this
Trademark Agreement or thereafter, (ii) to preserve and maintain all rights in
such Trademarks including the filing of appropriate renewal applications and
other instruments to maintain in effect such Trademarks and (iii) pay when due
all registration renewal fees and other fees, taxes and other expenses that
shall be incurred or that shall accrue. Any expenses incurred in connection with
such actions shall be borne by the Debtor. Further, the Debtor shall not abandon
any Trademark (or registration or application therefore) which is material to
the Debtor's business, without the consent of the Secured Parties.
C-2-A-4
(c) The Debtor shall have the right and the duty to bring suit or other
action in the Debtor's own name to maintain and enforce the Trademarks which are
material to its business. The Debtor may require the Secured Parties to join in
such suit or action as necessary to assure the Debtor's ability to bring and
maintain any such suit or action in any proper forum if (but only if) the Debtor
is completely satisfied that such joinder will not subject the Secured Parties
to any risk of liability. The Debtor shall promptly, upon demand, reimburse and
indemnify the Secured Parties for all damages, costs and expenses, including
legal fees, incurred by the Secured Parties pursuant to this ss.7(c).
(d) In general, the Debtor shall take any and all such actions (including
institution and maintenance of suits, proceedings, or actions) as may be
necessary or appropriate to properly maintain, protect, preserve, and enforce
the Trademarks which are material to Debtor's business. The Debtor shall not
take or fail to take any action, nor permit any action to be taken or not taken
by others under its control, that would adversely affect the validity, grant or
enforcement of such Trademarks.
(e) Promptly upon obtaining knowledge thereof, the Debtor will notify the
Secured Parties in writing of the institution of, or any final adverse
determination in, any proceeding in the PTO or any similar office or agency of
the United States or any foreign country, or any court, regarding the validity
of any of the Trademarks or the Debtor's rights, title, or interests in and to
the Trademarks, and of any event that does or reasonably could materially
adversely affect the value of any of the Trademarks, the ability of the Debtor
or the Secured Parties to dispose of any of the Trademarks, or the rights and
remedies of the Secured Parties in relation thereto.
ss.8. Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Secured Parties shall have, in addition to all other rights and remedies
given it by this Trademark Agreement, the Security Agreement, those allowed by
law and the rights and remedies of a secured party under the UCC, the right to,
immediately, without demand of performance and without other notice (except as
set forth next below) or demand whatsoever to the Debtor, all of which are
hereby expressly waived, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Trademarks, or any
interest that the Debtor may have therein, and, after deducting from the
proceeds of sale or other disposition of the Trademarks all expenses incurred by
the Secured Parties in attempting to enforce this Trademark Agreement (including
all reasonable expenses for broker's fees and legal services), shall apply the
residue of such proceeds toward the payment of the Secured Obligations as set
forth in or by reference in the Security Agreement. Notice of any sale, license,
or other disposition of the Trademarks shall be given to the Debtor at least
five (5) days before the time that any intended public sale or other public
disposition of the Trademarks is to be made or after which any private sale or
other private disposition of the Trademarks may be made, which the Debtor hereby
agrees shall be reasonable notice of such public or private sale or other
disposition. At any such sale or other disposition, the Secured Parties may, to
the extent permitted under applicable law, purchase or license the whole or any
part of the Trademarks or interests therein sold, licensed or otherwise disposed
of.
(b) The Debtor hereby grants to the Secured Parties, effective upon the
occurrence and during the continuance of an Event of Default, in order to
exercise its rights and remedies as
C-2-A-5
contemplated in Section 8(a) herein with respect to the Trademarks or any other
Collateral, a non-exclusive right and license to use the Trademarks, provided
that: (i) the goods sold or services offered under the Trademarks shall be of a
quality substantially consistent with those heretofore offered under such
Trademarks by the Debtor; (ii) the Debtor shall have the right to inspect, at
reasonable intervals and upon reasonable notice, representative samples of goods
sold under the Trademarks and the premises where such goods are manufactured;
and (iii) the Trademark shall be used only in conjunction with goods and
services of the nature previously offered by the Debtor under such Trademarks.
ss.9. Collateral Protection. If the Debtor shall fail to do any act that
it has covenanted to do hereunder, or if any representation or warranty of the
Debtor shall be breached, the Secured Parties, in their own names or that of the
Debtor (in the sole discretion of the Secured Parties), may (but shall not be
obligated to) do such act or remedy such breach (or cause such act to be done or
such breach to be remedied), and the Debtor agrees promptly to reimburse the
Secured Parties for any reasonable cost or expense incurred by the Secured
Parties in so doing.
