Promissory Note - Atari Interactive Inc. and Atari Inc.
THIS NOTE HAS BEEN ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH SUCH REQUIREMENTS OR A WRITTEN OPINION OF
COUNSEL ACCEPTABLE TO THE OBLIGOR THAT SUCH TRANSFER WILL NOT RESULT IN ANY
VIOLATION OF SUCH LAWS OR AFFECT THE LEGALITY OF ITS ISSUANCE.
ATARI INTERACTIVE, INC.
PROMISSORY NOTE
US $5,122,625.00 MARCH 31, 2004
WHEREAS, Atari, Inc., a Delaware corporation (the "Holder"), previously
sold a development project to Atari Interactive, Inc., a Delaware corporation
(the "Obligor"), related to certain Dungeons & Dragons games (the "D&D
Project");
WHEREAS, the D&D Project was transferred to Obligor effective as of
October 1, 2003 for a purchase price of Three Million Seven Hundred and
Forty-Four Thousand Dollars ($3,744,000) (the "Purchase Price");
WHEREAS, as of the date hereof, the Obligor has not made payment of the
Purchase Price and the Holder has incurred an additional One Million Three
Hundred Seventy-Eight Thousand Six Hundred and Twenty-Five Dollars ($1,378,625)
in development expenses related to the transition of the D&D Project (the
"Additional Development Expenses"); and
WHEREAS, the Obligor and its parent entity, Infogrames Entertainment, S.A.
("IESA"), agree that the Purchase Price and the Additional Development Expenses
are due and owing to the Holder and that payment of such amounts shall be made
in accordance with the terms of this Note.
FOR VALUE RECEIVED, the Obligor hereby promises to pay to the order of the
Holder, the principal sum of Five Million One Hundred Twenty Two Thousand Six
Hundred Twenty Five Dollars ($5,122,625.00), with interest on the outstanding
principal amount at the rate per annum equal to the applicable Prime rate (as
quoted in the Wall Street Journal on the second to last business day of each
month) plus 1.25%, payable as set forth below.
1. Payments of Principal and Interest. Subject to the set off and
acceleration provisions hereof, the principal due hereunder shall be
payable in the following manner and on the following dates (each, a
"Maturity Date"):
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(a) $3,516,125 on the earlier to occur of (i) the date upon which
Dungeons & Dragons Forgotten Realms: Demon Stone for Sony
PlayStation2 is released for public sale or (ii) December 31, 2004;
(b) $1,206,500 on the earlier to occur of (i) the date upon which
Dungeons & Dragons Real Time Strategy for PC is released for public
sale or (ii) December 31, 2004; and
(c) $400,000 on December 31, 2004.
Obligor shall pay interest to Holder in arrears on each respective
Maturity Date with regard to any interest that has then accrued and
is unpaid under this Note. Interest shall be calculated on the basis
of a year of 360 days and for the number of days actually elapsed.
In the event that any payment to be made hereunder shall be or
become due on a Saturday, Sunday or any other day which is a legal
bank holiday under the laws of the State of New York, such payment
shall be or become due on the next succeeding business day. Any
amounts of interest and principal not paid when due shall bear
interest at the maximum rate of interest allowed by applicable law.
All payments shall be applied first to accrued interest and
thereafter to principal. The payments of principal and interest
hereunder shall be made in coin or currency of the United States of
America which at the time of payment shall be legal tender therein
for the payment of public and private debts. All payments by Obligor
under this Note shall be subject to the Holder's right of set-off
and acceleration set forth herein and shall otherwise be free and
clear without any deduction or withholding for any taxes or fees of
any nature whatsoever, unless the obligation to make such deduction
or withholding is imposed by law. The Obligor shall pay and save the
Holder harmless from all liabilities with respect to or resulting
from any delay or omission to make any such deduction or withholding
required by law.
2. Prepayment. The Obligor shall have the right at any time to prepay
the principal hereof in whole or in part, without premium or
penalty, upon giving at least five (5) days prior written notice of
such prepayment to the Holder, provided that interest on the
principal hereof to be so prepaid, accrued to the date of such
prepayment, shall be paid concurrently therewith.