ss.10. Power of Attorney. If any Event of Default shall have occurred and
be continuing, the Debtor does hereby make, constitute and appoint the Secured
Parties (and any officer or agent of the Secured Parties as the Secured Parties
may select in their exclusive discretion) as the Debtor's true and lawful
attorney-in-fact, with full power of substitution and with the power to endorse
the Debtor's name on all applications, documents, papers, and instruments
necessary for the Secured Parties to use the Trademarks, or to grant or issue
any exclusive or nonexclusive license of any of the Trademarks to any third
person, or to take any and all actions necessary for the Secured Parties to
assign, pledge, convey or otherwise transfer title in or dispose of the
Trademarks or any interest of the Debtor therein to any third person, and, in
general, to execute and deliver any instruments or documents and do all other
acts that the Debtor is obligated to execute and do hereunder. The Debtor hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof, and releases the Secured Parties from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Secured Parties under this power of attorney (except
for the Secured Parties' gross negligence or willful misconduct). This power of
attorney is coupled with an interest and shall be irrevocable for the duration
of this Trademark Agreement.
ss.11. Further Assurances. The Debtor shall, at any time and from time to
time, and at its expense, make, execute, acknowledge and deliver, and file and
record as necessary or appropriate with governmental or regulatory authorities,
agencies or offices, such agreements, assignments, documents and instruments,
and do such other and further acts and things (including, without limitation,
obtaining consents of third parties), as the Secured Parties may request or as
may be necessary or appropriate in order to implement and effect fully the
intentions, purposes and provisions of this Trademark Agreement, or to assure
and confirm to the Secured Parties the grant, perfection, and priority of the
Secured Parties' security interest in any of the Trademarks.
ss.12. Termination. At such time as all of the Secured Obligations have
been indefeasibly paid and satisfied in full, this Trademark Agreement shall
terminate and the Secured Parties shall, upon the written request and at the
expense of the Debtor, execute and deliver to the Debtor all deeds, assignments
and other instruments as may be necessary or proper to reassign, reconvey, and
re-vest in and to the Debtor the entire right, title and interest to the
Trademarks previously granted,
C-2-A-6
assigned, transferred and conveyed to the Secured Parties by the Debtor pursuant
to this Trademark Agreement, as fully as if this Trademark Agreement had not
been made, subject to any disposition of all or any part thereof that may have
been made by the Secured Parties pursuant hereto or the Security Agreement.
ss.13. Course of Dealing. No course of dealing between the Debtor and the
Secured Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege hereunder or
under the Security Agreement or any other agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ss.14. Expenses. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and legal expenses incurred by
the Secured Parties in connection with the preparation of this Trademark
Agreement and all other documents relating hereto, the consummation of the
transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
or renewal fees, encumbrances or otherwise protecting, maintaining or preserving
the Trademarks, or in defending or prosecuting any actions or proceedings
arising out of or related to the Trademarks, shall be borne and paid by the
Debtor.
ss.15. No Assumption of Liability; Indemnification. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE SECURED PARTIES ASSUME NO
LIABILITIES OF THE DEBTOR WITH RESPECT TO ANY CLAIM OR CLAIMS REGARDING THE
DEBTOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR PURPORTED RIGHTS
ARISING FROM, ANY OF THE TRADEMARKS OR ANY USE, LICENSE, OR SUBLICENSE THEREOF,
WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE, ACT OR
OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE EXCLUSIVELY THE
RESPONSIBILITY OF THE DEBTOR, AND THE DEBTOR SHALL INDEMNIFY THE SECURED PARTIES
FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES,
INCURRED BY THE SECURED PARTIES WITH RESPECT TO SUCH LIABILITIES.
ss.16. Notices. All notices and other communications made or required to
be given pursuant to this Trademark Agreement shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first-class
mail, postage prepaid, or sent by telecopy and confirmed by delivery via courier
or postal service, to the addresses provided in the Agreement.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by such
officer, (ii) if sent by registered or certified first-class mail, postage
prepaid, three (3) business days after the posting thereof, and (iii) if sent by
telecopy or telex, at the time of the dispatch thereof, if in normal business
hours in the country of receipt, or otherwise at the opening of business on the
following business day.
C-2-A-7
ss.17. Amendment and Waiver. This Trademark Agreement is subject to
modification only by a writing signed by the Secured Parties and the Debtor,
except as provided in Section 6(b). The Secured Parties shall not be deemed to
have waived any right hereunder unless such waiver shall be in writing and
signed by the Secured Parties. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
ss.18. Governing Law; Consent to Jurisdiction. THIS TRADEMARK AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. The Debtor
agrees that any suit for the enforcement of this Trademark Agreement may be
brought in the courts of the State of Delaware or any federal court sitting
therein and consents to the exclusive jurisdiction of such court and to service
of process in any such suit being made upon the Debtor by mail at the address
specified in Section 16. The Debtor hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient court.
ss.19. Waiver of Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS TRADEMARK AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR SECURED OBLIGATIONS. Except as prohibited by
law, the Debtor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Debtor (a) certifies that neither the Secured Parties nor
any representatives, agents or attorneys of the Secured Parties have
represented, expressly or otherwise, that the Secured Parties would not, in the
event of litigation, seek to enforce the foregoing waivers, and (b) acknowledges
that, in entering into the Agreement, the Secured Parties are relying upon,
among other things, the waivers and certifications contained in this Section 19.
ss.20. Miscellaneous.
(a) The headings of each section of this Trademark Agreement are for
convenience only and shall not define or limit the provisions thereof.
(b) This Trademark Agreement and all rights and obligations hereunder
shall be binding upon the Debtor and its respective successors and assigns, and
shall inure to the benefit of the Secured Parties and its successors and
assigns.
(c) If any term of this Trademark Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Trademark Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein.
C-2-A-8
IN WITNESS WHEREOF, this Trademark Agreement has been executed as of the
day and year first above written.
[DEBTOR]
By:
-----------------------
Name:
Title:
Agreed and Acknowledged:
HASBRO INTERACTIVE, INC.
By:
-----------------------
Name:
Title:
HASBRO, INC.
By:
-----------------------
Name:
Title:
C-2-A-9
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ___ day of _____, 19__, personally appeared __________ to me
known personally, and who, being by me duly sworn, deposes and says that he is
the _____ of __________, and that said instrument was signed and sealed on
behalf of said corporation by authority of its Board of Directors, and said
__________ acknowledged said instrument to be the free act and deed of said
corporation.
---------------------------
Notary Public
My commission expires:
C-2-A-10
Schedule A
Trademarks
C-2-A-11
Exhibit 1
ASSIGNMENT OF TRADEMARKS
WHEREAS, _____________, a _____________ corporation (the "Debtor"), has
adopted and used and is using the trademarks and service marks (the "Marks")
identified on the Annex hereto, and is the owner of the registrations of and
pending registration applications for such Marks in the Patent and Trademark
Office identified on such Annex; and
WHEREAS, ______________, a corporation organized and existing under the
laws of the State of ________ (the "Secured Party"), is desirous of acquiring
the Marks and the registrations and applications therefor;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the Debtor does hereby assign, sell and transfer unto the
Secured Party all right, title and interest in and to the Marks, together with
(a) the registrations applications for the Marks, including, but not limited to
those registrations and applications on the Annex hereto and all reissues,
extensions, and renewals thereof, (b) the goodwill of the business, products,
and services appurtenant to, associated with, and symbolized by the Marks and
(c) the proceeds thereof including (i) any and all accounts, chattel paper,
instruments, other forms of money or currency or other proceeds payable to
Debtor from time to time in respect of the Marks, (ii) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Marks, (iii) any and all payments (in any form
whatsoever) made or due and payable to Debtor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Marks any governmental authority (or any Person acting under
color of governmental authority), (iv) any claim of Debtor against third parties
for past, present, or future infringement or dilution of any Mark or any injury
to the goodwill associated with any Mark, and (v) any and all other amounts from
time to time paid or payable under or in connection with any of the Marks.
This Assignment of Trademarks is intended to and shall take effect at such
time as the Secured Party shall complete this instrument by inserting its name
in the second paragraph above and signing its acceptance of this Assignment of
Trademarks below.
C-2-A-12
IN WITNESS WHEREOF, the Debtor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this _____ day of
_________, 199_.
[DEBTOR]
By:
-------------
Title:
-------------
The foregoing Assignment of Trademarks by the Debtor to the Secured
Parties is hereby accepted as of the _____ day of __________, __.
By:
-------------
Title:
-------------
C-2-A-13
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-------------------------
Notary Public
My commission expires:
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-------------------------
Notary Public
My commission expires:
C-2-A-14
Annex
Schedule of Trademarks
C-2-A-15
Exhibit C-2-B
INTELLECTUAL PROPERTY SECURITY AGREEMENT
COPYRIGHT SECURITY AGREEMENT
COPYRIGHT SECURITY AGREEMENT (the" Copyright Agreement") dated as of
August __, 1998, between ______________, a __________ corporation (the
"Debtor"), Hasbro, Inc., a Rhode Island corporation ("Hasbro"), and Hasbro
Interactive, Inc., a Delaware corporation (together with Hasbro, the "Secured
Parties")
WHEREAS, the Debtor and Hasbro are parties to a Loan and Distribution
Agreement, dated as of August __, 1998, (as amended and in effect from time to
time, the "Agreement"), between the Debtor and Hasbro,
WHEREAS, the Debtor has executed and delivered to the Secured Parties a
Security Agreement, dated August __, 1998 (the "Security Agreement"), pursuant
to which the Debtor has granted to the Secured Parties a security interest in
certain of the Debtor's property, including without limitation all copyrights,
copyright registrations, and copyright applications listed on Schedules A and B
attached hereto, all to secure the payment and performance of the Secured
Obligations (as defined in the Security Agreement);
WHEREAS, this Copyright Agreement is supplemental to the provisions
contained in the Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ss.1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings provided therefor in the Security
Agreement.
ss.2. Grant of Security Interest.