3. Set-Off and Acceleration Rights of Holder. In the event that the
Obligor fails to make any payment due hereunder on the applicable
Maturity Date or earlier Event of Default, the Holder shall have the
right to immediately set off the full amount of such delinquent
payment(s) against any amounts then payable by the Holder to the
Obligor, IESA, Paradigm Entertainment, Inc. or any subsidiary or
affiliate entity of any of the above (collectively, the "Obligor
Group Payables"), such set off to be allocated amongst the Obligor
Group Payables in the Holder's sole discretion.
4. Covenants. (a) The Obligor covenants and agrees that, so long as
this Note is outstanding and until payment in full of this Note, and
the performance by the Obligor of all its other obligations arising
hereunder, without the prior written consent of the Holder, the
Obligor shall not create, incur, assume, or suffer to exist
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any indebtedness, except (i) indebtedness incurred pursuant to this
Note, (ii) indebtedness outstanding on the date hereof and set forth
on Schedule A hereto; (iii) indebtedness to IESA; and (iv) trade
credit in the ordinary course of business.
(b) The Obligor covenants and agrees that, so long as this
Note is outstanding and until payment in full of this Note, and the
performance by the Obligor of all its other obligations arising
hereunder, without the prior written consent of the Holder, the
Obligor shall not transfer, assign, sell, pledge or otherwise
dispose of or encumber the 2,000,000 shares of Common Stock, $0.01
par value, of the Holder issued in the name of the Obligor (the
"Shares"). The Obligor further covenants and agrees that if all
amounts hereunder are not paid in full on or before the applicable
Maturity Date or earlier Event of Default, the Obligor shall within
five (5) business days of the applicable Maturity Date or earlier
Event of Default either (i) sell the Shares, in accordance with all
applicable securities laws and Atari, Inc. policies, to any one or
more third party purchasers and remit all proceeds from such sale(s)
to the Holder, or (ii) transfer the Shares to the Holder at a per
share price equal to the then current fair market value (as
determined by the average closing price of the Common Stock of the
Holder on the NASDAQ National Market (or such other market upon
which the Common Stock of the Holder may then be trading) for the
ten (10) trading days prior to the applicable Maturity Date or
earlier Event of Default). Any monies or value received by the
Holder as a result of the sale(s)/transfer contemplated by the
preceding sentence shall be applied by the Holder against the
Obligor Group Payables and shall be allocated amongst the Obligor
Group Payables in the Holder's sole discretion.
5. No Waiver. No failure or delay by the Holder in exercising any
right, power or privilege under this Note shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law. No course of dealing between the Obligor and/or any
other party acknowledging or agreeing to the terms hereof, and the
Holder shall operate as a waiver of any rights by the Holder.
6. Waiver of Presentment and Notice of Dishonor. The Obligor and all
endorsers, guarantors and other parties that may be liable under
this Note hereby waive presentment, notice of dishonor, protest and
all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Note.
7. Assignability/Replacement. The Holder may not assign or transfer
this Note without the prior written consent of the Obligor other
than to any affiliate of the Holder. The Obligor may not assign or
delegate its rights or obligations hereunder without the prior
written consent of Holder. The respective covenants and agreements
of the Obligor, any other party acknowledging or agreeing to the
terms hereof and the Holder under this Note shall be binding upon
each of them and their respective successors and assigns. Upon
receipt by the Obligor of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, the Obligor
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shall make and deliver a new Note of like tenor, in lieu of this
Note, if (a) in case of loss, theft or destruction, the Obligor
receives indemnity or security reasonably satisfactory to it, and
(b) in the case of mutilation, this Note is surrendered and
canceled.
8. Place of Payment. All payments of principal of this Note and the
interest due thereon shall be made (a) via wire transfer to the
following account:
Bank: JP Morgan Chase
Bank ABA#: 021000021
Account#: ******(1)
Account Name: Atari, Inc.
or (b) to such other account, or at such other place, as the Holder
may from time to time designate in writing to the Obligor.
9. Events of Default. "Event of Default," wherever used herein, means
any one of the following events (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(a) failure to (i) pay any principal or interest on this Note on
or before the applicable Maturity Date and such amounts are
not set off in accordance with the terms hereof or otherwise
fully settled pursuant to the terms of Section 4(b) hereof or
(ii) perform or observe any covenants of the Obligor set forth
herein;
(b) if the Obligor shall:
(i) admit in writing its inability to pay its debts
generally as they become due;
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act;
(iii) make an assignment for the benefit of creditors;
(iv) consent to the appointment of a receiver of the whole or
any substantial part of its property;
(v) on a petition in bankruptcy filed against it, be
adjudicated a bankrupt; or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any
other applicable law or statute of the United States of
America or any State, district or territory thereof;
-----------
(1) Material omitted pursuant to a request for confidential treatment and filed
separately.