(a) As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located: (a) any and all copyrights
and all registrations, applications, and recordings, thereof, including, without
limitation, registrations, recordings, and applications in the United States
Copyright Office (the "Copyright Office") or any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof including, but not limited to those U.S. and foreign
registered Copyrights and applications on Schedules A and B hereto and (b)
derivative works thereof (together with subsection (a), the "Copyrights") and
(c) any reissues, extensions or renewals thereof and (d) the proceeds thereof
including (i) any and all accounts, chattel paper, instruments, other forms of
money or currency or other proceeds payable to Debtor from time to time in
respect of the Copyrights, (ii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with respect
to any of the Copyrights, (iii) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Copyrights any governmental authority (or any person or entity
acting under color of governmental authority), (iv) any claim of Debtor against
third parties for past, present, or future infringement of any Copyright, and
(v) any and all other amounts from time to time paid or payable under or in
connection with any of the Copyrights
C-2-B-1
(b) The Debtor has executed in blank and delivered to the Secured Parties
an assignment of registered Copyrights in substantially the form of Exhibit 1
hereto (the "Assignment of Copyrights"). The Debtor hereby authorizes each
Secured Party to complete as Secured Party and record with the Copyright Office
the Assignment of Copyrights attached hereto as Exhibit 1 solely upon the
occurrence and during the continuance of an Event of Default and the exercise of
the Secured Parties' remedies under this Copyright Agreement and the Security
Agreement.
(c) Pursuant to the Security Agreement, the Debtor has granted to the
Secured Parties a security interest in the Collateral (including the
Copyrights). The Security Agreement, and all rights and interests of the Secured
Parties in and to the Collateral (including the Copyrights) thereunder are
hereby ratified and confirmed in all respects. In no event shall this Copyright
Agreement, the grant, assignment, conveyance, mortgage, pledge, hypothecation,
and transfer of a security interest in the Copyrights hereunder, or the
recordation of this Copyright Agreement (or any document hereunder) with the
Copyright Office or any state or foreign copyright registry adversely affect or
impair the Security Agreement, the security interest of the Secured Parties in
the Collateral (including the Copyrights) pursuant to the Security Agreement,
the attachment and perfection of such security interest in the Collateral
(including the security interest in the Copyrights), under the Uniform
Commercial Code, or any present or future rights and interests of the Secured
Parties in and to the Collateral under or in connection with the Security
Agreement, this Copyright Agreement, or the Uniform Commercial Code. Any and all
rights and interests of the Secured Parties in and to the Copyrights (and any
and all obligations of the Debtor with respect to the Copyrights) provided
herein, or arising hereunder or in connection herewith, shall only supplement
and be cumulative and in addition to the rights and interests of the Secured
Parties (and the obligations of the Debtor) in, to or with respect to the
Collateral (including the Copyrights) provided in or arising under or in
connection with the Security Agreement and shall not be in derogation thereof.
In the event of any irreconcilable conflict between the provisions of this
Copyright Agreement and the Agreement, or between this Copyright Agreement and
the Security Agreement, the provisions of the Agreement or the Security
Agreement, as the case may be, shall control.
ss.3. Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants that, except as previously or concurrently disclosed in
writing by Debtor to the Secured Parties:
(a) Schedules A and B hereto set forth a true and complete list of all
registered Copyrights and Copyright applications owned by Debtor;
(b) With respect to the copyright registrations and applications set forth
in Schedule A:
(i) The Copyrights are subsisting and have not been adjudged
invalid or unenforceable, in whole or in part, and there is no litigation or
proceeding pending concerning the validity or enforceability of the Copyrights;
(ii) To the best of the Debtor's knowledge, each of the
Copyrights is valid and enforceable;
(iii) To the best of the Debtor's knowledge, there is no
infringement by others of the Copyrights;
(iv) No claim has been made that the use of any of the
Copyrights violates the rights of any third person and, to the best of the
Debtor's knowledge, there is no infringement by the Debtor of the Copyright
rights of others;
C-2-B-2
(v) The Debtor is the sole and exclusive owner of the entire
and unencumbered right, title, and interest in and to each of the Copyrights,
free and clear of any liens, charges, encumbrances, and adverse claims, and
other than the security interest and assignment created by the Security
Agreement and this Copyright Agreement, and free and clear of all licenses and
registered user agreements and covenants by Debtor not to sue third persons,
except as previously disclosed to the Secured Parties in writing by the Debtor;
(vi) The Debtor has the unqualified right to enter into this
Copyright Agreement and to perform its terms and has entered and will enter into
written agreements with each of its present and future employees, agents,
consultants, licensors and licensees that will enable them to comply with the
covenants herein contained;
(vii) The Debtor has used, and will continue to use, proper
statutory and other appropriate proprietary notices in connection with its use
of the Copyrights;
(viii) This Copyright Agreement, together with the Security
Agreement, will create in favor of the Secured Parties perfected security
interests in the Copyrights protected under the laws of the United States or any
State thereof superior and prior to all liens, rights or claims of all other
persons, (other than Permitted Liens, as described in the Security Agreement),
upon making the filings and recordations referred to in Section 3(b)(ix); and
(ix) Except for the filing of financing statements with the
Secretary of State of the State of California under the Uniform Commercial Code
and the recording of this Copyright Agreement with the Copyright Office, no
authorization, approval or other action by, and no notice to or filing with, any
governmental or regulatory authority, agency or office is required either (i)
for the grant by the Debtor or the effectiveness of the security interest and
assignment granted hereby or for the execution, delivery and performance of this
Copyright Agreement by the Debtor, or (ii) for the perfection of or the exercise
by the Secured Parties of any of their rights and remedies hereunder.
(c) With respect to the copyright registrations and applications set forth
in Schedule B:
(i) The Copyrights have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Copyrights; and
(ii) The Copyrights have not been cancelled.
ss.4. No Transfer or Inconsistent Agreements. Without the Secured Parties'
prior written consent and except for licenses of the Copyrights in the ordinary
course of the Debtor's business consistent with its past practices, the Debtor
will not (a) transfer, license, or otherwise dispose or alienate any of its
rights in the Copyrights, or (b) enter into any agreement that is inconsistent
with the Debtor's obligations under this Copyright Agreement or the Security
Agreement.
ss.5. After-acquired Copyrights.
(a) If, before the Secured Obligations shall have been finally paid and
satisfied in full, the Debtor shall obtain any right, title or interest in or to
any other or new copyrights, then the provisions of this Copyright Agreement
shall automatically apply thereto and, upon the acquisition of any rights in any
Copyright registration or application not identified on Schedules A or B hereto,
Debtor shall promptly (and in no event longer than 30 days following the
acquisition of rights in such copyright registration or application) provide to
the Secured
C-2-B-3
Parties notice thereof in writing and execute and deliver to the Secured Parties
such documents or instruments as the Secured Parties may reasonably request
further to implement, preserve or evidence the Secured Parties' interest
therein.
(b) The Debtor authorizes the Secured Parties to modify this Copyright
Agreement and the Assignment of Copyrights, without the necessity of the
Debtor's further approval or signature, by amending Exhibit A hereto and the
Annex to the Assignment of Copyrights to include any other or new Copyrights.
ss.6. Copyright Prosecution.
(a) The Debtor shall assume full and complete responsibility for the
prosecution, defense, enforcement or any other necessary or desirable actions
in connection with the Copyrights and shall hold the Secured Parties harmless
from any and all costs, damages, liabilities and expenses that may be incurred
by the Secured Parties in connection with the Secured Parties' interest in the
Copyrights or any action or failure to act by Debtor in connection with this
Copyright Agreement or the transactions contemplated hereby.
(b) With respect to all Copyrights which are material to the Debtor's
business, the Debtor shall have the right and the duty, through copyright
counsel acceptable to the Secured Parties, to (i) prosecute diligently any
applications to register such Copyrights pending as of the date of this
Copyright Agreement or thereafter, (ii) to preserve and maintain all rights in
such Copyrights including the filing of appropriate renewal applications and
other instruments to maintain in effect such Copyrights and (iii) pay when due
all registration renewal fees and other fees, taxes and other expenses that
shall be incurred or that shall accrue. Any expenses incurred in connection with
such actions shall be borne by the Debtor. Further, the Debtor shall not abandon
any Copyright (or registration or application therefore) which is material to
the Debtor's business, without the consent of the Secured Parties.
(c) The Debtor shall have the right and the duty to bring suit or other
action in the Debtor's own name to maintain and enforce the Copyrights which are
material to its business. The Debtor may require the Secured Parties to join in
such suit or action as necessary to assure the Debtor's ability to bring and
maintain any such suit or action in any proper forum if (but only if) the Debtor
is completely satisfied that such joinder will not subject the Secured Parties
to any risk of liability. The Debtor shall promptly, upon demand, reimburse and
indemnify the Secured Parties for all damages, costs and expenses, including
legal fees, incurred by the Secured Parties pursuant to this Section 6(c).