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(c) if a court of competent jurisdiction shall enter an order,
judgment, or decree appointing, without the consent of the
Obligor, a receiver of the whole or any substantial part of
the Obligor's property, and such order, judgment or decree
shall not be vacated or set aside or stayed within thirty (30)
days from the date of entry thereof;
(d) if, under the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction shall
assume custody or control of the whole or any substantial part
of the Obligor's property and such custody or control shall
not be terminated or stayed within thirty (30) days from the
date of assumption of such custody or control; or
(e) if the Obligor is in default with respect to any of its senior
indebtedness.
10. Acceleration of Maturity; Remedies. (a) In case an Event of Default
described in clause (a) of Section 9 above, shall have occurred and
be continuing, the Holder may, by written notice to the Obligor,
declare the Note then outstanding to be due and payable in whole (or
in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and
thereupon the principal of the Note so declared to be due and
payable, together with accrued interest thereon and all fees shall
become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived
by the Obligor. In case of any Event of Default described in clauses
(b), (c), (d) and (e) of Section 9 above, the principal of the Note
then outstanding, together with accrued interest thereon and all
fees shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by Obligor.
(b) The Holder may proceed to protect and enforce its rights either
by suit in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this Note or
in aid of the exercise of any power granted in this Note, or the
Holder may proceed to enforce the payment of all sums due upon this
Note or to enforce any other legal or equitable right of the Holder.
The Obligor further promises to pay reasonable attorney's fees,
court costs and other expenses, losses, charges, damages incurred or
advances made by the Holder in the protection and enforcement of its
rights or caused by the Obligor's default under the terms of this
Note.
11. Amendments. Any term of this Note may be amended only with the
written consent of the Obligor and the Holder. Any amendment
effected in accordance with this Section 11 shall be binding upon
the Holder of this Note, each future holder of this Note and the
Obligor and any other party acknowledging or agreeing to the terms
hereof.
12. Notices. Unless otherwise provided, any notice required or permitted
under this Note shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be
notified, upon delivery by facsimile transmission, or upon the third
business day after deposit with the United States Post Office,
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postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at
such other address as such party may designate by five (5) days
advance written notice to the other party.
13. Severability. In the event that one or more of the provisions of
this Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note,
but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. This Note and the rights and obligations of the
Obligor and the Holder and any other party acknowledging or agreeing
to the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York (without regard to the
principles of conflicts of laws thereof).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
and delivered on the date first written above.
ATARI INTERACTIVE, INC.
By: /s/ Harry M. Rubin
-------------------------------
Name: Harry M. Rubin
Title: Senior Executive Vice President
Address: 50 Dunham Road
Beverly, MA 01915
Fax: 978-921-3520
AGREED TO BY HOLDER:
ATARI, INC.
By: /s/ Lisa S. Rothblum
-----------------------------------
Name: Lisa S. Rothblum
Title: Assistant Secretary
Address: 417 Fifth Avenue, 8th Floor
New York, NY 10016
Fax: 212-726-4239
ACKNOWLEDGED AND AGREED:
INFOGRAMES ENTERTAINMENT, S.A.
By: /s/ Frederic Chesnais
-----------------------------------
Name: Frederic Chesnais
Title: Directeur General Delegue
Address: 1 Place Verazzano
69252 Lyon Cedex 09
France
Fax: +33 (0)4 37 64 30 01
[SIGNATURE PAGE TO PROMISSORY NOTE]
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PARADIGM ENTERTAINMENT, INC.
By: /s/ Harry M. Rubin
-----------------------------------
Name: Harry M. Rubin
Title: Senior Executive Vice President
Address: 1628 Valwood Parkway, #110
Carrollton, Texas 75006
Fax: 972-488-6317
[SIGNATURE PAGE TO PROMISSORY NOTE]
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SCHEDULE A
OUTSTANDING DEBT OBLIGATIONS
None.