(d) In general, the Debtor shall take any and all such actions (including
institution and maintenance of suits, proceedings, or actions) as may be
necessary or appropriate to properly maintain, protect, preserve, and enforce
the Copyrights which are material to Debtor's business. The Debtor shall not
take or fail to take any action, nor permit any action to be taken or not taken
by others under its control, that would adversely affect the validity, grant or
enforcement of such Copyrights.
(e) Promptly upon obtaining knowledge thereof, the Debtor will notify the
Secured Parties in writing of the institution of, or any final adverse
determination in, any proceeding in the Copyright Office or any similar office
or agency of the United States or any foreign country, or any court, regarding
the validity of any of the Copyrights or the Debtor's rights, title, or
interests in and to the Copyrights, and of any event that does or reasonably
could materially adversely affect the value of any of the Copyrights, the
ability of the Debtor or the Secured Parties to dispose of any of the
Copyrights, or the rights and remedies of the Secured Parties in relation
thereto.
C-2-B-4
ss.7. Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Secured Parties shall have, in addition to all other rights and remedies
given it by this Copyright Agreement, the Security Agreement, those allowed by
law and the rights and remedies of a secured party under the UCC, the right to,
immediately, without demand of performance and without other notice (except as
set forth next below) or demand whatsoever to the Debtor, all of which are
hereby expressly waived, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Copyrights, or any
interest that the Debtor may have therein, and, after deducting from the
proceeds of sale or other disposition of the Copyrights all expenses incurred by
the Secured Parties in attempting to enforce this Copyright Agreement (including
all reasonable expenses for broker's fees and legal services), shall apply the
residue of such proceeds toward the payment of the Secured Obligations as set
forth in or by reference in the Security Agreement. Notice of any sale, license,
or other disposition of the Copyrights shall be given to the Debtor at least
five (5) days before the time that any intended public sale or other public
disposition of the Copyrights is to be made or after which any private sale or
other private disposition of the Copyrights may be made, which the Debtor hereby
agrees shall be reasonable notice of such public or private sale or other
disposition. At any such sale or other disposition, the Secured Parties may, to
the extent permitted under applicable law, purchase or license the whole or any
part of the Copyrights or interests therein sold, licensed or otherwise disposed
of.
(b) The Debtor hereby grants to the Secured Parties, effective upon the
occurrence and during the continuance of an Event of Default, in order to
exercise its rights and remedies as contemplated in Section 7(a) herein with
respect to the Copyrights or any other Collateral, a non-exclusive right and
license to use the Copyrights.
ss.8. Collateral Protection. If the Debtor shall fail to do any act that
it has covenanted to do hereunder, or if any representation or warranty of the
Debtor shall be breached, the Secured Parties, in their own names or that of the
Debtor (in the sole discretion of the Secured Parties), may (but shall not be
obligated to) do such act or remedy such breach (or cause such act to be done or
such breach to be remedied), and the Debtor agrees promptly to reimburse the
Secured Parties for any reasonable cost or expense incurred by the Secured
Parties in so doing.
ss.9. Power of Attorney. If any Event of Default shall have occurred and
be continuing, the Debtor does hereby make, constitute and appoint the Secured
Parties (and any officer or agent of the Secured Parties as the Secured Parties
may select in their exclusive discretion) as the Debtor's true and lawful
attorney-in-fact, with full power of substitution and with the power to endorse
the Debtor's name on all applications, documents, papers, and instruments
necessary for the Secured Parties to use the Copyrights, or to grant or issue
any exclusive or nonexclusive license of any of the Copyrights to any third
person, or to take any and all actions necessary for the Secured Parties to
assign, pledge, convey or otherwise transfer title in or dispose of the
Copyrights or any interest of the Debtor therein to any third person, and, in
general, to execute and deliver any instruments or documents and do all other
acts that the Debtor is obligated to execute and do hereunder. The Debtor hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof, and releases the Secured Parties from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Secured Parties under this power of attorney (except
for the Secured Parties' gross negligence or willful misconduct). This power of
attorney is coupled with an interest and shall be irrevocable for the duration
of this Copyright Agreement.
ss.10. Further Assurances. The Debtor shall, at any time and from time to
time, and at its expense, make, execute, acknowledge and deliver, and file and
record as necessary or appropriate with governmental or regulatory authorities,
agencies or offices, such agreements, assignments, documents and instruments,
and do
C-2-B-5
such other and further acts and things (including, without limitation, obtaining
consents of third parties), as the Secured Parties may request or as may be
necessary or appropriate in order to implement and effect fully the intentions,
purposes and provisions of this Copyright Agreement, or to assure and confirm to
the Secured Parties the grant, perfection, and priority of the Secured Parties'
security interest in any of the Copyrights.
ss.11. Termination. At such time as all of the Secured Obligations have
been indefeasibly paid and satisfied in full, this Copyright Agreement shall
terminate and the Secured Parties shall, upon the written request and at the
expense of the Debtor, execute and deliver to the Debtor all deeds, assignments
and other instruments as may be necessary or proper to reassign, reconvey, and
re-vest in and to the Debtor the entire right, title and interest to the
Copyrights previously granted, assigned, transferred and conveyed to the Secured
Parties by the Debtor pursuant to this Copyright Agreement, as fully as if this
Copyright Agreement had not been made, subject to any disposition of all or any
part thereof that may have been made by the Secured Parties pursuant hereto or
the Security Agreement.
ss.12. Course of Dealing. No course of dealing between the Debtor and the
Secured Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege hereunder or
under the Security Agreement or any other agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ss.13. Expenses. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and legal expenses incurred by
the Secured Parties in connection with the preparation of this Copyright
Agreement and all other documents relating hereto, the consummation of the
transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
or renewal fees, encumbrances or otherwise protecting, maintaining or preserving
the Copyrights, or in defending or prosecuting any actions or proceedings
arising out of or related to the Copyrights, shall be borne and paid by the
Debtor.
ss.14. No Assumption of Liability; Indemnification. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE SECURED PARTIES ASSUME NO
LIABILITIES OF THE DEBTOR WITH RESPECT TO ANY CLAIM OR CLAIMS REGARDING THE
DEBTOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR PURPORTED RIGHTS
ARISING FROM, ANY OF THE COPYRIGHTS OR ANY USE, LICENSE, OR SUBLICENSE THEREOF,
WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE, ACT OR
OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE EXCLUSIVELY THE
RESPONSIBILITY OF THE DEBTOR, AND THE DEBTOR SHALL INDEMNIFY THE SECURED PARTIES
FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES,
INCURRED BY THE SECURED PARTIES WITH RESPECT TO SUCH LIABILITIES.
ss.15. Notices. All notices and other communications made or required to
be given pursuant to this Copyright Agreement shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first-class
mail, postage prepaid, or sent by telecopy and confirmed by delivery via courier
or postal service, to the addresses provided in the Agreement.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by such
officer, (ii) if sent by registered or certified first-class mail, postage
prepaid, three (3)
C-2-B-6
business days after the posting thereof, and (iii) if sent by telecopy or telex,
at the time of the dispatch thereof, if in normal business hours in the country
of receipt, or otherwise at the opening of business on the following business
day.
ss.16. Amendment and Waiver. This Copyright Agreement is subject to
modification only by a writing signed by the Secured Parties and the Debtor,
except as provided in Section 5(b). The Secured Parties shall not be deemed to
have waived any right hereunder unless such waiver shall be in writing and
signed by the Secured Parties. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
ss.17. Governing Law; Consent to Jurisdiction. THIS COPYRIGHT AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. The Debtor
agrees that any suit for the enforcement of this Copyright Agreement may be
brought in the courts of the State of Delaware or any federal court sitting
therein and consents to the exclusive jurisdiction of such court and to service
of process in any such suit being made upon the Debtor by mail at the address
specified in Section 15. The Debtor hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient court.
ss.18. Waiver of Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS COPYRIGHT AGREEMENT, ANY RIGHTS OR SECURED OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY SUCH RIGHTS OR SECURED OBLIGATIONS. Except as prohibited
by law, the Debtor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Debtor (a) certifies that neither the Secured Parties nor
any representatives, agents or attorneys of the Secured Parties have
represented, expressly or otherwise, that the Secured Parties would not, in the
event of litigation, seek to enforce the foregoing waivers, and (b) acknowledges
that, in entering into the Agreement, the Secured Parties are relying upon,
among other things, the waivers and certifications contained in this Section 18.
ss.19. Miscellaneous.
(a) The headings of each section of this Copyright Agreement are for
convenience only and shall not define or limit the provisions thereof.
(b) This Copyright Agreement and all rights and obligations hereunder
shall be binding upon the Debtor and its respective successors and assigns, and
shall inure to the benefit of the Secured Parties and its successors and
assigns.
(c) If any term of this Copyright Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Copyright Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein.
C-2-B-7
IN WITNESS WHEREOF, this Copyright Agreement has been executed as of the
day and year first above written.
[DEBTOR]
By:
-------------------
Name:
Title:
Agreed and Acknowledged:
HASBRO INTERACTIVE, INC.
By:
-------------------
Name:
Title:
HASBRO, INC.
By:
-------------------
Name:
Title:
C-2-B-8
COMMONWEALTH OR STATE OF _____________)
) ss.
COUNTY OF ____________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ___ day of _____, 19__, personally appeared to me known
personally, and who, being by me duly sworn, deposes and says that he is the
_____ of __________, and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors, and said __________
acknowledged said instrument to be the free act and deed of said corporation.
-------------------------
Notary Public
My commission expires:
C-2-B-9
Copyrights
Schedule A
C-2-B-10
Schedule B
C-2-B-11
Exhibit 1
ASSIGNMENT OF COPYRIGHTS
WHEREAS, ____________, a ______________ corporation (the "Debtor"), is the
owner of the copyrights (the "Copyrights") identified on the Annex hereto, and
is the owner of the registrations of and pending registration applications for
such Copyrights in the United States Copyright Office identified on such Annex;
and
WHEREAS, _______________, a corporation organized and existing under the
laws of the State of _________ (the "Secured Party"), is desirous of acquiring
the Copyrights and the registrations and applications therefor;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the Debtor does hereby assign, sell and transfer unto the
Secured Party all right, title and interest in and to the Copyrights, together
with (a) the registrations applications for the Copyrights, including, but not
limited to those registrations and applications on the Annex hereto and all
reissues, extensions, and renewals thereof, (b) any derivative works thereof (c)
the proceeds thereof including (i) any and all accounts, chattel paper,
instruments, other forms of money or currency or other proceeds payable to
Debtor from time to time in respect of the Copyrights, (ii) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Copyrights, (iii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Copyrights any governmental authority (or
any Person acting under color of governmental authority), (iv) any claim of
Debtor against third parties for past, present, or future infringement of any
Copyright or any injury to the goodwill associated with any Copyright, and (v)
any and all other amounts from time to time paid or payable under or in
connection with any of the Copyrights.
C-2-B-12
This Assignment of Copyrights is intended to and shall take effect at such
time as the Secured Party shall complete this instrument by inserting its name
in the second paragraph above and signing its acceptance of this Assignment of
Copyrights below.
IN WITNESS WHEREOF, the Debtor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this ___ day of
______, 199_.
[DEBTOR]
By:
-----------------
Title:
--------------
The foregoing Assignment of Copyrights by the Debtor to the Secured
Parties is hereby accepted as of the _____ day of _______, __.
By:
-----------------
Title:
--------------
C-2-B-13
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-----------------------
Notary Public
My commission expires:
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-----------------------
Notary Public
My commission expires:
C-2-B-14
Annex
Schedule of Copyrights
C-2-B-15
Exhibit D
NOTICE OF BORROWING
[__________], 1998
Hasbro Interactive, Inc.
50 Dunham Road
Beverly, MA 01915
Attention: Thomas Dusenberry, President
Gentlemen:
Reference is made to the Software Distribution and Loan Agreement
dated as of August 11, 1998 (as amended, supplemented or otherwise modified,
(the "Agreement") between MICROPROSE, INC., a Delaware corporation (the
"Borrower"), and Hasbro Interactive, Inc., a Delaware corporation (the
"Lender"). Capitalized terms used herein and not otherwise defined herein have
the meanings given such terms in the Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to
Section 6.5(f) of the Agreement that the Borrower is requesting that a Loan in
an original principal amount of $[ ] be made under the Agreement on [ ],
1998 (the "Drawdown Date"), which day is a Business Day. After giving effect to
the making of such Loan, the aggregate original principal amount of Loans made
under the Agreement will be $[ ].
The Borrower hereby represents and warrants for the benefit of the
Lender on and as of each of the date hereof and the Drawdown Date that:
(a) this Notice of Borrowing has been duly authorized by all
necessary action on the part of the Borrower and its members, has been duly
executed and delivered by the Borrower and constitutes the legal, valid and
binding obligation of the Borrower;
(b) the representations and warranties of the Borrower set
forth in the Agreement and the other Loan Documents are true and correct in all
material respects as though made on and as of the date hereof and the Drawdown
Date, except to the extent such representations and warranties specifically
relate to a different date;
D-1
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(c) no event or circumstance has occurred and is continuing,
or would result from the making of the Loans requested hereby or the use of the
proceeds thereof, which constitutes a Default or an Event of Default; and
(d) the proceeds of the Loan will be used to fund Publisher's
operating working capital needs for the period [ ], 1998 to [ ], 1998 and
such uses are itemized on Schedule I hereto consistent with past practice.
Very truly yours,
MICROPROSE, INC.
By:
----------------------
Name:
Title:
D-2
Dates Referenced Herein and Documents Incorporated by Reference
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